Simple Arithmetic Without the Economics

Writing on the implications of the proposed Sirius-XM merger, Marc Fisher engages in a discussion of competition based on dubious assumptions. Consider:

Think about it: Can you name one example of a new consumer technology that was guaranteed to a single provider and still served customers well? (Don’t everyone say “cable TV” at once.)

Fair enough on the surface, but how is it economically any more sane to guarantee two and only two competitors in a new consumer technology, as the FCC did? How might the market have shaped up had the federal government not impeded the natural development of satellite radio? We’ll never know, of course, but that isn’t sufficient to say we’ve achieved the optimal market condition. Only the central planner is so presumptuous as to assume such nonsense.

[Sirius CEO Mel] Karmazin, who would be chief executive of the combined satellite provider and is leading the charge for a merger, counters that listeners would benefit by getting the best of both services without having to pay for two subscriptions. To bolster that claim, the companies propose a menu of pricing options: Subscribers could keep their current service at the same price they pay now; add the “best of” the other service for an extra $4 a month; or choose to get fewer channels at a lower price. But while the companies tout these choices as the a la carte offering that cable TV has never consented to, the fact remains that if you want more channels under a combined XM-Sirius operation, you will have to pay more.

I think that last argument is supposed to be a zinger. If you want more, you must pay more. Holy Batman, the injustice! It’s good to clear that up, since under the current dictate from the FCC, if I want more channels, I have to pay… more? Oh, wait.

The danger in offering packages with fewer channels is the same risk cable TV companies have warned against for years: If consumers can pick and choose channels, that undermines the whole business, because inevitably, the bulk of the audience will spend most of their time listening to a relative handful of channels. Less popular channels, now subsidized by a flat subscription fee, would wither away.

We must have competition, except when it interferes with anyone’s preference for what should be offered.

How long would more obscure, low-rated satellite programming such as Sirius’s Underground Garage rock or NPR Talk channels or XM’s Cinemagic movie music or choral classical outlets survive in a monopoly, a la carte system? And if the range of programming narrows, what is satellite offering that AM and FM do not?

And if a merged Sirius-XM stopped offering content compelling enough to “force” people to pay, wouldn’t the departure of subscribers to free radio be a fairly important incentive to offer more content? How does this competition thing work again?

Virtually anyone can start an Internet radio station these days [ed. note: if you can afford the exorbitant royalty fees for a format that generates little revenue.] and play an intriguing mix of music. But only XM and Sirius — and National Public Radio, perhaps — have the resources to produce a great range of creative, professionally produced programming: Bob Dylan’s explorations in music and storytelling on XM; original radio dramas; XM’s Artist Confidential series of sessions with big-name performers; and specialized programs for truckers, gays, Latinos, NASCAR fans, Broadway lovers, opera buffs, movie-music mavens, presidential campaign addicts and on and on.

That programming diversity is what justifies giving XM and Sirius a chunk of the government-licensed radio spectrum. …

No, the central planner’s belief that such programming diversity is the correct mix for customers, whether customers want it in sufficient quantity to justify its cost, is the excuse offered to perpetuate a two – and only two – competitor market. This, despite the evidence cited earlier in the essay that most subscribers to either service listen to a small subset of the offered channels.

… Reducing the two services to a satellite monopoly will inevitably bring about a diminution of choices, along with higher prices. …

This is a blanket statement unsupported by the case made in the essay. Prices only rise if the subscriber wants more content. I know I’m supposed to be outraged by that, but I’m not. And if the merged company dumps the niche programming he likes, he cancels his subscription. That’s a useful signal to the company. If it happens enough, imagine how the company might respond with some combination of more content and lower prices. But that only occurs if there are two – and only two – competitors. Because that’s the free market.

… At XM’s Washington headquarters, the number of producers and DJs would decline, meaning more formulaic programming — if XM even remained here. How long would Karmazin keep production facilities in both the District and New York, where Sirius is based?

An individual how lives in Butte and wants to hear both Howard Stern and her beloved Pittsburgh Pirates should care about the employment prospects of producers and DJs in the Washington, DC area, why? Based on what Sirius and XM have said, she could get both for less money than she would have to pay now, but only if the companies merge. How is she harmed?

