Articles by Adam Thierer

Avatar photoSenior Fellow in Technology & Innovation at the R Street Institute in Washington, DC. Formerly a senior research fellow at the Mercatus Center at George Mason University, President of the Progress & Freedom Foundation, Director of Telecommunications Studies at the Cato Institute, and a Fellow in Economic Policy at the Heritage Foundation.


A La Carte: Moral Aspects of the Debate

by on December 5, 2005

With a la carte regulation in the news again, I have penned a short new paper on the “Moral and Philosophical Aspects of the Debate over A La Carte Regulation.” In this PFF Progress Snapshot, I set aside the economic issues at stake in this debate and instead focus on the moral arguments that are really driving this debate today, namely: (1) that consumers have a “right” to video programming on any terms they wish; and, (2) that a la carte regulation will help “clean up” indecent programming on cable and satellite television.

To see why neither is the case, read my paper.

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More Bad News for Old Media

by on November 22, 2005

The news just keeps getting worse for old media sectors and providers. Almost every Wall Street report or consultant survey that comes out these days predicts a dire situation for old media operators in coming years. New technologies, distribution outlets, the digitization of all information, complete media portability, and rapidly changing consumer expectations are combining to undermine the hegemony of the old media guard.

The latest report echoing this theme comes from a Kagan newsletter entitled, “Media Giants Cling To ‘Growth’ Label Even As Their Core Businesses Plateau.” This sobering report, which is based on a much longer study due out shortly, notes that the media industry’s “self proclaimed ‘growth stocks’ no longer show impressive growth.” “Over the past five years, [the share prices for] Disney, Comcast, News Corp., Time Warner, Viacom and other big names have underperformed the broad stock market, and their organic revenue gains are nothing special.

As a result, the Kagan report predicts anemic growth for old media operators in coming years. From 2005-2015, they project the following compound annual growth rates for various media outlets / services:

1% for daily newspapers; 2% for premium pay TV channels; 2.3% for TV stations; 2.3% for networks; 3.9% for movies; 4.4% for basic cable;

This echoes what Daniel English and I revealed in our recent analysis of the financial performance 5 leading media company stocks. In “Testing ‘Media Monopoly’ Claims: A Look at What Markets Say,” Daniel and I found evaluate the market performance of Time Warner, News Corp., Clear Channel, Comcast, and Viacom over the past five years and show that they have lost a whopping 52 percent of their market value (in terms of market capitalization). Moreover, we charted the performance of the entire Dow Jones U.S. Broadcasting & Entertainment Index and showed that it is down almost 45 percent below where it stood in 2000.

Meanwhile, Google’s over $400 a share and the Internet continues to steal away countless consumers of old media services. An yet, there are some people in this country who still lose sleep at night about the supposed big, bad “media monopolies” that supposedly rule the universe and control our thoughts! Give me a break.

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The Video Revolution Just Keeps Rollin’ Along

by on November 21, 2005

Seriously, is there a week that goes by these days that we don’t hear about another stunning innovation on the media front? In his recent essay on “Migrating Video Content,” Daniel English points out that “Media is shifting to a digital architecture where media is a continuous, ubiquitous experience and content is decoupled from any one particular distribution channel or device.” He goes on to cite numerous examples of this from just the past few weeks.

Continuing this theme, today’s big news was TiVo’s announcement that they plan to let users download onto an iPod ANY television show that they’ve recorded at home. What we have here is the marriage of two of the most disruptive media technologies the world has ever seen. What makes a “disruptive technology” truly disruptive, in my opinion, is the way it completely changes consumer expectations such that the old ways of doing business suddenly become increasingly difficult and then quickly impossible. That’s what TiVo and iPod are doing to the world of entertainment media delivery and use. The old mass media playbooks are being torn up and throw out the windows.

TiVo revolutionized the video experience by changing consumer expectations regarding when and how we viewed video programming. We no longer have to be sitting in front of the TV at a specific time just to catch a certain show we like; that show will now wait till we’re ready to watch it. Similarly, Apple’s iPod has revolutionized our listening experience by doing the same for audible media. We now expect our entire music collection (and all new music we buy) to be (a) digitized & intangible, (b) perfectly portable, and (c) playable on multiple devices. And iPod is in the video deliver business now too helping to change expectations in a similar way.

In sum: TiVo and iPod’s appearance on the scene have shattered the old “you’ll get it when we send it, however we want to send it to you” model and replaced it with an “anytime you want it, any way you want it” mentality. Media operators who buck this trend are probably doomed in the long run.

Oh, by the way, TiVo said today that they were going to offer all these new video space-shifting services for PlayStation Portables (PSPs) too. In my new book on the futility of trying to regulate content in a world of media abundance and convergence, I kick off the introduction to the book by asking the reader to imagine a future where every possible piece of content–videos, music, news, games, websites, photos, etc., etc.–is available for instantaneous use on their mobile media devices. And then I tell the reader to open up their eyes and take a look at what their kids at doing at this very moment. Chances are, they are already using their iPods and PSPs to do all that and more. The future is now, and I am enjoying the ride.

