It’s the 48th inning. Everyone’s exhausted. Keep playing!

Steven Pearlstein offers a few reasons why the government should block the proposed merger between Sirius and XM. Mostly, it’s boilerplate fear of big business and its assumed power to dominate people’s lives. I think I yawned once or twice while reading it. He wrote the perfect summation against his argument in his conclusion. It only takes a moment of looking beyond the words.

What we have here, folks, is a case of two money-losing companies locked in what has become ruinous competition, from which they hope to escape by merging. It may be that, given the economics of the business, there is room for only one to survive and prosper. But if satellite radio is such a “natural monopoly,” consumers will be better off if the companies are forced to duke it out until one prevails and the other dies. The antitrust laws were designed to foster competition, not to foreclose it by bailing out competitors that overpaid for talent, over-invested in plant and equipment or over-promised results to their investors.

How do we know consumers will be better off if the two companies continue to bloody each other? We can assume it, but it’s just an assumption. Sort of like the assumption that the FCC made that the public interest would be best served by allowing two, and only two, competitors to purchase a satellite radio license. How do we know what will be best in the future?

The explanation generally revolves around some imagined significant harm that will result from a monopoly. Only history doesn’t always show such harm. Would we have a viable, efficient economy with the same power if regulators had stopped steel or oil consolidation? Evidence suggests that those industries continually improved their manufacturing methods, increasing efficiency and lowering prices. We should not act in response to potential harm. If the merged company actually exhibits monopoly behavior, then intervention may be warranted. Until then, it’s wise to realize that the threat of intervention acts as an incentive against monopoly behavior.

More to the case at hand, perhaps it’s better to let one of the two surrender and preserve assets for productive use than to make them fight each other until one company is toast.

“You see yourself as some sort of humanitarian, don’t you?”¹

Now that I’ve had a day or so to digest the proposed SiriusXM merger, I have a few more coherent thoughts about it. As a Sirius investor, I think this is ultimately the right deal. I know that CEO Mel Karmazin is offering the usual talk of synergies and cost savings. This is standard fare for such transactions. I have no doubt a combined company will realize some of that, but I’m not silly enough to assume it’ll be grandiose or immediate. Any significant benefit from this is years away, at least. I’m okay with that because I’ve invested for the long term. Most of the time I only know the general Sirius share price. When my shareholder ballot arrives, I’ll check “yes” with realistic expectations.

As a customer, I’m thrilled by this deal. As I mentioned, the ability to receive Howard Stern and Major League Baseball on one subscription is irresistible. I find Sirius’ radio programming better (particularly the original MTV VJs on The Big ’80s), and I’m a devoted Howard Stern fan. Those two items are year-round. That’s why I subscribe to Sirius. But the absence of Major League Baseball broadcasts is a huge frustration. This merger would solve that, even if the combined company offers a “cafeteria-style” selection of programming, as I’ve read. I can live with that. I don’t really care to have Oprah, Bob Dylan, Opie and Anthony, Nascar, or Martha Stewart. Give me Howard Stern and the Phillies for a reasonable price, and I’ll be a subscriber. To get me, it’s that simple.

However, the information announced so far is insufficient. The FCC and Department of Justice will have questions. First, Sirius and XM must convince the government that their market is not satellite radio, but audio entertainment. (I’d cite a reference for the term audio entertainment, but I don’t remember where I read it. I’ll give credit if I stumble upon it again.)

My audio choices at work are a perfect example. During a typical day, I’ll listen to Stern in the morning through my Sirius subscription. When that’s done, I’ll move on to my iPod and whatever music appeals to me at the time. Or maybe an audiobook. Then I might switch over to an internet radio station. On my commute home, I usually listen to terrestrial radio. When I get home, I have cable television, Netflix, and Xbox 360.

Every one of these things competes for my time and money. I can afford various subscriptions for those that require one, but if the programming on any one of them becomes stale or the price exceeds what I think it’s worth, I’ll cancel it. That’s the fate that HBO faces from my household as soon as The Sopranos is done. It’s barely $10 per month, but it isn’t worth it to me. I’m capable of making the decision better than the federal government, regardless of the implied public trust built into the artificial market created by government satellite licensing.