Aside from the gain I’d likely receive as a Sirius investor and the definitive gain I’d receive if my Sirius subscription included Major League Baseball, this merger should occur because the government has no legitimate basis to be involved, much less deny a free market outcome based on some subjective criteria of consumer benefit.

Surely there’s an intern who can use Google.

There have been many annoyances from the national and local media this week. I don’t intend to focus on any of them beyond this:

About our name

Our official name is Virginia Polytechnic Institute and State University, but using the full name is cumbersome. Thus, using “Virginia Tech” is preferable in all but formal uses.

Virginia Tech is used in news releases, feature articles, and publications and on the Web. When using the full name of the university, never use an ampersand instead of “and.” Never use VPI&SU, VPI and SU, VA Tech, or Virginia Tech University.

“Tech” is acceptable after a first reference to “Virginia Tech,” but it should not be used repeatedly or solely.

“VT” and “Va. Tech” are acceptable only in limited, informal situations, such as a news headline where space is tight. Do not use “VT” or “Va. Tech” in body copy, in titles of publications, on signs, or in any formal publication.

To every media outlet determined to continue discussing “Virginia Tech University,” please stop. That school does not exist. Those who know this, and there are many of us all over the country and world, your desire to sensationalize at the expense of even the most minimal amount of research shines through. Is that what you want?

Bigotry can be defensible?

From Andrew Sullivan, a comparison of bigotry:

As for Sharpton, surely Imus hs a minor, but valid point. Sharpton deploys the vilest form of racist assumptions against whites in general, and gets away with it. He got away with it while accusing specific people of rape – people who turned out to be innocent. Again, since whites still enjoy vastly more cultural power than blacks, Sharpton’s bigotry is more defensible than Imus’s. But it’s still bigotry. (And, to give Sharpton his due, he has spoken out against the rhetorical depravity of much hip-hop.)

Surely Mr. Sullivan left something out of that paragraph? Bigotry is not defensible. When we start laying out levels of defensibility, we start laying out levels of acceptable responses to the same type of statements. A standard with degrees based on victimization will never end well, as we should be able to see from the current Don Imus mess.

[Insert Witty, Accurate Title]

I’m not an attorney, but I’m fairly certain the relevant CNN editor botched attached to this story:

A judge violated a juvenile’s free-speech rights when he placed her on probation for posting an expletive-laden entry on MySpace criticizing a school principal, the Indiana Court of Appeals ruled.

The three-judge panel on Monday ordered the Putnam Circuit Court to set aside its penalty against the girl, referred to only as A.B. in court records.

“While we have little regard for A.B.’s use of vulgar epithets, we conclude that her overall message constitutes political speech,” Judge Patricia Riley wrote in the 10-page opinion.

The state filed a delinquency petition in March alleging that A.B.’s acts would have been harassment, identity deception and identity theft if committed by an adult. The juvenile court dropped most of the charges but in June found A.B. to be a delinquent child and placed her on nine months of probation. The judge ruled the comments were obscene.

The title of the article?

First Amendment extends to MySpace, court says

I doubt that was up for consideration. The meat of the story seems to be whether the school’s punishment of the girl’s speech was constitutional. It doesn’t seem to matter that she posted her rant on MySpace, any more than if she’d written it on her arm and walked sleeveless around her local mall.

I know how hard it is to come up with effective, catchy titles from blogging for 3½ years. If I can’t be witty, I aim for accurate. Anything else is just a punt. I’m not charging for my product and I adhere to that. CNN should, as well.

For what it’s worth, I don’t think the judges had any business inserting the court’s opinion that it has little regard for her vulgar epithets. So what? If it has no bearing on how the case should be interpreted under the law, keep the subjective disdain out of the ruling. I might accept “While the court recognizes that A.B.’s use of vulgar epithets is unpopular, …” or some such pandering to community morals. I doubt it, but even then, speech is speech.

The apology machine is in gear.

Don Imus said something stupid and offensive¹. Normally I wouldn’t care because I don’t listen to him. There is no need to decide whether or not I will listen to him. I just don’t. I trust others to do the same, if they’re so compelled. But the fallout is absurd:

Imus said he hoped to meet the players and their parents and coaches, and he said he was grateful that he was scheduled to appear later Monday on a radio show hosted by the Rev. Al Sharpton, who has called for Imus to be fired over the remarks.

“It’s not going to be easy, but I’m not looking for it to be easy,” Imus said.

