perrie
2008-03-26 20:11:17 UTC
"XM-Sirius is the latest in a long series of cop-outs by the antitrust
police, but it's also more than that. As an unregulated monopoly, it
is the perfect embodiment of Bush-Cheney capitalism -- a capitalism
that reflexively favors shareholders over consumers, rewards financial
manipulation over genuine innovation and is never shy about harnessing
the power of government to the service of private interests."
Like the Bear Stearns tax-payer bailout, the merger is just one more
example of hypocrisy by your Nincompoop-In-Chief, who publicly
castigates "big government," but uses it to his and his wealthy
friends' benefit.
Of course, Bushie's veto of the State Children's Health Insurance
Program expansion still applies.
-----------------------
"Out of Tune With Consumers"
By Steven Pearlstein
Wednesday, March 26, 2008; D01
The latest example of a government bailout of a troubled industry has
nothing to do with Bear Stearns. It is, instead, the Justice
Department's decision to give the green light to the merger of the
satellite radio companies XM and Sirius.
For the past several years, these two companies have been competing so
hard for talent, distribution channels and customers that neither has
been able to turn a profit, and probably wouldn't have for years.
Consumers have been the big winners, with great programming at
affordable prices.
All that is about to change now that the Bush administration has
concluded that we'll all be better off if these heretofore fierce
rivals are allowed to stop competing and concentrate instead on
reducing costs, paring down their combined offerings and finally
delivering profit to their shareholders.
It took some doing -- and more than a year of "investigation" -- for
the Justice Department to come up with its undisclosed evidence and
tortured logic to justify this strikingly anti-consumer decision. As
precedent, it could be used to justify the merger of ABC with both CBS
and NBC, Clear Channel with the Bonneville radio network or even Coke
with Pepsi. The message it sends to business executives is clear: If
you find yourself in a tough competitive environment, the best
strategy is not to find a way to offer better products and services at
a better price, but rather to call your investment banker and
negotiate a truce with your biggest rival.
The essence of the decision announced Monday by Thomas Barnett, the
head of the Justice Department's antitrust division, is that, contrary
to all appearances, XM and Sirius really don't compete much with each
other.
One reason, according to Barnett, is that when you buy a new car, you
don't have a choice of whether to install an XM or Sirius radio.
That's because the two radio services have negotiated exclusive
contracts with all the major carmakers, who in many cases have
cemented these relationships by taking equity stakes in XM and Sirius.
Now you might think that if the Justice Department were doing its job
all along, it would have stepped in to prevent these kind of exclusive
relationships, which in the long run tend to raise prices and restrict
consumer choice. You would particularly want that kind of vigilance in
the case of a government-sanctioned duopoly, which is how the Federal
Communications Commission viewed XM and Sirius when it granted only
two licenses for satellite radio.
But not Tom Barnett. Not only did he turn a blind eye to such
"vertical restraints," but now uses them as a justification for
approving the XM-Sirius merger, arguing that they eliminated whatever
competition once existed in the auto "channel" of the satellite radio
market.
The second argument Barnett puts forward is that while some of us
consider XM and Sirius as next-best substitutes for each other, most
people do not. This apparently is based on "empirical evidence" that
consumers chose one or the other service for its exclusive program
offerings -- baseball or football or Howard Stern or Oprah -- that
aren't available from the rival service. So the choice isn't between
XM and Sirius, according to Barnett, but between XM or Sirius and
nothing at all.
Anyone in business, of course, will recognize this as a static view of
how competition is waged -- it's as if you divide the world into Pepsi
people and Coke people and declare the competition over.
It makes no allowance for the possibility that, if you force the two
companies to compete, XM might come up with a morning host who is
funnier and more outrageous than Howard Stern. Or Sirius, lacking a
Major League Baseball offering, might take a chance on World Cup
soccer or college lacrosse and tap into a whole new audience that
nobody knew existed. The prospects for that kind of innovation will be
greatly reduced after XM and Sirius merge and the combined company
focuses on protecting its existing hit channels rather than creating
new ones to displace them.
