Category: Business

Rent-seeking protectionism is ugly when you confront it.

More on the proposed Sirius-XM merger, this time recapping recent research studies:

One of the main arguments against the merger, according to the Carmel Group, is that consumers’ audio options, particularly in the car, are limited. While some technology firms promise great advances that could bring more choice — such as in-car, high-definition radio and built-in MP3 technology — regulators should consider only what’s available now, the group says.

“The FCC and DOJ aren’t in the business of looking into some crystal ball and predicting some technology in the future,” said Jimmy Shaeffler, Carmel Group senior analyst and author of the group’s report released last week. “Somewhere down the line, maybe 5 years, 7 years or more, XM and Sirius can come back to this argument and possibly prevail.”

I wrote about this study last week when it first appeared. I must say, it’s mighty gracious of Mr. Shaeffler to permit Sirius and XM to come back to regulators and the National Association of Broadcasters, presumably with hat in hand, and ask for permission. Assuming they’re both still around, of course. But it’s not competition they have to worry about. Nope, that’s not evolved, and it would certainly be irresponsible to predict changes that will no doubt be glacial in speed. Look at where we were 5 or 7 years ago. So little has happened, it would be irresponsible to assume anything.

Nothing to see here, folks. The Carmel Group’s study is independent and unbiased, despite being paid for by the National Association of Broadcasters.

Voting to Bolster Political Egos

Residents of one New Mexico county voted to impose a tax on themselves to fund a commercial spaceport. (Two other counties will vote soon.) The usual bromides about economic development seem abundant, but I like this one:

Rick Homans, chairman of the New Mexico Spaceport Authority and the state’s secretary of economic development, said the referendum is sufficiently far ahead in the counting of provisional ballots to declare victory, although an official count has not yet been announced.

“This positive vote ignites the final design, engineering and construction of Spaceport America,” Homans said. “New Mexico is prepared to launch a whole new era of discovery, exploration and commercial activity in space, on the moon and beyond. We have nothing but beautiful black sky ahead of us.”

Any guesses who will be taking credit for such visionary brilliance? Does it matter that a commercial spaceport is not even distantly related to a legitimate government task? I don’t for a second believe that the commercial spaceport will be used for discovery and exploration beyond what space tourists seek. But still. Discovery! Exploration! Besides, there’s (allegedly) a market, so build it!

The $200 million spaceport is to be built in scrubland near the White Sands Missile Base and is expected to be open for business by early 2010.

British entrepreneur Richard Branson and his company Virgin Galactic have signed a long-term lease with the state to make New Mexico its international headquarters and the hub of a space-tourism business.

Those lease terms are favorable to Virgin Galactic, costing it $27.5 million total over the 20 years of the lease. Clearly that doesn’t recoup the $200 million “investment” approved by a majority of voters. I can’t help thinking that the same standard that applies to every other “private” business should apply here, vote or no vote. If it’s a viable commercial business, the business itself will fund the spaceport. If it can’t fund the spaceport, it’s not a viable business. That should be the end of the analysis from the state’s viewpoint.

Avoiding Capitalism Because Winners Aren’t Pre-determined

Is this the type of “research” our government listens to?

The influential research firm Carmel Group, whose analysis helped kill the 2003 merger of EchoStar Communications Corp. (ECHO) and DirecTV Group Inc. (DTV), will release a new report Tuesday that outlines arguments against merging satellite radio companies Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc., The New York Post reported in its Tuesday editions.

Sponsored by the National Association of Broadcasters, which has already come out against the deal, the 11-page independent white paper includes a point-by-point rebuttal to the six main arguments put forth by Sirius and XM in favor of a merger.

I like having research back up my opinions as much as anyone, but this is shameless. I shouldn’t worry, though, because I’m sure the National Association of Broadcasters is looking out for customers and only customers, whether those customers choose to purchase the free broadcasts of its members or the non-free broadcasts of its competitors non-members. The FCC will probably fall for it, which is why Sirius’ stock price is down so much.

Catching Up to What It Should’ve Offered at Launch.

“Complete My Album” is so obvious that it should’ve happened much earlier.

Apple introduced the “Complete My Album” feature Thursday on its iTunes Store. It now gives a full credit of 99 cents for every track the user previously purchased and applies it toward the purchase of the complete album.

For instance, most albums on iTunes cost $9.99 so a customer who already bought three tracks can download the rest of the album for $7.02.

Previously, users who bought singles and later opted to buy the album had to pay the full price of the album and ended up with duplicates of those songs.

The album price reduction is good for only 180 days after the initial purchase of individual tracks.

Indeed, I’ve thought this to myself many times when purchasing singles. The advantage of iTunes is being able to sample individual songs before buying a full album. If I buy a song and then I like the album, I want to not pay for the same digital download again. The primary goal of technology should be to make life easier/better for customers. When doing this, the company can succeed, as well. Bravo to Apple for catching on in another area.

Please tell us if you steal from us.

With a recent update through its Automatic Update feature, Microsoft proves that it’s incompetently evil, at most. At issue, it released Windows Genuine Advantage Notification (KB905474). The description is as follows:

The Windows Genuine Advantage Notification tool notifies you if your copy of Windows is not genuine. If your system is found to be a non-genuine, the tool will help you obtain a licensed copy of Windows.

