Valleywag’s post on “The New Payola” (which is a rehash of a WSJ post) is an interesting bite-sized insight. The gist:

Lily Allen, the young singer whose rocketed to stardom with songs such as Smile and LDN, says: “They won’t advertise your album unless you give them extra material.” Nobody is accusing Apple of traditional payola. The concessions it squeezes, from performers and their record labels, benefit consumers foremost, and Apple only in so far as the company cements their loyalty.

Exclusive content is a powerful customer acquisition technique. In the case of traditional payola, a chunk of change is exchanged under the table and the end result is typically worse radio content (any music that requires payola to get decent air time is likely not as good as the “non-payola” music it replaces on the air). However, in the case of this new Apple payola, a revenue-generating customer acquisition tool is exchanged (which is far better than illicit payola money that can’t move the company numbers) AND the end result is a bigger content catalogue which improves the iTunes service. Smart move.

It’s a double win for Apple and a loss for both content creators and consumers. It’s a loss for content creators because it limits the amount of revenue they can receive from their new content by making it an Apple exclusive. And, it’s a loss for consumers because the content is locked up in the Apple store. If you (the consumer) don’t want to patronize the DRM-laced Apple iTunes Music Store, then you can never get access to the content.

This tactic is not as illegal as traditional payola, and it is more effective than traditional payola. I’m surprised media companies that had their hands in both retail and radio didn’t try similar tactics, perhaps there was no overlap between radio and retail.