It really is amazing how much the audio marketplace has evolved over the past decade. I’ve written about the growing “competition for our ears” here before, but over at the Radio Survivor blog, there’s an outstanding collection of essays about “The Decade’s Most Important Radio Trends” by several long-time industry experts. Dennis Haarsager of National Public Radio has a nice listing of all the entries over on his blog, which I have reproduced down below.
It just blows my mind to think that just 10 years ago I didn’t have satellite radio (now have 3 subscriptions); I didn’t have Pandora (my 8 different personalized channels are playing in the background on my computer non-stop); I had never heard a podcast (and now subscribe to several and have hosted one here on occasion); I didn’t have an MP3 player and had never burned any of my music (now have 3 players and my entire 25-year collection of CDs on all 3 devices); and I had never spent any time listening to music online (and now am quite in love with Lala and LastFM). Meanwhile, I am still listening to the old fashion radio quite a bit, including on a new HD Radio player in my house. You gotta love choice like that!
Anyway, read these essays for a fuller investigation into the state of the audio marketplace. I don’t agree with everything said in each of the entries but still recommend you check out the entire series:
Continue reading →
Good ideas, supported by evidence, eventually matter.
That’s the conclusion I reached after reviewing the outline the FCC’s broadband task force presented to the commission yesterday. Here are some ideas perceptive scholars have been discussing for a long time that are apparently going to be part of the National Broadband Plan:
- “Private sector investment is essential; new funding is limited.” So I guess the Interstate Highway System won’t be the funding model for universal broadband. Whew!
- “Policy changes require the consideration of unintended consequences.”
- “Competition drives innovation and better choices for consumers.”
- Wireless broadband needs a big new chunk of spectrum, and policymakers need to consider reallocating broadcast TV spectrum and spectrum reserved for use by the federal government.
- “Market forces should be applied to all [spectrum] bands, though other policy objectives should play a role in allocation decisions.”
- Fundamental reform of the Universal Service Fund, which subsidizes phone service very inefficiently, should actually be done, not just talked about.
- Universal service reform should include reform of “intercarrier compensation,” the charges phone companies pay each other when they hand off traffic.
- “USF policies should be designed to achieve measurable outcomes with transparency, oversight, and accountability.”
Most of these ideas were considered wacky, ideological, politically unrealistic, or just not relevant a few decades (or even a few years) ago. Now they are the mainstream.
That doesn’t mean everything is wonderful with the National Broadband Plan. The FCC is supposed to plan how broadband will be used to promote consumer welfare, civic participation, public safety, education, health care, energy independence, community development, worker training, and a host of other legislative goals. In many cases there may be a fundamental tension between consumer welfare — a term of art in economics that means resources are allocated so that consumers get the selection of goods and services they are most willing to pay for, with the quality attributes they most prefer, at the best possible prices — and the other goals, which often involve planners deciding what consumers
should want. Similarly, FCC Chairman Genachowski’s comments illustrate some decisionmakers’ disturbing tendency to conflate access (the service is available to those who want it) with adoption (everybody actually chooses to use it). Technophiles sometimes have an annoying habit of assuming that those of us who fail to adopt the latest info tech gadget or service must be ignorant rubes who don’t understand the glories of being hooked up to a fat information pipe 24/7 — rather than careful shoppers who have better things to do with our time than read Yahoo OMG! while driving. For this reason I fully expect to be annoyed by the National Broadband Plan, as well as gratified to see that some good ideas have finally made it from the Ivory Tower to real-world policy application.
But there’s enough good stuff in there to stick with “gratified” for at least one day.
Three months ago, when the DC Circuit struck down the FCC’s “Cable Cap”—which prevented any one cable company from serving more than 30% of US households out of fear that he larger cable companies would use their “gatekeeper” power to restrict programming—the New York Times
bemoaned the decision:
The problem with the cap is not that it is too onerous, but that it is not demanding enough.
Even with the cap — and satellite television — there is a disturbing lack of price competition. The cable companies have resisted letting customers choose, a la carte, the channels they actually watch….
[The FCC] needs to ensure that customers have an array of choices among cable providers, and that there is real competition on price and program offerings.
Perhaps the
Times‘ editors should have consulted with the Lead Technology Writer of their excellent BITS blog. Nick Bilton might have told him the truth: “Cable Freedom Is a Click Away.” That’s the title of his excellent survey of devices and services (Hulu, Boxee, iTunes, Joost, YouTube, etc.) that allow users to get cable television programming without a cable subscription.