Good grief. I know my copy of Windows is genuine. I do not need notification. I purchased every computer I own, and they still have the original operating system included when I turned them on for the first time. I’m honest; I don’t need this surveillance. Thanks for the trust, though.

If I happened to be the type of person who would install a pirated non-genuine copy of Windows, does Microsoft really believe that I would utilize its help in obtaining a license?

The idea is preposterous. Yet, there is the option from Microsoft, treating me like I’m incompetent or stupid. Yes, it has a significant portion of the market for several key software product types. So what? There are options to avoid Microsoft brought about by its own incompetence at innovating and/or adapting to the market’s demands.

Post Script: None of this applies to the Xbox 360. I love my Xbox 360.

I hate the tiny screen of MLB.tv.

I’m beating Major League Baseball’s anti-fan deal with DirecTV repeatedly, but it keeps providing fodder.

In Demand president Rob Jacobson, whose company is owned by affiliates of the companies that own Time Warner, Comcast and Cox cable systems, offered to carry the package on the same terms that DirecTV is for the next two seasons while putting off the issue of The Baseball Channel until it launches.

“This would ensure that for the next two years at least, all baseball fans would have access to the `Extra Innings’ package,” he said. “If we’re unable to reach an agreement when the channel launches, we’d give baseball the right to cancel the `Extra Innings’ deal. We think this is a fair compromise.”

[Sen. John] Kerry, trying to play the role of mediator, got behind the effort.

“What’s the matter with that?” he asked Bob DuPuy, baseball’s chief operating officer.

That’s a valid question, but only coming from a fan. [And I’m asking it: what’s the matter with that? – ed.] Congress, in its official duties, should not be determining the specifics of business deals in the private market. I know baseball and television aren’t fully private markets the way a corner store and a candy producer would be, but they should be.

“When fans react, Congress reacts,” [Sen. Arlen] Specter said. “You may be well advised to act before we do.”

Sen. Specter’s first statement is wrong because it amounts to nothing more than mob rule. He’s parading it as democracy, but we’re talking about the same beast. I’m angry about the deal. Still, it’s not something I expect my congressman to address. Sen. Specter’s concern may be correct. His actions are not.

Which gets to his second sentence. Stop threatening. Act or shut up. I’ve already stated that Major League Baseball should not have antitrust exemption. As long as it exists, though, dictate. That way everyone understands the true nature of the deal. Instead, we get blabber about the interests of consumers until someone inevitably steps up with cash or politicians back down without dignity. It’s tiresome.

I still hold out hope that a deal will get done. I can’t fight the fear that Major League Baseball only offered the Extra Innings deal to cable and Dish Network as a front to later pass blame on an outside party for not meeting the terms. I despise Bud Selig.

Informed, educational thoughts on antitrust absurdity at A Stitch in Haste.

That’s very 2005.

I don’t think I’d brag quite so much if I’d lagged so far behind the market.

NBC Universal will join Rupert Murdoch’s News Corporation Inc. to provide content — such as Fox’s “24” and NBC’s “Heroes” — for distribution beginning this summer on AOL, Yahoo, Microsoft Corp.’s MSN and News Corp.’s MySpace sites, the companies said today.

Also included in the new free, ad-supported service will be movies from Universal Pictures and News Corp.’s 20th Century Fox studios, such as “Borat” and “Little Miss Sunshine.”

“This is a game-changer for Internet video,” said News Corp. President Peter Chernin. “We’ll have access to just about the entire U.S. Internet audience at launch. And for the first time, consumers will get what they want — professionally produced video delivered on the sites where they live.”

What does it even mean to “have access to just about the entire U.S. Internet audience at launch”? YouTube has that same access, although it had to build a brand name that established media companies already possess. YouTube didn’t take long to overcome its disadvantage, so there’s obviously more to this product than just access.

If implemented correctly, I don’t see a reason for this to fail. Content is king. However, proper implementation (providing extensive user control) is a major assumption. Like the music industry sitting around for half a decade while peer-to-peer networks exploded, companies with video content will probably enact a plan based in fear (think extensive DRM) and arrogance.

I might be too old, though. I’ll stick with Netflix and DVR.

Cable throws a strike. No, wait, it’s a ball.

I’m cautiously optimistic and peeved, even though I’ll probably get most of what I wanted from the beginning.

Cable television said it offered to match DirecTV’s deal for the “Extra Innings” package of out-of-market games, but Major League Baseball said the proposal fell short.
…

IN Demand, owned by affiliates of the companies that own the Time Warner, Comcast and Cox cable systems, said Wednesday it was agreeing to the terms and that its partners would carry The Baseball Channel when it launches in 2009 to at least the same number of subscribers who will get the channel on DirecTV.

Here’s why I’m cautious:

“The communication sent to our office today by iN Demand is not responsive to that offer,” [Bob DuPuy, baseball’s chief operating officer] said. “In spite of their public comments, the response falls short of nearly all of the material conditions (among them requirements for carriage of The Baseball Channel and their share of the rights fees for Extra Innings) set forth in the Major League Baseball offer made to them on March 9.”

