Payola and satellite radio

In the last two weeks I’ve heard the new George Harrison box set mentioned so often on channel 26 Sirius satellite radio — accompanied by the playing of Harrison songs — that I’ve concluded some form of payola is going on.  In its early days, satellite radio was critical of the mainstream radio stations for this practice, but now it’s jumped on board.  And you know what — no one cares!  Even on the internet, there is hardly anyone complaining.  Hard to believe, I know, but that is maybe one indirect advantage of the current political polarization.

And why should you complain about satellite radio payola?  Without payola, the stations choose songs (directly or indirectly, through dj instructions) to pull in the marginal subscriber.  With payola, payments from IP holders become a separate influence on program content.  Those payments are most likely to come from IP holders whose products show a high elasticity of demand with respect to advertising.  In other words, the influence of producer surplus rises, relative to consumer surplus.

Intuitively, that seems to me “music that a lot of listeners already are familiar with, even if they don’t know that a new boxed set just has been released” is how that category translates into satellite radio circa 2017.  Or, in other words, George Harrison.

Perhaps the most underrated George Harrison song is “You.

Addendum: Interestingly, payola in earlier parts of the 20th century seemed to favor music for the young, black music, and new, previously undiscovered artists.  It’s worth thinking through why this has changed.  For 1950-2000, there is no “marginal subscriber to radio” the way there is for satellite radio, rather most listeners are in the relevant network.  Furthermore, today’s satellite radio listeners are I believe considerably older and somewhat wealthier than the typical radio listener, either now or earlier.  When more or less everyone was on the “free radio network,” the high elasticity of profits with respect to advertising was for the artists who otherwise wouldn’t get much exposure.  In contrast, today it is for “golden oldies,” where the taste for the product already is there but information about availability may be lacking.

Here are previous MR posts on the economics of payola.


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