Sharpton has said he wants Imus fired and that he intends to complain to the Federal Communications Commission about the matter.

“Somewhere we must draw the line in what is tolerable in mainstream media,” Sharpton said Sunday. “We cannot keep going through offending us and then apologizing and then acting like it never happened. Somewhere we’ve got to stop this.”

I agree. Such nonsense as this has no place in our society. Yet, people have the right to believe and say such racist ideas. If someone wants to put this on the airwaves, don’t listen. It’ll stop eventually. Easy enough?

Going to the FCC, though, is ridiculous. What is the FCC supposed to do? Even in the context of the unconstitutional mission of the FCC in monitoring “indecency”, Imus’ words were merely objectionable. How strong are our ideas of modernity if the truth of equality can’t withstand one deejay? How strong will they become if “respect” for those ideas is imposed by the government? Sheer lunacy.

¹ The article includes what he said. Read it there, if you’re interested.

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.

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.

Competition Over Central Planning

Over at Cafe Hayek, Russ Roberts has an excellent commentary on FCC Chairman Kevin Martin’s concerns about a Sirius-XM merger. I agree with Mr. Roberts entirely, and as a Sirius subscriber, I’ll pay more if I can get the same quality Sirius service I have now and Major League Baseball.

One bit of Mr. Roberts’ post struck an interesting thought:

Five years ago there was no satellite radio. When one company came along (I don’t know who was first, Sirius or XM), should the FCC have shut them down for daring to monopolize the market? So why is it now that there’s two going back to one we have a potential calamity that the government has to worry about?

That’s an excellent question. Sirius was formed first, but XM was the first to broadcast. For those who think the government has a legitimate function in regulating this way, the government should’ve mandated that the two companies begin broadcasting on the same day. That would’ve been the only fair way to have them compete on equal footing. It can artificially decide that two is the magic number of satellite radio providers. It should be able to dictate business conditions, too. No?

I guess the automated e-mail service is down.

The Smoking Gun reports that the Super Bowl broadcast, namely Prince’s phallic silhouette and the Snickers commercial showing two guys kissing, generated “about 150 complaints to the Federal Communications Commission.” Wonderful. Who knows what the FCC will ultimately do, although by the absurdity of the complaints included in the Smoking Gun story must surely indicate to the FCC that it must do nothing.

The complaining viewer on the main Smoking Gun article believes decision on who televises the Super Bowl belongs to the FCC. There is also a very decent addition that Prince is “a scumbag.”

A few more choice letters fall into two basic themes. First, the FCC is should attempt to censor anything that might be objectionable. Second, they were “tricked into watching gay sex!”. Gotcha. But my favorite falls a bit out of that and into blanket paternalism.

“This violates our religious beliefs and exposes our children to obscene and disgusting material they are taught are wrong. I want something done about this!!”

Read this as slowly as possible to get my incredulous tone. If they are taught this type of behavior is wrong, how will they be corrupted by seeing it. Seeing it only confirms that it exists. It is not a judgment for or against. Presumably, parental teaching will apply the subjective interpretation. Are the parents so afraid of their own ineffectiveness that they expect the government to dictate to America what they teach their children? And if it’s so ineffective coming from them, why are they teaching their children anything? And why would it suddenly be more effective coming from the government?

My advice: stop watching the halftime show.

It’s back? It was gone?

Does Rep. Greg Walden have a split personality?

Speaking to broadcasters yesterday, Rep. Greg Walden (R-OR) of the House Telecommunications Subcommittee said he could envision the Supreme Court taking away the FCC’s powers over indecency on the airwaves. The FCC’s recent decisions on indecency are being challenged in court by three of the major TV networks.

Walden says that he supports an increase in FCC fines and the Commission’s powers, but says that the vague nature of past indecency rulings could give the courts the opening they need. …

At the NAB-sponsored conference in Washington D.C., Walden also said to expect more government control over ad content and pressure on TV violence. “Keep your hand next to the panic button. Advertising is likely to get blamed for everything. Forget personal responsibility. Paternal government is back.”

The First Amendment gives the Supreme Court all the opening it should need to fight censors like Rep. Walden. That it ignores its duty is only a symptom of the larger problem with government. He warns broadcasters that they need to be more proactive against paternal government while seeking to expand the power of that paternal government. How complicated is “Congress shall make no law…“?

Via: Fark