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Google Print and Transaction Cost-Based Analysis for Fair Use Law

by on November 21, 2005

Last Friday, PFF hosted a forum on the Google Print battle featuring 4 excellent panelists. I’m not going to go into all the issues at stake in this debate, but I did find it interesting that the panel of legal experts speaking at the event spent so much time focusing on transaction costs, something we usually only hear about when the panel consists of a bunch of economists. Economists love to engage in debates over transaction costs issues because they often dominate many public policy disputes. But what role should transaction cost-based analysis play in the outcome of the Google dispute with publishers?

Quite a bit, if we are to believe copyright lawyer Jonathan Band. He repeatedly stressed how part of Google’s winning case can be built around the notion of transaction costs. (Jonathan has written a nice background paper on the issues involved in the Google controversy that you can find here).

Specifically, he argues that the transactions costs for Google would be exorbitant if the company would first have to find every copyright holder and receive their permission before copying a text for the GP program. Band elaborated on his point quite a bit, and also made mention of Jim DeLong’s recent congressional testimony in which he employs a transaction cost-based framework in discussing various interpretations of fair use. Jim argues for “focusing on fair use as a transaction cost issue.”

Well, I completely agree with Jim and Jonathan that it would make a great deal of sense to the courts and copyright lawyers to focus on fair use as a transaction cost issue and even apply that logic in the case if Google Print. But while that logic provides a useful way to look at fair use law, and perhaps a seemingly powerful defense for Google in their case, I just don’t know if it really makes a damn bit of difference in a legal context.

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Media Deconsolidation, Part 11: Knight Ridder’s Coming Crackup

by on November 19, 2005 · 6 comments

This week, newspaper giant Knight Ridder announced that it was putting itself up for sale. In a sign of just how much the media universe has changed in just the past few years:

(1) the announcement received almost zero front-page attention in other papers; word of the sale was buried in the obscure back pages of most papers; and, more importantly,

(2) almost no one in the media business community expressed any interest in buying the giant paper chain.

Five years ago, such an announcement would have made front-page news and been greeted by a wave of offers from other media operators. Today, by contrast, the “ho hum” reaction is another indication that the Internet / media revolution is set to claim another old media victim.

For many years, newspaper industry analysts have predicted a contraction in this sector. As circulation continued it long, steady decline, and papers slowly began losing their lock on classified ads, market watchers have argued that consolidation would be the likely end result. If smaller papers were to be saved, bigger ones (owner by the biggest chains) would likely need to come to the rescue.

But it may be too late for that scenario now. In this weekend’s Wall Street Journal, venture capitalist John Ellis, who was also formerly a columnist at the Boston Globe, argues in an editorial entitled, “For Sale–Mostly Second-Rate Newspapers,” that “The consolidation everyone expects may in fact more closely resemble a break-up of the old order, and the selling-off of its assets, piece by piece.”

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Is Convergence Nothing But Hype?

by on November 15, 2005

Two of my favorite media and First Amendment scholars, Thomas G. Krattenmaker and Lucas A. Powe, once observed that “it has become a trivial ritual to observe that telecommunications technologies and media are converging.” But while “convergence” is a buzzword that has been uttered in almost every conversation about technology, communications, and media over the past decade, that doesn’t mean the significance of this phenomena should be casually overlooked or ignored by policy makers, business leaders, or consumers. Indeed, technological convergence is set to upend the entire media universe and public policy along with it.

If you don’t believe me, then you need to check out this excellent new report by Deloitte entitled Digital Convergence: The Trillion Dollar Challenge. The Deloitte report notes that “increasingly substance is displacing the hype” about convergence. They cite numerous examples of how convergence is at work–and with a vengeance–in the technology, media and telecommunications (TMT) sectors.

Rapid convergence for TMT is being driven, they argue, by three underlying trends:

(1) The Proliferation of Digital Data: The general digitization of all information and content in our new economy;

(2) Widespread Connectivity: The tying together of previously diverse information, networks, devices, organizations, and communities; and,

(3) Technological Advance: The unrelenting pace of technological change and innovation–most notably embodied in Moore’s Law–which continues to make everything in the Digital Economy faster, cheaper, smaller and more energy effiecient.

These convergence factors, the report goes on to argue, can be expected to “create new product categories, new markets, and in some cases even change the structure of existing industries–shifting the balance of power and altering the basis of competition. Some companies will win; some will lose; and some will stand idle as the best opportunities pass them by.”

Traditional media and communications companies… are you listening?

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Questions about FCC Indecency Numbers

by on November 9, 2005 · 2 comments

Each quarter, the Federal Communications Commission (FCC) releases a report documenting the number of complaints that the agency receives. The numbers that they gather for “indecency” related complaints are increasingly drawing the most attention. Indeed, these numbers are mentioned frequently in news reports and are also cited by many lawmakers as the driving force underlying federal efforts to crack down on unseemly broadcast content.

