Payola Case:

I noticed this article on the payola settlement the other day, which dusted off old memories from my Econ grad student days reading Coase explaining the efficiency of payola in the recording industry. Apparently some lessons have to be relearned every generation or so.

Josh Wright guest-blogging on the Conglomerate has an excellent analysis of the case, with an update and extension of Coase's classic article, plus an explanation of why similar deals are efficient in other contexts as well (such as grocery store slotting).

I love his closing paragraph on the unintended consequences of General Spitzer's "victory":

Because radio airtime is a substitute for advertising, it is completely unsurprising that music publishers desired to collude to stop advertising --- an important dimension of competition for record sales. Collusion is notoriously difficult to accomplish in the first instance, and even harder to sustain because members of the cartel increase profits by deviating from the collusive agreement. Successful collusion often takes a third party to regulate the agreement and punish defectors. Occasionally, would-be cartel members are able to persuade the government to take the job. It appears that Spitzer may succeed where the recording industry has failed for over a century by stepping up to police the industry restriction on competitive payments for spins.


Sorry, I originally forgot to post the link to Wright's post. It is there now.