The short-term implications of this deal are also apparent, both as an investor and a subscriber. Sirius and XM work on separate signals, so each company’s hardware is incompatible with the other. I’ve been thinking about upgrading my Sirius receiver since the unit I have is several years out-of-date. But I don’t want to spend $300+ on a new receiver with all the features I want if I’ll have to dump it in a year when (if) the merger wraps up. I’ve seen no concrete answers on this, only that the companies are working this out. That’s wonderful, but current subscribers are left out in the interim if they want to upgrade.

As for potential subscribers, what incentive will they have to sign up now? The rational decision is obviously to wait this out until the executives offer answers. That will hurt both companies financially until they decide. That makes me nervous realistic about any short-term bump in the share price from this deal. The downward pressure on revenue and subscriber growth, which is what this industry needs least right now, is evident. The only responsible choice is for customers and potential customers to get answers soon. Essentially, I want the Heroes approach to answering questions, not the Lost approach.

I understand the hurdles this merger will face. In the end I think the government should get out of the way let it proceed. It will benefit customers when viewed with the correct understanding of the combined company’s market competition. I applaud the deal with guarded enthusiasm.

Full disclosure: Several times in the past, I subscribed to XM. For a brief time, I owned XM shares. For what it’s worth.

¹ The title of this entry is a quote from Heroes. Sylar said it to Mr. Bennett. I think we might be able to ask the same thing of the federal government as it reviews this deal.

Come back when you conform (and prevent HIV).

Yesterday, I found this frustrating article from an e-mail list I’m on. It’s in French, which I don’t speak, so I relied on a rough translation from the e-mail list member who sent it. Danielle verified that the translation I received is accurate as a literal translation. Any errors are as I received them, but I accept responsibility for any inaccuracies.

A Kenyan secondary school dismissed 20 pupils because they were not circumcised, fearing that they should be the object of mockery or violence on behalf of comrades, in this country where certain communities estimate that keeping ones foreskin is not hygienic, one learned Sunday from official sources.

The persons in charge for the secondary school for boys of Kiriani (Eastern Province) addressed to the parents of the 20 pupils a letter announcing their exclusion to them and asking them to proceed to the circumcision of their children so that they can take again the way of the school.

“This to inform you that your son may not present himself at school under the condition where he happens to be. You succeeded in registering your son in our school without informing us that he was different from the others, i.e. non-circumcised. You are requested to do the necessary within two weeks and to present yourself at school with your son as soon as he recovers” (after the operation), can be read in the letter of which AFP obtained a copy.

The circumcision is not compulsory to register in a school, but the headmaster of the college of Kiriani, F. NR. Githinji, explained that the pupils had been dismissed to prevent them from being the object of harassing on behalf of older pupils.

That kind of conformity, even if it’s more extreme than would occur here, is no different than the basic mentality in the United States among parents who circumcise to avoid any locker room embarrassment. It’s easier to teach children to conform through forced bodily modification than to disregard the opinion of another, future teenager. In any other context, we would see this for the fallacious joke it is. But we accept incorrect ideas about the male foreskin without question because we refuse to reject old ideas.

Here’s an idea: if the intact boys will be in a situation where their intactness will be apparent and subject them to harassment, the school has an obligation to protect those boys. It can’t shirk this obligation by sending them home for unnecessary genital cutting.

The related English-language version, courtesy of the BBC, is much shorter, without some of the critical details. That could be an editorial decision to present “just the facts,” but I don’t think so. One daft deft addition to the original article shows that there’s a bias. I’m not sure it’s designed to be “balanced” or to not present this school’s decision as the obscenity it is, but it exists.

Circumcision is not obligatory for admission to secondary school, but a study released in December said it reduced the risk of contracting HIV/Aids.

