One of the great things about intrade (recently split from TradeSports) is that they are open to suggestions from wide-eyed academics. For example, at Justin and Eric’s urging, intrade listed several simple combinatorial markets, including baskets of states (e.g., “FL+OH”) in the 2004 US Presidential election and an October surprise market probing for a statistical correlation between Bush’s 2004 reelection and bin Laden’s capture.
Recently, again at Eric and Justin’s request, intrade launched a Sirius-XM merger market to predict whether the two satellite radio companies’ wedding vows will be blessed by the U.S. Department of Justice and the Federal Communications Commission.
The picture of XiriuM as a powerful monopoly threatening consumer choice is, to put it bluntly, laughable.
The problem I see for XiriuM is that one-way purely broadcast technologies are nearing extinction. Even if some media don’t directly utilize the Internet or even TCP/IP, they will almost surely use a two-way communications link of some kind. Why? Ostensibly, because consumers want personalization and interactivity. Perhaps more to the point, because publishers and advertisers want better targeting and performance metrics.
The only “way out” I see for XiriuM is to actually become an Internet service provider for cars, much like the (formerly broadcast-only) cable companies did, for example by bundling high speed satellite downloads with a low bandwidth cellular uplink. Even so, I imagine that latency would be a serious problem, as with HughesNet (formerly Direcway) satellite Internet service, meant for use in rural areas with no broadband alternatives.
So, although I have no idea how DOJ will rule, and thus have no advice for intrade bettors, I do know how DOJ should rule: “sure, knock yourselves out”. Plus I have some throw away advice for SIRI and XMSR shareholders:… Sell!
Good post. Unfortunately you missed the biggest point of electronic media going back to the beginnings of radio and the point that won’t change no matter what happens. Content Is King! There are about a million internet radio stations. There is only one Howard Stern and only one National Football League and only one Oprah Winfrey. He who has the content in media ALWAYS wins no matter what the medium. Otherwise you are just one of a million internet stations with 5 listeners a piece.
[...] David Pennock on the Sirius–XM prediction markets David Pennock on the Sirius–XM prediction markets [...]
> Content Is King!
You’re right, my argument is mainly about music, but music is a big driver of satellite radio sales, at least as big as the specialized content.
I agree that Howard, NFL, etc. are also big drivers. However, satellite pays for this content on top of their huge infrastructure costs. Internet radio can pay for content too (and once they have distribution they will have the funding). Moreover, Internet radio can arguably pay a whole lot more for content than satellite, because they have comparatively negligible infrastructure costs.
“You’re right, my argument is mainly about music, but music is a big driver of satellite radio sales, at least as big as the specialized content.”
When Howard signed with Sirius about 2 years ago they had 600 hundred thousand subscribers. Today they have over 6 million subscribers with Howard being on the air just a little over a year. There is no way music is as big a driver as Howard or specialized content. Not even close.
“Internet radio can pay for content too (and once they have distribution they will have the funding).”
About a million internet radio stations. Very fragmented industry. Doubt that any of them will have the funding or spend the money for bigtime content. Its possible. I doubt internet radio goes in that direction. Too fragmented. By that time Sirius and XM will be in just about every car with all the major content wrapped up.
Thanks for the great/insightful comments. You may well be right. I’m still convinced that Internet will have equal or greater penetration into cars for other reasons (maps, traffic, news, info, communication, etc.), so the question becomes whether consumers will pay for both.
Also, Internet radio may not be as insignificant/fragmented as you think. Yahoo! Launchcast alone averaged 2.3 million unique listeners per week in December 2006: http://www.arbitron.com/onlineradio/dec_ratings_2006.htm
[...] David Pennock, John Delaney’s poodle The Yahoo! “research scientist”: One of the great things about intrade (recently split from TradeSports) is that they are open to suggestions from wide-eyed academics. […] [...]
[...] The Yahoo! “research scientist”: One of the great things about intrade (recently split from TradeSports) is that they are open to suggestions from wide-eyed academics. […] [...]
“Also, Internet radio may not be as insignificant/fragmented as you think.”
I have no doubt you are correct that the internet will be pervasive in the car. I also think you are definitely correct that internet radio is wildly popular. I read it doubled its audience last year. I think it may have 40 million or more listeners already. Free Terrestrial radio is already wildly popular with 95% of the people in this country listening. Maybe internet can even reach that one day. BUT……WHAT WILL PEOPLE PAY FOR? 10,000 terrestrial stations, a million internet stations, OR Howard Stern and Major League Baseball. Answer is obvious. Content is king. People pay for content. Satellite radio has the content. Will big internet radio like AOL or Yahoo acquire content and move the internet in the right direction? Doubt it. Not as long as they view themselves as technology companies instead of the media companies that they should have become 10 years ago.
[...] – Put your most important sentence(s) in bold —which is what I’m doing right now ( ). Yahoo! research scientist David Pennock prefers highlighting his most important sentences in yellow. Most people don’t read on the Web; they scan. Thus, help them scanning your text. [...]
Here is an article with a similar argument to my own, citing a more recent development (AOL Music on iPhone):
http://www.alleyinsider.com/2008/6/iphone_aol_radio