But what do we know about these numbers and how they are gathered? Like most people, I’ve always just taken it for granted that most government statistics are accurate and can be trusted. I know there are flaws in some statistically gathering efforts (consider inflation or productivity numbers), but at least the government is doing it’s best to accurately gauge those trends. And, so, I figured the same was true of FCC indecency data.

Sadly, however, that doesn’t appear to be the case. Indeed, as my new paper “Examining the FCC’s Complaint-Driven Broadcast Indecency Enforcement Process” shows, the FCC now measures indecency complaints differently than all other types of complaints and does so in a way that artificially inflates indecency tallies relative to other types of complaints.

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The Real Net Neutrality Debate: Pricing Flexibility Versus Pricing Regulation

by on October 27, 2005 · 12 comments

[Cross-posted from the PFF blog]

As Ray noted in his essay last week on Clearwire and VoIP blocking, I have long argued that broadband service providers (BSPs) will eventually will end up price differentiating based on bandwidth usage, in part because of the futility of differentiating based on service bundling or technological applications / usage.

What I mean by this is that most attempts to discriminate against specific websites or applications are likely doomed to fail or end miserably for the carriers. First, with Net surfers getting more sophisticated with each passing day, it will be very difficult to block most activities without them finding ways around the restrictions. Second, attempting to discriminate against certain types of bits is complicated for the carriers and will likely require more effort than it’s worth. Third, even if carriers were able to discriminate against certain bits, if they went overboard it would spark an intense consumer backlash and a likely exodus to an alternative broadband provider. (And if a serious alternative backbone provider was not yet available in that region, excessive blocking / meddling by the incumbent BSP would likely serve as the best incentive for new entrants to enter the market and offer a less-restricted surfing experience.)

But critics claim that I’m full of it and some of them pointed to last week’s front-page story in the Wall Street Journal as evidence. In their article, “Phone, Cable Firms Rein in Consumers’ Internet Use,” reporters Peter Grant and Jesse Drucker claim that, “Several large telephone and cable companies are starting to make it harder for consumers to use the Internet for phone calls or swapping video files.” The story goes on to note that some BSPs “have begun to closely monitor the uses of their network with an eye toward controlling activity by users who are swapping movies, TV programs, pornography and other video files. Operators say file sharing is growing so quickly, it threatens to sharply slow down other uses.”

What are we to make of this? Are BSPs hell-bent on controlling our web-surfing experiences and even resorting to “discrimination” against certain types of uses or activities? Should that be illegal? Are there other ways of handling this problem?

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Our Coming Wireless World

by on October 26, 2005

The market research firm In-Stat reports that 9.4 percent of the nation’s 193 million wireless subscribers have already made their mobile phone their primary phone and the firm expects that percentage to grow to 23 to 37 percent by 2009.

Hopefully our wireline-obsessed policymakers in Washington will read this report and realize that their seemingly endless efforts to regulate wireline networks will only seek to further disadvantage those networks relative to the new wireless and Internet-based competitiors. Of course, it is more likely that lawmakers and regulators will simply respond to this news by finding new ways to regulate new wireless technologies and competitors.

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OT: My Annual Anti-Soccer Rant

by on October 22, 2005 · 18 comments

OK, this has nothing to do with technology policy, but knowing the love some of my fellow TLF bloggers have for the game of soccer, every once and awhile I like to go off on a little rant about this dreadful sport that is currently infecting America.

To explain why I hate soccer so much, let’s take a look at last night’s opening PLAYOFF game between the D.C. United and the Chicago Fire.

Both teams charged up and down the field numerous times, playing footsie with each other the whole way, until they got close to the goal and then – – assuming some stupid offsides penalty was not called for someone actually beating their man downfield – – they kicked the ball and the crowd would go wild because it was only 5 feet away from the net instead of the usual 10-15 feet off the mark.

Back and forth they went all night until this monotony produced the stellar result of – – are you ready for this – – a 0-0 TIE GAME.

Woo-hoo! Pop the champagne and let’s celebrate this big ZERO-ZERO playoff tie!!

I just cannot think of anything more exciting than that. After all, wining is for losers. In our “let’s not hurt Johnny’s feelings” political correct world, soccer is the perfect sport. When the commies who invented this stupid sport were sitting down to devise the rules, apparently they had a special “from each according to their need” moment and decided that TIE games during PLAYOFFS would be the ultimate equalizer of the masses.

I’m sorry, but I refuse to call anything a “sport” if it can end in a tie especially during “a playoff.” Doesn’t “playoff” mean you play till one team is off the board? I guess not in the pinko little sport of soccer.

[Jim Harper, Tim Lee and other soccer dorks… I invite any defense you guys want to provide for this pathetic “sport.” But I won’t be reading it until after I get done watching Game 1 of the World Series. You’ve heard of baseball, I assume? That’s a sport where playoff games end with one team defeating the other.]

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