That’s not related to this story in any way. The BBC’s editors decided that this nonsensical mantra should be repeated. This is how irrelevant scientific ideas get pushed. The logic against circumcision as an HIV preventive and any cost-benefit analysis based in reality is simply inconvenient and not appropriate for the article (or any BBC coverage, for that matter). The BBC skewed the story in its attempt to provide a justification for the school’s irrational action instead of presenting the facts. Now people will read this story without thinking and agree that, yeah, the school’s action is a bit extreme, but it’s okay. They boys will be protected from HIV, in addition to the ridicule they’ll allegedly now avoid.

This is bullshit. The BBC should be ashamed.

Update: A Kenyan newspaper published an editorial against the principal’s decision. Kenya’s education minister George Saitoti said that the principal will face disciplinary action.

¹ Not incorrect, just irrelevant. It’s relevant to adult males, if they choose it for themselves. Until baby boys start having unprotected sex with HIV-positive women, or circumcision reduces HIV transmission through blood transfusions and intravenous drug use, circumcision is not indicated for the limited future possibility of a disease with a specific, identifiable sexual behavior.

Thank you, Janet and Justin.

I don’t need to see risqué commercials during the Super Bowl, nor do I much care about the halftime show. But I can only assume that Janet Jackson and Justin Timberlake are the root cause of this year’s debacle billed as commercials. My rough estimate is that, of the total aired, I viewed 50% talking animals, 40% violence, 8.7% CBS promos, 1% suicide, 0.2% GoDaddy breasts, and 0.1% funny/interesting. Wonderful. Next year, maybe a little creativity. Or just go ahead and give us 75% talking animals and 25% network promos.

I’m beginning to wonder if Mike judge knows something.

P.S. The amateur-created Doritos commercial, aired early in the game, was the only ad worth my time. The rest, particularly every ad from Chevy, stole time from my life that I will never retrieve.

P.P.S. Yep, I noticed the phallic homage from Prince during the halftime show. As I mentioned, normally I don’t care about the halftime show, but I watched last night because of Prince. I’m glad I did, because he’s always amazing. But the phallic silhouette was a subtle middle finger in the middle of an otherwise Disneyfied crapfest.

Promoting Ignorance

I seldom watch the evening news because everything it presents can be found in shorter, more productive (i.e., less sensational) formats on The Internets. Last night I stumbled on a segment on NBC where Brian Williams introduced the news that Exxon Mobil produced a record profit of $39.5 billion for 2006. Rather than taking the standard “windfall” profits route, Williams hit a different bit of stupidity. He set up the reporter to address this popular “outrage” by asking what incentive Exxon Mobil now has to find alternate energy sources. Ehhhhhhhhh.

I didn’t listen to the answer because, as he asked it, his implication lacked any notion of understanding or belief that Exxon Mobil might not drive its business into the ground seeking ever greater profits from oil. In the larger context of the economy, Exxon Mobil doesn’t have to perceive any incentive to find alternate energy. Perhaps Exxon Mobil doesn’t want to be in that business and believes that oil (and natural gas) will be around long enough that it can keep generating profits without alternate energy sources. I doubt its executives believe that, but it doesn’t owe anyone beyond its shareholders an obligation to adjust its business to market pressures. If alternate energy is potentially profitable, someone will pursue it. That someone will most likely include Exxon Mobil. This is not complicated.

Of course, the $20 billion or so that Exxon Mobil invested in exploration and research last year suggests that they’re at least working to find more oil, oil that we currently can’t reach or find. While not an alternate energy source, finding more oil delays the need for finding an alternate energy source. The scarcity and political ramifications that Williams probably thought he was asking about are a bit more complicated than one company generating a large¹ profit through its activities. If Williams wanted to make that point, he should’ve offered a monologue on how a $39.5 billion profit is socially irresponsible or some other pontification. He probably figured that Al Gore already has that covered, which left him free to continue his economically simple misunderstanding.

