PAPERS WE’RE READING: “Pay-to-Playlist: The Commerce of Music Streaming”

1958 saw the tunes of Chuck Berry, Elvis Presley, Fats Domino, and Buddy Holly and the Crickets steaming across the country on the express bound rock-n-roll train. The Big Beat, a nationwide television program filmed out of New York with disk jockey Alan Freed, was the train’s conductor.

However, on May 3 of the same year, the train was derailed. Freed, hosting Chuck Berry on his show taped in the Boston Arena, remarked, “I guess the police here in Boston don’t want you kids to have a good time.” These words were the sparks of a riot that spilled out into the streets surrounding the Arena, and rock-n-roll was banned in Boston and five other Northeast cities.

Throughout the 1950s, music publishers and record labels began providing radio stations with cash, gifts, and royalties in exchange for the ears of consumers. This practice of pay-to-play, or payola, had existed as early as the nineteenth century. Nevertheless, Congress outlawed payola in 1960. Freed plead guilty to two counts of commercial bribery in 1962 and was forced to pay fines and end his television program.

Today, streaming platforms have replaced radio stations resulting in a new form of payola with payments going to influencers and playlist curators on these platforms. Currently, online platforms are not regulated by the Federal Communications Commission, leaving the practice unregulated federally, with only a few states implementing their own.

In a research paper set to be published in the University of California Irvine Law Review later this year, Christopher Buccafusco and Kristelia García argue that the factors that supported an earlier regulation of payola are simply not applicable to streaming pay-to-play practices.

Historically, proponents of payola regulation have relied primarily on two arguments. First, monetary influence leads to bad editorial judgments that may lead consumers to make misinformed decisions about their music tastes. Second, a system in which artists have to pay for their music to be played will necessarily harm artists with fewer resources.

Though these arguments are compelling if valid, the authors note, this is simply not the case with the contemporary music distribution landscape.

“The intuitive appeal of this argument is strong,” writes the pair. “Historical practice and the structure of the contemporary music industry suggests that it is simply not true.”

Streaming platforms are not direct competitors with music sales but are rather supplements. The authors also argue that the barrier to entry for getting songs on playlists on a platform like Spotify is much lower and more competitive than a local radio station.

Furthermore, they note that some of the payola practices include social media users with large presences on sites, such as Tik Tok, Twitter, and Instagram, sharing new music. Additional regulation runs the risk of violating fair use laws but could also lift the barrier to entry for some up-and-coming performers.

The authors note that Tik Tok has begun signing licensing deals with major record labels. If entrants must meet or beat those rates, as further regulation would require, it would substantially impact their ability to compete.

From the days of sheet music and terrestrial radio, the music industry has seen significant changes. Many of them have been for the better, allowing for cheaper products, more voices, and music to fit every consumer’s taste. The authors believe policymakers must not be too eager to regulate this progress away.

“We advise lawmakers to tread carefully when considering whether and how to regulate streaming payola, or to subject either users or the platform to copyright liability for these uses,” warned the pair. “The traditional justifications for payola regulation aren’t particularly convincing, and they are even less so in the streaming context where pay-for-play offers an unexpected access point for smaller artists with fewer resources, while positing little to no downside for consumers.”

Christopher Buccafuso is a Professor of Law at Yeshiva University Cardozo School of Law and Director of the Intellectual Property & Information Law program.

Kristelia García is an Associate Professor at the University of Colorado Law School and Director of the Intellectual Property Initiative at the Silicon Flatirons Center for Law, Technology, and Entrepreneurship.

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