[opendtv] Re: Satellite radio
- From: Craig Birkmaier <craig@xxxxxxxxx>
- To: opendtv@xxxxxxxxxxxxx
- Date: Wed, 26 Sep 2007 09:04:59 -0400
At 10:45 AM -0400 9/25/07, Manfredi, Albert E wrote:
Craig Birkmaier wrote:
Another BIG HUH?????
I'm totally flabbergasted by both of your "huh"s.
I'm not surprised. It's good to know that "that" shoe can fit on the
other foot for a change.
;-)
Here is what I said, Craig:
Best I can tell, the NAB's concern is that such a monopoly would
have so much content buying power that local stations would be
shut out of competition. Although the NAB also makes arguments
which I find puzzling. For example, that such a merger would
reduce innovation and increase prices for satellite radio.
Probably true, but it sounds to me like that would work to the
NAB's advantage.
Yeah, I read that Bert.
So:
1. Go to the NAB site.
2. Read this:
http://www.nab.org/AM/Template.cfm?Section=The_Truth&Template=/CM/Conten
tDisplay.cfm&ContentID=8371
"Of course, there is also the very real risk that a combined XM/Sirius
will use its market power to force content providers like sports
programmers to deal only with them. If the merger is approved, it may
only be a matter of time before the American public can listen to their
favorite baseball or college football team by paying whatever monopoly
rents a combined XM/Sirius chooses to charge."
Read that too Bert.
I am surprised that you are falling for this propaganda from the NAB.
A bit of logical analysis quickly pokes holes in their argument.
There is no such risk that a niche radio service is going to
challenge free-to-air radio broadcasts. The key word here is FREE.
Content owners who want more money for their content understand that
there are only two ways to get more money.
1. Increase the size of the audience, which in turn allows the
service(s) carrying that content to charge advertiser more, which in
turn allows the content owner to share in the increased revenues.
2. Decrease the size of the audience by charging for the content,
hoping to make enough from the subscriber fees to offset the reduced
revenues from advertising.
The first option requires broad distribution. This is not possible
with a niche service that reaches less than 10% of the market. To
complicate matters even more, the radio broadcasters have lobbied
effectively to prevent the satellite services from offering most
forms of local content. This makes it even more difficult to grow the
subscriber base beyond those who are willing to pay a monthly fee to
avoid commercials, and the even smaller group of subscribers who
cover large geographic areas in their vehicles and place significant
value in a "national" service. You may find HD radio to be compelling
in a large market like D.C., however, if you drive in any direction
from D.C. you will need to frequently change stations as you move
from market to market.
The second option can work for something like Howard Stern, who was
pushing the limits in terms of content that is acceptable for FTA
broadcasts. But it is very difficult to charge enough for specific
programming like sports, to compensate for the loss of ad revenue
from the significantly larger audience delivered by Free OTA radio.
This is especially important for college sports, which has strong
local and regional appeal, but does not attract a large national
radio audience.
And, as I pointed out, Satellite radio's biggest competitor is the
iPod, not broadcast radio. Apple has sold more than 100 MILLION iPods
(this is a global not U.S. number), while the total U.S. satellite
audience is about 15 million. And there are many competitors to the
iPod - their 30% market share is larger than the satellite radio
audience.
"More specifically here, having monopoly status would enable the united
XM and Sirius to stop agreeing to pay outrageous talent salaries and to
exert greater pressure on programming suppliers. Eliminating competition
in the national mobile radio market through this proposed merger would
also greatly reduce incentives for the combined XM and Sirius to
innovate."
Hmmmmm...
The oligopoly status of the big media conglomerates has not helped
much in reducing the outrageous talent salaries paid to the content
industry talent pool. Actors, musicians, and athletes are making more
money than ever thanks to the audience aggregation power of the media
oligopoly. The broadcast TV networks have been writing off billions
in losses related to bidding wars they have gotten into for major
sports franchises. The "logic" here is that you can lose money on
these deals because of the promotional benefit gained from the large
audiences they generate.
The problem with this is that its not working. People still watch the
NFL, but they are not watching the prime time network programming in
higher numbers - those numbers continue to decline.
And then there is the reality that the big sports franchises do not
need the media conglomerates to deliver their content. There is
nothing to prevent the NFL network from eventually going direct with
the multi-channel services, except for the potential ire with the
Congress Critters who have given them a pass on anti-trust.
Why would the NAB object to either eliminating "outrageous talent
salaries" or to satellite radio becoming stale? Makes no sense to me.
Exactly!
The larger threat to FTA radio is that the content oligopoly is going
to force them to pay ever higher fees for the music and other content
they deliver. This is already happening. What was once a potent
promotional tool for the music industry is now viewed as another
distribution channel that they can milk for new revenues.
When I was growing up we were encouraged to record music from radio.
The industry understood that sharing popular music was the most
potent form of promotion, that caused consumer to buy their products.
Now they want to use radio to deliver paid downloads of the same
music.
This is not surprising. It's just the natural progression with
monopolies and oligopolies.
Regards
Craig
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