¹ I’ve made this point before, but it probably needs to be said again. In absolute dollars, $39.5 billion is impressive and mind-boggling. In the context of the expenses (and taxes) needed to create such a figure, a great deal of the luster wears off. As a percentage of total revenue, the net profit is only 10.45% (39,500/377,635). Many companies with a smaller absolute dollar profit have significantly higher profit ratios. To illustrate this point relative to Exxon Mobil, its revenue for the fourth quarter of 2006 decreased (pdf link) by more than $9 billion from the same quarter in 2005. Yet, it managed to keep net income mostly stable by lowering its costs. There’s obviously more thorough analysis needed to give that weight, but only politicians with a populist axe to grind would hammer its conservative results. Maybe I should hammer away at the “revenue” brought in by the U.S. government.

While important, this is where you start?

This article is incoherent for the last two-thirds, but it raises a wonderful opportunity to restore Constitutional principles. I’m sure Democrats will screw it up based on the provided quote, but I can dream for a moment about America:

The Republican-controlled FCC — which makes far-reaching decisions on telephone, television, radio, Internet and other services that people use daily — has sparred infrequently with Republican-controlled congresses. But the Democratic-run 110th Congress is about to heat up the grill, starting with a Senate Commerce, Science and Transportation Committee hearing on Thursday.

Senators vow to press the chairman and four commissioners on matters such as media-ownership diversity, Internet access, broadcast decency standards and delays in resolving various issues. The hearing may cover the waterfront, Democratic staff members say, but there’s little doubt that the agency will face a tone of questioning unseen in recent years.

“They’ve effectively emasculated any public-interest standards that existed” for radio and TV stations, said Sen. Byron L. Dorgan (D-N.D.), a committee member who plans sharp questions on decency, media consolidation and other topics. “The entire Congress for years now has been devoid of any kind of oversight,” he said, and the new Democratic majority is launching a process that will force the FCC to “beat a path to Capitol Hill to respond.”

If Sen. Dorgan intends his sharp questions on broadcast decency to imply that the FCC isn’t doing enough to protect the public (the children!), we might as well repeal the First Amendment because the politics of family values has clearly kicked the principles of liberty in the nuts male anatomical part and declared victory. The “public-interest standards” isn’t promising, either.

One Year of Laughs, Interrupted

Yesterday Howard Stern celebrated his one-year anniversary on Sirius. As a fan who’s listened for that year, I can say that the show’s never been better. Artie is hilarious now that he can be blue honest. Howard is relaxed, with no need to rant about the FCC. Although I enjoyed those rants, not needing them has made the few that did occur that much funnier. More targeted anger/comedy, if you will. And the J.D. song makes me smile every time Fred plays it. One year of the show is worth celebrating.

As a gift to the fans, Sirius replayed the first show, from January 9, 2006. I listened when it was live, but somehow I was either away from the radio or not paying close enough attention during one specific announcement. (Read by the awesome George Takei, written by ???.) The segment was meant to praise Howard, and the concept is reasonable to fans: A Salute to Great Revolutionary Men.

The list exaggerated Howard’s importance, of course, but that’s part of the humor. Still, the list made me angry for one particular inclusion. Can you spot it?

  • George Washington
  • Dr. Martin Luther King, Jr.
  • Ernesto “Che” Guevara
  • Mahatma Gandhi
  • Nelson Mandela
  • Howard Stern

It’s blasphemous to include a communist thug murderer in that list of great revolutionary men. Justifiable revolutions free people from oppression. Che Guevara sought to oppress a nation. Unfortunately for much of Latin America, he succeeded. Including him in this list is appalling.

Che Guevara is proof that it takes more than being revolutionary to make someone great. Idolization by the popular, ignorant culture notwithstanding. Worse, I fear the number who actually agrees with Guevara’s ideas and methods. Shameful.

Why not give them the company?

More signs of dinosaurs protecting their territory using the power of government.

A music industry group is asking XM Satellite Holdings Inc. and Sirius Satellite Radio Inc. to pay at least 10 percent of their revenues for the right to play songs over their networks.