Nick explains that consumers can “cut the video cord” and still find much, if not all, their favorite cable programming—as well as the vast offerings of online video—without a hefty monthly subscription. (Adam recently described how Clicker.com is essentially TV guide for the increasing cornucopia of Internet video.) This makes the 1992 Cable Act’s requirement that the FCC impose a cable cap nothing more than the vestige of a bygone era of platform scarcity, predating not just the Internet, but also competing subscription services offered by satellite and telcos over fiber. That’s precisely what we argued in PFF’s amicus brief to the DC Circuit a year ago, and largely why the court ultimately struck down the cap.
Bilton notes that “this isn’t as easy as just plugging a computer into a monitor, sitting back and watching a movie. There’s definitely a slight learning curve.” But, as he describes, cutting the cord isn’t rocket science. If getting used to using a wireless mouse is the thing that most keeps consumers “enslaved” to the cable “gatekeepers” the FCC frets so much about, what’s the big deal? Does government really need to set aside the property and free speech rights of cable operators to run their own networks just because some people may not be as quick to dump cable as Bilton? Is the lag time between early adopters and mainstream really such a problem that we would risk maintaining outdated systems of architectural censorship (Chris Yoo’s brilliant term) that give government control over speech in countless subtle and indirect ways? Continue reading →
Wine lovers in 37 states can now order wine online from out-of-state sellers and have it shipped to their homes. But if you’re thinking of laying in a nice California red to celebrate the holidays, you could have to pay more if your state law only allows you to order online from wineries.
This topic came up yesterday while I was testifying before the Tennessee General Assembly’s Joint Study Committee on Wine in Grocery Stores. Rick Jelvosek, a Tennessee wine consumer who testified on behalf of Tennessee Consumers for Fair Wine Laws, asked lawmakers to allow out-of-state retailers to ship to Tennessee consumers, so consumers could have access to a greater variety of wines than they can get from the 160 wineries currently licensed to ship wine to consumers. (Video of the hearing is available here.)
Letting retailers ship directly to consumers also lets consumers save money. In 2002 and 2004, Alan Wiseman (now at Ohio State University) and I gathered data on the prices and availability of a sample of popular wines from online sellers and in Nothern Virginia retail stores. For most bottles, the lowest online price was offered not by the winery, but by a retailer. Usually a California retailer offered the lowest price, but for a few bottles the low-price retailer was in Illinois, New York, Washington DC, Missouri, or Texas. We suspect the reason is that California allows wineries to bypass wine wholesalers and sell directly to retailers if they choose. The tabulations are in this article.
I’ve just released a new PFF white paper looking at the hysteria that has often accompanied major media mergers and then taking a look at the marketplace reality years after the fact. Here‘s the PDF, but I have also pasted the entire thing down below.
_____________________________
A Brief History of Media Merger Hysteria:
From AOL-Time Warner to Comcast-NBC
by Adam Thierer
Although the pending union of Comcast and NBC Universal has not yet made it to the altar, Chicken Little-esque wails about the marriage have already begun in earnest. For example, the pro-regulatory media organization Free Press has already set up a website to complain about the deal.[1] And Jeff Chester, executive director of the Center for Digital Democracy, has called it “an unholy marriage.”[2] The fever only promises to spread once the deal is formally announced, and a lengthy fight over the deal is expected at the Federal Communications Commission (FCC) and whichever antitrust agency reviews the deal.[3]
But reality tends to play out somewhat less dramatically than the script penned by the media worrywarts. It’s worth looking back at some of the more prominent examples of media merger hysteria in recent years to understand why such panic is unwarranted, and why a deal between Comcast and NBC Universal is unlikely to lead to the sort of problems that the pessimists suggest.[4] Continue reading →
I was just digging through some old files and came across a quote that I found entertaining. Back in 2003, when he was still president and chief operating officer of Viacom, Mel Karmazin said with reference to Microsoft, AOL-Time Warner, and Comcast: “I can’t imagine being a competitor with any of these guys.” At the time, some media worrywarts made great hay of Mel’s quip and claimed, as Gene Kimmelman of Consumers Union argued at the time, that it proved how “Media moguls themselves admit their desire to avoid real competition within their industry.”
Utter rubbish. In fact, just six years after Karmazin spoke those words, Microsoft finds itself in a heated war with Google on all fronts, AOL-Time Warner has crumbled (even Time Warner Cable and Time Warner Entertainment got divorced!), and Comcast is now squaring off against telco and online video competitors that were unfathomable at the time (not to mention traditional satellite TV competitors.) In the meanwhile, Karmazin abandoned Viacom and today, as CEO of Sirius XM, is struggling to find a way to make the satellite radio universe survive the ongoing digital music bloodbath thanks to unforeseen competition from online music services and a little thing called the iPod!
It’s proof positive that media markets and digital technologies
always evolve faster than most people — even smart industry titans like Karmazin — anticipate.
