Friday, April 13, 2007

NAB Lobbys Congress Via New Reports

April 13, 2007

The NAB is on the pace of creating a new report every two weeks it seems. After previous reports and lobbying efforts, this one almost went under the radar, and was not accompanied by as much fanfare as the first reports. Whether this is a change in strategy or not is unknown, but the reports are now available to view.

The first report is the Napoli Report authored by Philip M. Napoli.

Napoli takes stances that by now will be familiar to SSG readers.

He first tries to define the competitive landscape

He then addresses three components of the marketplace....specifically the "Upstream Content Market", The "Downstream Content Market", and the "Audience Market"

In his position, he defines the "Upsteream Content Market" as the buyers of national content such as Sirius and XM. He states that if a merger were allowed that Sirius and XM would have a monopoly and thus the content providers and talent would have less negotiating power. the framework of his statements sound plausible, but they rely on the reader to ignore several key items:

1. National Talent is not exclusive to XM. For the Napoli stance to hold water, readers would have to believe that simulcasting on terrestrial radio does not exist, and talent such as Rush Limbaugh, Michael savage, Sean Hannity, etc. are not broadcast on terrestrial radio.

2. Readers would also have to set aside the fact that many radio groups exist in several markets, and in fact, many act as a "cooperative" by allowing other networks to broadcast a feed of a particular show.

3. The reader also has to virtually ignore what radio is mostly made up of.......music channels. I can assure you that "Let It Be" by the Beatles is the same on terrestrial, I-Pods, internet or satellite.

Napoli then discusses the "Downstream Content Market" where the sellers are providers such ass Sirius and XM, and consumers are the buyers. Napoli wants this segment to carry a narrow definition to support his stance. Her feels that the competitive landscape should be limited to services that are mobile. He also feels that satellite radio differs from other mobile service in many ways, and that these other mobile services are not substitutable, but rather complimentary from satellite radio.

Well, this is interesting. How much is new here. It is obvious by even a casual observer that the method of delivery differs between the various services. It also stands to reason that consumers will utilize more than one type of service or more than one delivery method. This also seems to be the first time that complimentary has been added into the stance by the NAB. It seems that perhaps they are getting a bit closer to the word competition.

Napoli then gets to the "Audience Market" where he calls the audience the advertisers that buy ads on radio. Napoli insinuates that there is very little competition between terrestrial radio and satellite radio on this front. How he arrives at this conclusion is interesting. He states that satellite gets most of it's revenue from subscriptions, and terrestrial gets most of its revenue from advertising dollars. HMMMM.....That is part of the point of satellite radio. Consumers can choose a free service and get advertising, or a subscription service and have less advertising. further, there was a substantial dent in ad revenue for terrestrial radio when Howard Stern left for Sirius. Mel Karmazin has stated that he is working towards ad revenue being 10% of overall revenue. At $1,000,000,000 of revenue, that would mean $100,000,000 from advertising. That is a substantial amount of money, and believe me when I say that both terrestrial and satellite compete every day for ad dollars.

All told, the Napoli report is well written, but once again, it is a document written to support a specific side of the issue. This is obvious as you read through the report. The reader has to ignore many aspects of the sector that we already know exist. The reader has to ignore the $200,000,000 in revenue terrestrial radio collected for the internet side of their business in 2006. The reader has to ignore that there are radio companies that own stations across the country. The reader has to ignore the fact that terrestrial radio carries many shows with a national presence.

The second piece from the NAB this week came in the form of a letter from James C. Miller III. In which he categorizes the proposed merger as a "Two-Down-To-One" situation. Again, this is something that has been floated by the NAB since the beginning, and again, it requires the reader to suspend the belief that terrestrial radio, cell phones, internet radio, and I-Pods are not competing for the ears of the consumer. All one has to do is boil this down to the roots of the issue, and you arrive that all of these types of companies carry a common goal.......Have consumers listen to content provided by their company.

This merger has many facets to consider, and many debates and arguments to hear. In the end, it is the mission of the DOJ and FCC to consider all sides and render a decision. If you are a reader of SSG I highly suggest that you let your opinions be known as well. readers can click on the banner ad to the right and voice their opinion.

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4/13/2007 10:14:00 PM

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  • The author of the Napoli Report complains that a merger between XM and Sirius would be bad because "... the content providers and talent would have less negotiating power."

    If true, that would be good for consumers because XM/Sirius would be able to share that cost savings with its customers through lower subscription rates.

    Thats a great argument in Support of the Merger!

    By Anonymous Matt G., Carlsbad, CA, at April 14, 2007 10:47 AM  

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