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Partnership or Payola?

Geeks get technology, but they don't always understand economics. John C. Dvorak, one of the brightest journalists in tech, has recognized many of the important economic factors effecting the tech industry, such as the Sarbanes-Oxley Act. But on the latest episode (78) of Cranky Geeks, his weekly video review of tech news, Dvorak and the show's assembled guests lambaste studios for making deals with HD-DVD or Blu-Ray, going so far as to call the deals format payola. Is this a fair charge?

If this is a fair accusation, then it would seem to me that any partnership or exclusivity deal between two companies is some form of payola. For example, restaurants that carry only Coke or Pepsi products are committing an egregious act of cola-payola. But we don’t think we’re being bamboozled when we discover that a restaurant has only one brand or another—we expect it.

So what’s different with formats, and for that matter, music. If disc makers want to dump millions into winning a format war, great. Large companies can subsidize the price of their discs all they want, I’m happy to buy HD-DVD or Blu-Ray at a reduced cost on the manufacturer’s dime.

If all of this is about fears that we’ll get locked-in to one format or another and then be charged monopoly rents for our disc-based content, think again. VHS, DVD, and CD have all been format “monopolies,” but prices have never skyrocketed—they’ve fallen over time. While some might think that CD-based music should be cheaper, apparently many people are still willing to fork over $18 for a CD filled with teenage emotional tripe. You can’t argue with supply and demand.

While we’re on the topic of music, I still don’t understand why payola gets a bad rap. An obscure artist could become an international sensation if played a few times over the air in major markets, so why shouldn't airplay be for sale? The argument seems to be that disclosure is necessary. People should be informed if a song is a choice of a DJ under the influence of commercial pressure, or just under the influence of the usual cocktail of psychotropics taken by DJs. This seems reasonable. Google places ads on the right, algorithm-based search results on the left. Informing consumers about how what information or which song comes to them just makes good business sense. But would it then follow that stations should also announce that they play a lot of Britney Spears or Justin Timberlake because their sponsors prefer them to acts like Pantera or Gwar?

We can’t escape the fact that commercial interest are at play in all facets of society. But merit isn’t undermined by commercial interest, it’s rewarded. If something is good—good enough to sell—commercial interest insures that someone will be there to help get it to market.

As for the format wars, enjoy this one while it lasts, because we won’t be seeing any more of them. Discs are going the way of the dinosaur—leaving us with a world of digital downloads to bring us our music, movies, and other content. Future formats will be dealt with by installing a simple codec to our media player, alleviating us of format fights and the commentary that goes with them.

This post was updated, to repair broken outbound links, on December 20, 2019.