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Wednesday, March 10, 2010

Cablevision vs. ABC

This story was interesting. There was a dispute between ABC/Disney and Cablevision, regarding fees for carrying ABC's over-the-air signal.

According to that article, a permanent deal was not reached. ABC/Disney and Cablevision reached a temporary agreement, so that the Oscars would not be interrupted. Otherwise, some of the slaves would have started complaining about the immoral Cablevision monopoly.

The real problem was not disclosed in the mainstream media coverage. The problem is that Cablevision has a monopoly. It's explicitly illegal for me to lay my own cables and compete with Cablevision.

The problem is not "It's hard to lay cables and sign up customers." Cablevision has an explicit State-backed monopoly. Competition is illegal.

In NYC, you can get Cablevision or Time Warner, depending on where you live. However, there are no places where you can get both. It's like mafia gangs agreeing to share their turf, rather than true competition.

Why do State parasites allow abusive monopolies? Monopolies maximize the opportunity for corruption. Suppose a monopoly is worth $100M/year. Then, executives can afford to spend $10M+/year on lobbying and kickbacks. With true competition, the seller would not earn economic rent. There would be no surplus profits to spend on bribes, in a really free market.

The cost of corruption and monopolies isn't free. It's paid by customers as higher prices and a lower quality product.

It's almost exactly the same as the king granting certain merchants a monopoly and corporate charter, in exchange for a cut of the profits and certain legal protections like "limited liability incorporation". In the present, the graft is paid to State insiders, rather than to the king. The bribe can come via a campaign contribution. The bribe can come by hiring a politician's idiot brother-in-law as an executive.

The mechanism by which politicians trade favors and bribes is a type of counter-economy! It's totally illegal, but it happens all the time! If only the agorist counter-economy was as sophisticated as the mechanism by which politicians/insiders/parasites buy and sell favors!

If you look at your cable package, you'll notice 100+ channels. However, they're owned by a small handful of corporations. Each channel has its own separate brand, even though the same corporation controls them. For example, MTV and Comedy Central are both owned by Viacom.

The mainstream media monopoly leads to lower quality. There's 100+ channels, but they represent the viewpoint of a tiny handful of insiders. This enables important viewpoints like "Taxation is theft!" to be completely excluded.

If I want to start my own cable TV channel, it's explicitly illegal. I can try, but I probably won't convince the State-owned monopoly to carry my content. Why should the mainstream media cartel allow competition? If an executive at Viacom wants to start a new channel, he just bundles it with the channels he already sells. If I want to start a new channel, I wouldn't be able to get the mainstream media cartel to carry my content.

A pro-State troll says "FSK doesn't deserve his own channel. He has only 200 regular readers on his blog!" First, 200 regular readers, starting with zero marketing budget and no investment besides my time, is actually pretty good. Second, the mainstream media does not promote my content; this severely restricts my opportunities. How do you know that, if I had a show on a mainstream media channel, I wouldn't get better ratings than "The Daily Show"? It's like the mainstream media saying "We shouldn't cover Ron Paul's 2008 Presidential campaign, because he has no chance of winning." Ron Paul had no chance of winning because he didn't receive any mainstream media coverage. Similarly, do I have only 200 readers because my blog sucks? Or, do I have only 200 readers because the mainstream media cartel denies people like me an opportunity to reach a wider audience?

If there really was a free market of ideas, some mainstream media employer would say "Wow! FSK's ideas are awesome! I have to hire him as a writer!" I'm not holding my breath waiting for that to happen. A pro-State troll says "The mainstream media cartel doesn't want to hire FSK as a writer. Therefore, FSK's ideas are wrong." There's no way I'd get a job at a mainstream media corporation. My writing would call out the rest of them for being frauds.

The Internet does level the playing field somewhat. I was able to start a blog for zero capital cost, an opportunity I would not have had pre-Internet. With a physical newspaper, that's a huge barrier to entry. The old saying was "Freedom of the press is a good idea, especially for those people who own a printing press!" Without the Internet, I wouldn't be able to read other people's non-mainstream ideas and get feedback on my ideas. Even if Blogger wasn't free, I could spend the $20/month and buy hosting. Google gives free Blogger hosting because they probably data mine the IP logs. Plus, Google shows ads around search results that include my blog.

I could start my own YouTube channel and grow my audience organically. It's going to be awhile before that's as profitable as a mainstream media program. Plus, the slaves have been brainwashed to believe "If it's on the mainstream media, then it's true."

Superficially, the problem with the ABC vs. Cablevision dispute is a fee disagreement. The real problem is Cablevision's monopoly; the other issues are evil fnords distracting from the real issue.

There's a law saying "Cable providers must carry the over-the-air signal." There's also a law saying "Cable providers need permission from the station owner to carry the over-the-air signal." This leads to the obvious conflict.

Mainstream media corporations used to provide the signal free/cheap. Squeezed for revenue, they're looking for higher fees.

Does Cablevision really care if ABC demands a higher fee? Actually, no. They will just pass the cost on to customers as higher prices. However, if the fee is too high, then customers might drop their cable.