Perhaps the silliest of Barnett's arguments is that, since XM and
Sirius really don't compete for customers, there will be no real loss
of pricing competition after they merge.
As a matter of first impression, it's hard to square that analysis
with the fact that both companies charge $12.95 for basic monthly
service.
Nor is it particularly convincing that the new XM Sirius will be
forced to hold down its prices because of competition from traditional
AM-FM radio, iPods and MP3 players and, within a few years, streaming
Internet radio delivered over all manner of portable devices.
Obviously, all of these are forms of audio entertainment, just as
trucks, trains and airplanes are all ways of moving freight around the
country. But that doesn't mean that they are such perfect substitutes
for one another that we need not worry if there were only one trucking
firm, one train line and one airline.
In the case of AM-FM radio, or even Internet radio, these are services
that get their revenue from advertisers rather than listeners, so it's
hard to see how they impose much pricing discipline on XM or Sirius.
Obviously, consumers have to make trade-offs in deciding between free
service interrupted constantly by advertising and a higher-quality
subscription service with few or no commercial interruptions. But
that's a loose and indirect form of pricing discipline that in the
case of TV cable rates, for example, has yielded unimpressive results.
Nor are those iPods and MP3 players ready substitutes for satellite
radio. Although they deliver you the music you like and want, you have
to know exactly what music you want (as opposed to having a
knowledgeable disc jockey choose it for you) and take the time to
download it. Even then, you're going to spend way more than $12.95 a
month to get the kind of variety offered by satellite radio. And if
it's live broadcasts of news and sports you're looking for, then iPods
and MP3 players are not much of a substitute and offer no pricing
discipline at all.
XM-Sirius is the latest in a long series of cop-outs by the antitrust
police, but it's also more than that. As an unregulated monopoly, it
is the perfect embodiment of Bush-Cheney capitalism -- a capitalism
that reflexively favors shareholders over consumers, rewards financial
manipulation over genuine innovation and is never shy about harnessing
the power of government to the service of private interests.
http://www.washingtonpost.com/wp-dyn/content/article/2008/03/25/AR2008032503269.html
police, but it's also more than that. As an unregulated monopoly, it
is the perfect embodiment of Bush-Cheney capitalism -- a capitalism
that reflexively favors shareholders over consumers, rewards financial
manipulation over genuine innovation and is never shy about harnessing
the power of government to the service of private interests."
Like the Bear Stearns tax-payer bailout, the merger is just one more
example of hypocrisy by your Nincompoop-In-Chief, who publicly
castigates "big government," but uses it to his and his wealthy
friends' benefit.
Of course, Bushie's veto of the State Children's Health Insurance
Program expansion still applies.
-----------------------
"Out of Tune With Consumers"
By Steven Pearlstein
Wednesday, March 26, 2008; D01
The latest example of a government bailout of a troubled industry has
nothing to do with Bear Stearns. It is, instead, the Justice
Department's decision to give the green light to the merger of the
satellite radio companies XM and Sirius.
For the past several years, these two companies have been competing so
hard for talent, distribution channels and customers that neither has
been able to turn a profit, and probably wouldn't have for years.
Consumers have been the big winners, with great programming at
affordable prices.
All that is about to change now that the Bush administration has
concluded that we'll all be better off if these heretofore fierce
rivals are allowed to stop competing and concentrate instead on
reducing costs, paring down their combined offerings and finally
delivering profit to their shareholders.
It took some doing -- and more than a year of "investigation" -- for
the Justice Department to come up with its undisclosed evidence and
tortured logic to justify this strikingly anti-consumer decision. As
precedent, it could be used to justify the merger of ABC with both CBS
and NBC, Clear Channel with the Bonneville radio network or even Coke
with Pepsi. The message it sends to business executives is clear: If
you find yourself in a tough competitive environment, the best
strategy is not to find a way to offer better products and services at
a better price, but rather to call your investment banker and
negotiate a truce with your biggest rival.
The essence of the decision announced Monday by Thomas Barnett, the
head of the Justice Department's antitrust division, is that, contrary
to all appearances, XM and Sirius really don't compete much with each
other.