Unlike land-based radio stations, which pay royalties only to songwriters and music publishers, federal law requires satellite radio, digital cable and Internet companies that broadcast music to pay the artists and record companies.

The two subscription satellite radio companies have been paying about 6.5 to 7 percent, analysts estimate, although the figures are not publicly disclosed. That agreement expires at the end of this year, and the Copyright Royalty Board, an arm of the Library of Congress, will determine the rates the companies pay for the next six years.

Why is there a federal law for satellite radio, digital cable, and Internet companies? Maybe there’s a valid reason for such a difference, but I can’t think of one that appeals to common sense. And why are rates decided by the government, rather than negotiated in the marketplace? It would make more sense to find the true market value of those rights than to have the government decide what they should be. Letting the market decide would allow companies to create new distribution and pricing models that might prove more beneficial to the music industry.

Besides could the market work faster than this?

The Copyright Royalty Board will hold hearings before it decides on new rates, a process that many say could take 18 months. Until then, XM and Sirius will continue to pay the current rates. If an increase is approved, they will be required to pay the difference retroactively.

Without regulation forcing capitalism out of the equation, no such structure would survive the pressures of competition.

I like alien radio. Here’s why.

Witness the actions of a dinosaur:

The radio wars are escalating. In a one-two punch aimed at enlisting regulators to their cause, the National Association of Broadcasters (NAB) and National Public Radio want the Federal Communications Commission to investigate alleged misdeeds by satellite radio companies XM (XMSR) and Sirius (SIRI).

In its second claim, the NAB contends that XM and Sirius shouldn’t be allowed to give away their products for free to new car buyers or online. Last week, Sirius streamed Howard Stern’s program for free on its Web site.

The NAB argues that such freebies ought to subject satellite radio to the same FCC regulations as those governing terrestrial radio. That likely would trigger restrictions, for example, on language and other racy content.

If you can’t beat them, force them to join you? I don’t recall learning that maxim in business school. Yet, that’s exactly the perversity unleashed by regulation. The NAB’s members roll over and play dead every time the FCC yells Bang!, so it expects satellite broadcasters to do the same. They’re imbeciles. People don’t have to consume satellite radio, even when it’s free. They don’t have to consume terrestrial radio, either, which is what the NAB seems to miss in bowing before legislators instead of customers.

I won’t be surprised if the FCC takes action, though XM and Sirius will clearly fight back if it does since they’re businesses are on the line. But the NAB’s complaint leads to an obvious, and chilling, conclusion. If we’re going to take its claim as valid, that would open every podcaster to FCC regulation if he allows his customers to download his podcast for free. I’ll take my liberty in maximum strength tablets, not children’s chewables. Liberty for all, including customers.

Can I steal a MINI if I spend $25,000 on football cards?

I don’t have much to say on Hollywood’s economic assertions about intellectual property piracy, other than to say that I’m sure it’s overstated, it will result in destructive legislation, and it will delay the industry’s entrance into the 21st Century of electronic distribution. In other words, it’s the typical nonsense from a dinosaur. However, this quote countering Hollywood’s nonsense is bogus:

It’s important to remember, however, that even though piracy prevents money from reaching the movie industry, those dollars probably stay in the economy, one intellectual property expert said.

“In other words, let’s say people are forgoing paying for $6 billion in movies by downloading or consuming illegal goods but end up spending that $6 billion on iPods, computers and HDTV sets on which to watch the movies, which leads to $25 billion in job creation in the computer/software/consumer electronics field,” Jason Shultz, staff lawyer at the Electronic Frontier Foundation, wrote in an e-mail.

The net economic effect of piracy is irrelevant to the intellectual property discussion. It does not matter that consumers spend their $350 on an iPod instead of movies. What matters is that $350 is not going to the company that created something of value to the consumer. There are many theories on how best to protect intellectual property and guarantee payment, most of them interesting. But the basic formulation of the problem does not include a community approach to evaluating economic spending. He who takes the risk should reap the reward.