Another problem is that cable corporations only offer "bundled pricing". Customers don't get to individually pick which channels they want. For example, ESPN is an expensive channel, and I hardly ever watch it. However, if I want the package with Comedy Central and the Cartoon Network, I have to also buy ESPN. "Bundled pricing" is the way a monopolistic seller behaves, just like the way Microsoft bundles IE with Windows. Even if I use Firefox, I pay the cost of IE when I buy Windows.

With unbundled pricing, it wouldn't matter if ABC decided to charge $10/month. Then, customers could not pay for ABC and save. Why doesn't Cablevision offer unbundled pricing? Then, ABC could charge whatever fee they want, and Cablevision would itemize the customer's bill. "Unbundled cable" is technically feasible; the cable monopoly chooses to not implement it.

I can't say "I refuse to pay the ABC portion of my cable bill. I'll use the over-the-air signal when I want to watch ABC."

The cable corporations don't want unbundled pricing, because bundling is the way a monopolistic seller maximizes profits. The mainstream media corporations also like this arrangement, because they can bundle unpopular channels with popular channels. Monopolistic sellers like to bundle things together, because customers have to buy stuff they want along with stuff they don't want.

There is one form of competition with the local cable monopoly. There's parallel competition. The phone monopoly also sells cable now, via Verizon FiOS. (FiOS isn't available yet where I live. My parents are eager to dump Time Warner. I'd certainly like a faster Internet connection.)

You also can download some shows on the Internet. That can be done legally on various websites like Hulu. It can also be done illegally via BitTorrent.

However, Internet access is still bought via a State monopoly/oligopoly. Several State-licensed competitors provides some of the benefits of a free market, while still providing the benefits of an oligopolistic cartel. It's mostly/completely illegal for me to start my own ISP business. With Internet access, I have more than two choices. There's the telephone monopoly and the cable monopoly. There's also Internet via cellphone, which isn't as good as a wire (yet?).

When two monopolies negotiate, the incentive is for brinksmanship negotiation. It is not a true free market negotiation. A monopolistic seller and a monopolistic buyer have no market price signals.

For example, suppose the economic rent due to Cablevision's monopoly is $20 per subscriber per month. What is ABC's fair share of this $20 economic rent? There's no correct answer, because it's monopolistic rent.

Therefore, both ABC/Disney and Cablevision have an incentive to stall as long as possible. The only threat is that some Congressman will bow to public pressure and impose a solution. If Cablevision or ABC/Disney act too much like jerkwads, then some Congressman might pass a law that makes their monopoly less valuable, due to public outrage. You can steal from the slaves via taxes and monopolies. If you deny the slaves their bread and circuses and Oscars, that's a real problem!

Another example of brinksmanship negotiating is between a sports league and the players' union. The incentive is for neither side to offer meaningful concessions until the last minute.

For example, the NFL has a State-backed football monopoly. Competition isn't illegal, but there's severe State restriction of the market. Most of the NFL's profit is economic rent. What is the fair share for the players? There's no correct answer. It's like thieves disagreeing over how to share their stolen property.

However, in a really free market, the players would almost certainly earn more. The reason the players don't form their competing league is that it's illegal/impractical. For example, most stadiums are State-funded. The NFL also has long-term mainstream media contracts and bank loans subsidized via negative real interest rates. A new league wouldn't get those perks.

The negotiations between the NFL and the players' union will almost definitely go down to the last minute. The probably will be a lockout. Both sides have a State-backed monopoly. The owners have a stronger bargaining position, because a player's career only lasts a few years. The owners can "divide and conquer" the players, offering concessions that benefit the majority but hurt a minority. One such example is the "franchise" and "transition" tags, which only hurt star players.

The mainstream media covered the dispute between ABC and Cablevision, but not the correct answer. The problem is that Cablevision has a monopoly.

Mainstream media celebrities and journalists are forced to work as wage slaves. Why doesn't someone like Conan O'Brien say "**** this! I'm starting my own channel!" The problem is that the mainstream media cartel won't allow competition.

If I tried to start my own mainstream media channel, I could not get the cable monopoly to carry it. Even if I gave away the signal for free and had a decent audience, it still is impossible/illegal to compete.

The mainstream media monopoly doesn't just lead to higher prices. It also leads to lower quality. Certain important ideas, such as "Taxation is theft!" are not mentioned at all. In many ways, the mainstream media is as State-owned and controlled in the USA, worse than in the Soviet Union. The USA merely has an illusion of a free press. Any journalist who didn't follow the State disinformation campaign would be discredited and forfeit his career.


dionysusal said...

The USFL (1983) and XFL (2001) did try to compete with the NFL, and they were crushed like bugs. But they were not formed around players revolting from the NFL. Even if they were, like you so eloquently said, the NFL has a State-backed monopoly. Still, I think if enough star players defected from the NFL and started their own league, and if they were able to make progressive rules changes, I think a competing league could work. The old AFL actually gave the NFL a run for its money and ended up merging with it. Good blog entry.

Scott said...

Cable is for suckers.

(sorry, accidentally posted this in the wrong thread before, please ignore the other one)

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