DuPuy said the March 31 deadline to match remains.

At this point, with ten days to go, I don’t imagine this deal falling apart. Yay, me, since I tried to watch a game on my computer last night. The experience was as excruciating as I’d imagined. Three hours of television isn’t meant to be watched on a tiny screen. I’m not signing up for DirecTV, more because I don’t want to drill holes in my house than anything, so the status quo¹ would be excellent.

I’m peeved because this means that Bud Selig gets what he wanted all along, times two. That makes me angry. Sure, this can be seen as a shrewd move, but that’ll be nothing more than spin. Selig sold out his hardcore fans. He only relented when they complained, and probably then only because someone else in the Major League Baseball office interpreted the obvious signals of disgust. He shouldn’t be rewarded for that with many extra millions. He will be because I’m an addict. Still, it makes me ill.

Go Phillies.

¹ I know my cable company will have to raise prices to pay for this. I’m crazy enough about the Phillies that I have a higher threshold for the inevitable financial pain than I should.

Ability to Speak Does Not Validate the Opinion

Many people fought for the title of stupidest logic yesterday.

The proposed merger of the nation’s two satellite radio companies came under sharp criticism yesterday from the chairman of a Senate panel that monitors antitrust matters, who said consumers probably would suffer if the deal goes through.

“You’d be virtually unrivaled, unchallenged in this area,” said Sen. Herb Kohl (D-Wis.), chairman of the Judiciary subcommittee on antitrust, competition policy and consumer rights. “You’d have no competition — what a business!” he told Mel Karmazin, chief executive of Sirius Satellite Radio, at a two-hour hearing.

Right, and satellite radio subscriptions are price inelastic. Whatever the merged company wants to charge me, I’ll pay. I’m a sucker and an automaton. If the merged company offered a service to take over my financial well-being and make choices for me, I’d give up control in an instant. I am beholden to the power of Mel Karmizin.

That’s pretty bad, but this is like what I expect to say after a kick in the head.

Mary Quass, chief executive of NRG Media, a radio company in Iowa, said local AM and FM stations cannot match Sirius’s and XM’s ability to send scores of channels to every corner of the country. Listeners and advertisers might abandon local stations, she said, and “consumers will be the losers.”

If listeners abandon local radio stations, they, as those consumed, will choose to “lose”. This makes sense in what understanding of reality? The government needs to step in because I might make a decision to abandon local stations. I’m unable to know that I’d lose by doing this. Thanks, but I can make up my own mind. Local stations already lost me, anyway. There are only so many Yuk Yuk D-Double-E-Jays I can suffer, and I’ve already passed my lifetime limit.

Of course, a company like Clear Channel owns lots of local stations, all over the country. Somehow this seems like radio companies send “scores of channels to every corner of the country”. Ms. Quass’ objection surely has nothing to do with being CEO of a competing radio company.

Just for fun, I like this euphemism for central planning of the essential satellite radio product:

Gigi B. Sohn, president of the advocacy group Public Knowledge, urged the government to set price caps and other restrictions on the merger. “We believe that a properly conditioned merger would be in the public interest,” she said.

Baseball gloves are “properly conditioned”. Hair is “properly conditioned”. This is plain vanilla government regulation designed to give consumers what they “should” get and to protect specific donors constituents. No doubt the latter decides the former. Goverment knows best, after all.

Contract every team except Boston and New York.

Major League Baseball finally announced its deal with DirecTV to air is Extra Innings package. It’s not an exclusive deal at this point, but it might as well be. The cable industry and Dish Network have until March 31st to match the terms agreed to by DirecTV. Cable would be hard-pressed to match that offer because DirecTV is insane. I can’t imagine a scenario in which Dish Network could agree, having only 50,000 Extra Innings subscribers last year. Still, this is over the top:

Dish Network assailed the new agreement. “When our customers are suddenly cut off from watching their favorite sports teams on TV,” the company said in a statement, “it is time to ask whether the market is working. This is both anti-competitive and anti-consumer.”

The deal is certainly anti-consumer, for all the reasons I’ve stated. But the market is not wrong. Two companies that reach a mutual agreement can’t be considered a broken market. Stupid, definitely maybe, but not broken.

As a perfect example of how stupid Bud Selig is in his patronizing claims that fans can still see lots of baseball, consider the 2007 schedule offered by Fox. Beginning April 7th, it will air a game every Saturday. In the first month we get these choices:

Saturday, April 14

  • Los Angeles Angels of Anaheim at Boston Red Sox

Saturday, April 21

  • New York Yankees at Boston Red Sox
  • St. Louis Cardinals at Chicago Cubs

Saturday, April 28

  • Boston Red Sox at New York Yankees
  • Chicago Cubs at St. Louis Cardinals

Saturday, May 5

  • Seattle Mariners at New York Yankees

My vision might be bad, but I see April 21st and 28th looking exactly the same, with only the stadium scenery changing. Whoopee. And the two bookend weekends present us with either the Red Sox or Yankees. That’s some amazing diversity. Well done, Bud. Thanks for looking out for fans.