One reason, according to Barnett, is that when you buy a new car, you
don't have a choice of whether to install an XM or Sirius radio.
That's because the two radio services have negotiated exclusive
contracts with all the major carmakers, who in many cases have
cemented these relationships by taking equity stakes in XM and Sirius.
Now you might think that if the Justice Department were doing its job
all along, it would have stepped in to prevent these kind of exclusive
relationships, which in the long run tend to raise prices and restrict
consumer choice. You would particularly want that kind of vigilance in
the case of a government-sanctioned duopoly, which is how the Federal
Communications Commission viewed XM and Sirius when it granted only
two licenses for satellite radio.
But not Tom Barnett. Not only did he turn a blind eye to such
"vertical restraints," but now uses them as a justification for
approving the XM-Sirius merger, arguing that they eliminated whatever
competition once existed in the auto "channel" of the satellite radio
market.
The second argument Barnett puts forward is that while some of us
consider XM and Sirius as next-best substitutes for each other, most
people do not. This apparently is based on "empirical evidence" that
consumers chose one or the other service for its exclusive program
offerings -- baseball or football or Howard Stern or Oprah -- that
aren't available from the rival service. So the choice isn't between
XM and Sirius, according to Barnett, but between XM or Sirius and
nothing at all.
Anyone in business, of course, will recognize this as a static view of
how competition is waged -- it's as if you divide the world into Pepsi
people and Coke people and declare the competition over.
It makes no allowance for the possibility that, if you force the two
companies to compete, XM might come up with a morning host who is
funnier and more outrageous than Howard Stern. Or Sirius, lacking a
Major League Baseball offering, might take a chance on World Cup
soccer or college lacrosse and tap into a whole new audience that
nobody knew existed. The prospects for that kind of innovation will be
greatly reduced after XM and Sirius merge and the combined company
focuses on protecting its existing hit channels rather than creating
new ones to displace them.
Perhaps the silliest of Barnett's arguments is that, since XM and
Sirius really don't compete for customers, there will be no real loss
of pricing competition after they merge.
As a matter of first impression, it's hard to square that analysis
with the fact that both companies charge $12.95 for basic monthly
service.
Nor is it particularly convincing that the new XM Sirius will be
forced to hold down its prices because of competition from traditional
AM-FM radio, iPods and MP3 players and, within a few years, streaming
Internet radio delivered over all manner of portable devices.
Obviously, all of these are forms of audio entertainment, just as
trucks, trains and airplanes are all ways of moving freight around the
country. But that doesn't mean that they are such perfect substitutes
for one another that we need not worry if there were only one trucking
firm, one train line and one airline.
In the case of AM-FM radio, or even Internet radio, these are services
that get their revenue from advertisers rather than listeners, so it's
hard to see how they impose much pricing discipline on XM or Sirius.
Obviously, consumers have to make trade-offs in deciding between free
service interrupted constantly by advertising and a higher-quality
subscription service with few or no commercial interruptions. But
that's a loose and indirect form of pricing discipline that in the
case of TV cable rates, for example, has yielded unimpressive results.
Nor are those iPods and MP3 players ready substitutes for satellite
radio. Although they deliver you the music you like and want, you have
to know exactly what music you want (as opposed to having a
knowledgeable disc jockey choose it for you) and take the time to
download it. Even then, you're going to spend way more than $12.95 a
month to get the kind of variety offered by satellite radio. And if
it's live broadcasts of news and sports you're looking for, then iPods
and MP3 players are not much of a substitute and offer no pricing
discipline at all.
XM-Sirius is the latest in a long series of cop-outs by the antitrust
police, but it's also more than that. As an unregulated monopoly, it
is the perfect embodiment of Bush-Cheney capitalism -- a capitalism
that reflexively favors shareholders over consumers, rewards financial
manipulation over genuine innovation and is never shy about harnessing
the power of government to the service of private interests.
http://www.washingtonpost.com/wp-dyn/content/article/2008/03/25/AR2008032503269.html