Thursday, March 29, 2007

Comments on Criterion Report Part 3

March 29, 2006

Comments on the study conducted by Criterion Economics against the merger.

SSG is looking over the study conducted by Criterion Economics and commenting on various aspects of the study. Bear in mind that we are not professional economists, but we can offer insight and opinion that we feel the author of the report has overlooked. This analysis will happen over a series of articles.

Article series links below:

Article #1 - Comments on The Criterion Report

Article #2 - CS3R and NAB

This segment concentrates on the comparison to the satellite television merger that was attempted and failed in 2002. SSG Comments in RED

The author of the report states:

"The merger proponents suggest implausibly that this merger bears no resemblance to the proposed DBS merger that was abandoned in the face of FCC skepticism in 2002. But similarities are striking, and they have been detected by many respected industry observers. In the proposed DBS merger, most MVPD customers would have experienced a reduction in the number of suppliers from three (the incumbent cable operator, Direct TV, and Echostar), to two, and five million DBS customers in areas not passed by cable television systems would have experienced a reduction in the number of suppliers from two to one. Assuming generously that terrestrial radio serves the same role of the incumbent cable operator here, most radio customers would experience a reduction in the number radio suppliers from two to one, and those 22 million age 12 and over who receive 5 or fewer stations would experience a reduction in the number of radio suppliers from two to one. For the same reason that the FCC was skeptical of the proposed satellite television merger, the proposed satellite radio merger should be rejected."

Interesting thesis, but lacking in very real terms:

1. Radio stations can not be compared to cable operators. Cable operators are the sole source of cable television and the cable company collects all of the revenue associated with cable subscribers. To insinuate that the many radio stations in a market are collectively a single entity is very very very very wrong. Terrestrial radio stations compete aggressively with each other and other media on a day in and day out basis. Have you ever seen the ratings books????? Pick any town in the U.S with a single cable operator and tell me what their share is of the cable market.......That's right 100%. Radio stations do not have that luxury.

2. The assertion that 5 million customers in ares without cable would have been relegated to one choice is correct, but lets put that in realistic terms. those 5 million customers represent less than 5% of the population of this country.

3. How is it in one statement the author can go from lumping all radio stations together as a single entity to then speaking about markets with 5 or fewer stations? For the purposes of your argument are they lumped together or separate???? Pick a stance and stick to it. This statement seems like it is likely a Direct quote from David Rehr of the NAB. He is good at flip-flopping.

Sorry Mr. Sidak, but you seem to be trying to compare apples to oranges. And, if anyone takes the time to read your footnotes, the supporting argument for the comparisons of these mergers does not reflect at all the sentiment you state in the paragraph above

Labels: c3sr, criterion economics, nab