This blog contains posts and comments written by students in Dr. Tufte's economics classes at Southern Utah University.
3/20/2007
Will XM & Sirius radio create a monopoly?
There have been several articles lately about the possible merger between XM and Sirius radio. A current article in Forbes discusses the situation and the possible outcomes. The argument is if XM and Sirius merge, will a monopoly be created? I think that the answer to this question is no. However, it may depend upon what time horizon is looked at. Currently, satellite radio, in my eyes, is considered to be a competitor to land-based radio, I-Pods and other hand held devices, and internet radio. It seems that if a business takes customers away from another business, they are competitors. So, if XM and Sirius merge, they are still left with competition. Thus, they would not become a monopoly. However, this may change depending upon the future. If satellite radio is the future of radio and other music devices, then this possible merger may be the beginning of a monopoly. On the other hand, many people do not like the idea of paying for radio. Because of this market segment, it might not be possible for XM and Sirius to create a monopoly. Free radio and other music devices may always be in demand. In the end, it must be determined who satellite radio competes with.
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5 comments:
I agree with Sebastian about the competitors of satellite radio. Competitors are land-based radio, mp3 players, internet radio and believe it or not cd's and cassette tapes are still around. I think over time the trend will be toward satellite radio as these other competitors phase out; however, what new technology will we have then? I don't think we need to worry about a monopoly if these two companies merge. They may have a competitive edge in the satellite radio market, but they won't be able to take control over the music industry.
This all seems sensible to me, but of course, this is not how the regulators view it.
I think this is a big case in terms of what we are going to see in textbooks over the next 10-20 years. This is a contestable market if there ever was one, yet here we are 6 years into a Republican administration and the anti-trust folks are going after struggling companies because theoretically they might raise the price for a product that it isn't clear anyone wants at the lower competitive price.
Dr. Tufte's comment was hilarious! "anti-trust folks are going after struggling companies because theoretically they might raise the price for a product that it isn't clear anyone wants at the lower competitive price." It is very important to remember demand in a case like this. XM and Sirius are not widely popular even now. Why bother regulating something that has weak demand in the first place?
Because they can.
That's a problem.
I agree with sebastian about th ecompetitors of satellite radio.
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