Be prepared next week for a cacophony of hand-wringing and prognosticating about retail sales figures reported on “Black Friday.” Retailers traditionally count on holiday shoppers to put them “in the black” for the year with a surge of purchases on the Friday after Thanksgiving.
But if you really want to understand this year’s retail sales picture, wait til the Monday after Thanksgiving. “Black Monday” is day a lot of people return to work, fire up the computer, and begin their online holiday shopping.
Recent reports suggest that the recession has boosted rather than harmed electronic commerce, for one simple reason: the Internet makes it a lot easier to find the best price for many common purchases. Numerous recent posts tell this story:
Harsh Economy Can’t Shake Love for Online Retailers
Internet Supermaket Booms in Bad Times
Is Online Shopping Affected by a Recession?
The most popular online sites on STORES Magazine’s list include those of established merchants, such as Walmart, Best Buy, JC. Penney, and Target. They also include the pure online plays, such as Amazon.com, eBay, and Overstock.com. Craigslist — the site where I hunt for used and free stuff — made Stores’ “Top 50” list for the first time this year. That’s surely a sign that the recession has been a boon to online shopping!
If you have any credit cards, you’ve probably received notices recently that your credit card company is going to do you some wonderful favors, like apply payments to the balances carrying the highest interest rate first. These same notices also contain changes in other contract terms that might make you worse off. One of mine, for example, tells me that henceforth my annual percentage rate on purchases will be the prime rate plue 11.99 percent, with a minimum of 17.99 percent. The company tells me this is higher than my old fixed rate. (I don’t know what it was, since I never use credit cards to borrow.)
These changes are the result of new federal regulations that were supposed to make credit card companies give us a break on certain terms and conditions. But since all of the terms and conditions of the credit card contract are not comprehensively regulated, the companies can adjust other terms to make up for the money they lose as a result of the mandated regulatory changes. Some scholars call this “term substitution.” I call it “regulatory whack-a-mole,” after that carnival game in which you whack a mole that pops up out of a hole only to have another mole pop up out of another hole.
What does this have to do with technology policy? Term substitution is a pervasive feature of reality whenever regulators regulate some, but not all, aspects of a transaction. Since technology markets are not comprehensively regulated like public utilities, we can expect to see term substitution all over the place in technology markets in response to regulatory mandates.
If you want to find term substitution in technology markets, think of transactions that are only partially regulated:
- If wireless companies couldn’t charge early termination fees, we’d pay more for phones.
- The last time the federal government tried to regulate “basic” cable rates (for your local broadcast and public affairs channels), rates for “expanded basic” and premium channels went up.
- Casket sales have also experienced term substitution. Responding to low-priced Internet competition and federal regulations that allow consumers to BYOB (bring your own box), funeral directors simply reduce casket prices and increase the price they charge for their services.
- Net neutrality regulation might have this kind of effect, if it prevents network operators from charging high-bandwidth users different prices from low-bandwidth users. Forcing them to charge everyone the same, unregulated price could mean the low-bandwidth users pay more than they otherwise would.
I’m curious to hear more actual examples from readers of term substitution in technology markets. What’s the most interesting thing you’ve seen?
A recent article by Lisa Carley in the New York Wine Examiner reports that Amazon is suspending plans that would have allowed wine producers to sell direct to consumers. The culprit? State regulations:
One of the main reasons why this program has been put on hold is the complexity of wine-shipping laws within the United States, and that fact that the major wholesalers spend millions of dollars on the state level to keep it difficult for the consumer to have access to wine they want at good prices.
About 35 states permit some form of direct shipment to consumers, but laws vary greatly. In Virginia, consumers can order wine from any winery or retailer licensed in any state, as long as the seller registers with the state of Virginia and collects taxes. In Maryland, direct shipment of wine to consumers is still a felony. Montana limits the total amount of wine any consumer can order to 12 cases per year, which means most wineries won’t ship there because an individual winery has no way of knowing how much wine the consumer has ordered from other sellers. I’m not making this stuff up; check the Wine Institute’s compendium of state laws.
In several studies, Alan Wiseman and I found that consumers can enjoy significant savings on higher-priced wines if they order online. (The savings disappear for wines priced under $20 per bottle because of shipping costs.) The Internet also gives consumers access to wines that they might not find by simply walking into a store.
It would be a shame to see Amazon’s idea die. Currently, a winery or retailer that wants to ship directly to consumers has to figure out and comply with each state’s laws. It makes a lot of sense that a single retail sales portal could consolidate and continuously update this information, then set up a system that lets any seller market its wine direct to consumers in states where that’s legal, in compliance with all state laws.
The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.