Saturday, March 03, 2007

The Smoking Gun?

The Satellite Standard Group made an excellent find on the NAB's position on media ownership. We had hitherto took the position that the FCC would not consider satellite radio as part of the relevant product market. However, the NAB makes some convincing arguments that satellite radio, internet radio, mobile phones, and the like should be part of the relevant product market. Further, the attachment document found by following the source link gives all the facts and figures to back up their statement, and provides a mechanism to compare satellite radio to the local markets. NAB talks about the substitutability between the various products. That is a key word. Here's a look at some of their provocative statements:

Competition
In a multichannel environment dominated by consolidated cable and satellite system operators, broadcasters are clearly unable to obtain and exercise any undue market power. For this reason, the traditional competition rationale for maintaining a regulatory regime applicable only to local broadcasters and not their competitors is not a proper basis for keeping the current rules. Indeed, the primary competition-related concern in today’s digital, multichannel marketplace is the continued ability of local broadcasters to compete effectively and to offer free, over-the-air entertainment and informational programming that American citizens rely upon. NAB documents, in detail, the audience fragmentation and increasing competition for advertising revenue experienced by broadcast stations, as the result of new entry by cable television, satellite television and radio, numerous Internet video and audio applications, and mobile devices such as MP3 players. To best achieve the Commission’s goals of a competitive media marketplace that provides lower prices, better service and greater innovation to consumers, the Commission should now structure its local ownership rules so that traditional broadcasters and newer programming distributors can all compete on an equitable playing field.

A level regulatory playing field is particularly urgent, given that local broadcasters’ most prominent competitors enjoy dual revenue streams of both subscriber fees and advertising revenues.

Broadcasters, of course, are almost solely dependent on advertising, and local stations today must struggle to maintain needed revenues in a vastly more competitive advertising market.

Any realistic assessment of today’s media marketplace leads to the conclusion that competition considerations dictate change in the broadcast ownership rules.

Congress adopted the existing numerical station limits in 1996 before the emergence of satellite radio, Internet streaming of radio stations, the development of Internet applications such as podcasting, on-line music sites, music file-sharing and downloading, and the growth of mobile audio technologies such as MP3 players and even mobile phones.

XM and Siruis alone now put hundreds of channels of music, news, talk and sports into every local market in the United States, and earn dual revenue streams from subscriber fees and advertisers, all without being subject to comparable ownership restrictions.

In the Internet age, every local radio station is potentially competing against thousands of radio stations from around the country or the world, and estimated monthly audiences for Internet radio are over 52 million.

With satellite radio and a host of mobile gadgets, terrestrial radio stations now also face growing competition for listeners while consumers are in automobiles or outside the home or office.

The radio/television cross-ownership rule similarly does nothing to advance the public interest under current marketplace conditions. The rule is no longer needed to ensure diversity in local markets, but in its current form primarily serves to limit radio station ownership arbitrarily. With television and radio broadcasters facing unprecedented competition from cable, satellite television and radio, and audio and video Internet applications, a cross-ownership rule applicable only to local radio and television broadcast stations is inequitable and outdated.


Terrestrial stations have not been able to raise advertising rates due to "increasing competition for advertising revenue experienced by broadcast stations, as the result of new entry by cable television, satellite television and radio, numerous Internet video and audio applications, and mobile devices such as MP3 players." In other words, they no longer have market power due to raise their rates due to satellite radio and other competition. This is a good case for including terrestrial radio as part of the relevant product market for satellite radio. It is obviously that terrestrial radio feels satellite radio and internet radio bearing down on them, preventing them from exercising market power.

Not only is satellite radio and internet applications competition, it is "unprecedented competition".

The information in the "Attachments" is even more damning. Although we don't fully comprehend the method, they provide a way to directly compare satellite radio to the local stations. In the example, they say that satellite radio is equivalent to adding 20.7% increase in local, terrestrial stations to the market. We are not sure we agree with this, but it is in their own words:

Satellite Delivered Radio Programming

In addition to the increased number of local radio stations available in these
markets, additional radio programming is available from the two satellite radio
programming services – XM and Sirius Radio. XM Radio provides 149 programming
channels and Sirius 116 channels. XM Radio reported 7,185 million subscribers as of
September 2006, and Sirius Radio reported 5,119 million subscribers as of September
2006.

While data on the level of penetration are not publicly available on a market basis, we can calculate the added number of channels, on average, using the national penetration levels. Applying those subscribers across the total number of U.S. households results in a total penetration rate of 6.5% for XM and 4.6% for Sirius. Using those penetration rates and the corresponding number of total channels provided by these two services results in an average number of 15.1 satellite radio channels available in all of these selected markets, which equates to 20.7% more radio services over and above the average number of local radio stations discussed previously.


Here is a statement that says the terrestrial listening decline is directly related to satellite radio:

The percentage of listening to in-market commercial radio stations continues to decline, decreasing by 4.5-5.0% from the late 1990s level due in part to the introduction and adoption of satellite radio services.

In another place they say:

There has been a 4.5 – 5.0% decrease in the percentage of listening to local commercial radio stations in 2006 as compared to the late 1990s. Some of that listening is clearly moving to satellite radio services and/or streaming audio channels, as well as other terrestrial radio stations.

The following, in our estimation, is the smoking gun. In other words, they seem to say that the FCC would be remiss not to include satellite radio in the same relevant product market.

The results in this paper only confirm the earlier findings. The level of listening and viewing to out-of-market sources of programming has only increased. The introduction of satellite radio services and the significant expansion in the number of cable and satellite delivered national and regional video networks has considerably increased the level of competition in both the audio and video marketplace. Failure to include these outlets in any examination of local media markets would mischaracterize the explosion in listening and viewing options available to consumers.

The above is cited many times, many ways.

Calling Mr. Rehr... Calling Mr. Rehr [Satellite Standard Group]

xm sirius satellite radio stocks patent patents trademark copyright experimental licenses wcs eas invest investing fcc

Jump to :: Satellite Radio Techworld Home Page ::

No comments: