MUSIC|MEDIA|DESIGN

It’s hard to imagine a worse disaster for the media world than the proposed XM/Sirius merger. In spite of the hoopla, assurances, and analysis, on every level, this deal stinks by definition. While we firmly reject “zero-sum” economic models, we recognize real benefits in competition. There’s plenty of pie to go around, as long as the pie keeps growing. Competition and risk drive innovation, which in turn enables growth. Lack of competition results in market stagnation. Stagnant markets not only don’t grow, but evaporate! Take a closer look at how this merger will affect the media market.

Consumers will be hit first, if not worst, by this change. First and foremost, subscription prices will be disconnected from a real market. After you’ve invested in special hardware to listen, especially in-dash systems, you are more likely to accept a non-stop stream of small increases over time. Like health care costs, the lack of direct competition and the false appearance of choice (does DBS really compete with free radio?) mean there will be no disincentive for regular price increases.

Direct Broadcast Satellite systems are enormous technological undertakings, requiring enormous capital outlays. Since the turn of the century, XM and Sirius have continuously pushed the technology, increasing channels and quality, while making subscriptions affordable. As a result of their competition, XM has developed technology superior to their sole competitor, Sirius. Meanwhile Sirius focused on new content models, developing programming that differs from conventional radio, alongside more open talk formats, like Howard Stern’s shows, which drove subscriptions. While a merger will certainly reduce infrastructure costs, and improve Sirius’ technology and XM’s programming, the incentive to innovate in either arena will largely disappear. Today both companies deliver superior programming compared to most terrestrial broadcasts, by any measure, because they must out-do each other in the race for subscribers in a mutually exclusive market. After a merger the competition returns to earth. DBS will have to be better than broadcast radio and cable/web based “music choice” channels and home made podcasts, but the strongest competitor for each company will vanish overnight. So much for innovative programming.

Investors of both companies are also losers. While competition meant significant risk for all shareholders, it guaranteed significant reward for those of at least one company. In the worst case, the weaker broadcaster might collapse entirely, but with good management and innovation it shouldn’t be hard (much less impossible) for them to survive on less than half of a market much larger than todays. The nearly inevitable outcome of their current battle is more receivers and subscription for both, the only question is who gets more. Competition is harder than riding the gravy train for sure, but it grows the train and creates more gravy. Here’s what we know for sure: Given that there are THREE major TV networks, a few more major radio networks, dozens of cable system operators, hundreds of cable networks and literally thousands of individual broadcasters in the US alone, there are more than enough subscribers for two satellite radio systems.

It appears the management of both companies are colluding to drive down the cost of programming. The status quo has given B list celebs and radio personalities enormous raises, relative to their previous earnings on terrestrial networks. Launching and maintaining a system of satellites, not to mention creating, marketing and supporting receivers and constantly developing software is not an inexpensive proposition. The merger’s immediate effect on that investment is to severely discount one of the two company’s ground-side technology (which amortized over time becomes a long term drag on profits). There are some savings in administration, and some potential savings in consolidating facilities. But the biggest savings of all are to be found when it’s time to negotiate talent contracts and deals. Given the state of terrestrial broadcasting and podcasting, for the real stars, DBS has suddenly become a one horse town. The same is true in music: Satellite already has a better deal than webcasters, but if their music channels become star-making vehicles as radio once was, expect that deal to improve.

This deal has no winners, but it’s not really about that. It’s an early venture in “dataculture”, and like early agriculture, there are some bugs to work out of the model. These competitors have recognized the facts presented here, and determined that while the rewards accrue slowly but steadily, risk is a constant. XM and Sirius have decided that since upside growth is largely fixed (audience can never exceed population) they are better off sharing the rewards, than driving up the cost of goods through competitive pressures and adding to their risk. This merger is all about eliminating the possibility of losing at an opportune moment in time (before the next round of talent bidding and technology upgrades begin).

So what’s the problem? First, one of these companies stands to “win” in today’s market, and in the process define the norms for both company’s future survival. Merging eliminates the rewards for the winners entirely, while guaranteeing the “losers” investment is no longer at risk (removing all possibility of rebound or turnarounds that happen all the time in every market). Similarly consumer choice will be eliminated, putting it entirely on government regulators to protect their existing investment in hardware, and subscription decisions they’ve already made. Finally artists and creative talent suffer severely when there is no competition. Entertainment monopolies are among the most difficult to police and prosecute once they get rolling, and their effect on the market has historically never been positive. This deal really smells bad for everyone other than the executives and big-time investors who are using it to hedge past bad bets.

Dave Davis
Media Designer . Sound Images

…is that they require both literacy and time to consume. While email and the web certainly enhance basic literacy, they actively consume free time. Ruthlessly Darwinian decisions are constantly made about what to read, view and consider. In many (most?) cases the rawest sensationalism will beat depth or accuracy. Of course this view comes off as sour grapes in the context of dataesthetic.org, where we spew ideas to no one. But it’s equally true for The Daily Kos and the New York Times. For many reasons, raw meat trumps meatloaf on the web. So what’s a blogger to do?! Short of “sexing up” one’s posts with inflammatory or sensational headers and content, the answer may involve expanding the concept of literacy to other media, including video and audio, so ideas may be consumed at other venues and times. Podcasting, in all it’s forms, is one such solution.

Of course simply reading this post into a microphone will not make it more interesting or compelling. Likewise, while “powerpoint” style visuals and text can improve retention and comprehension, they do nothing to attract and hold interest. In today’s media market, high production values matter more. You Tube user-generated content seems to contradict this notion, but consider the nature of viral videos: they tend to be short, and derive or assume legitimacy through low production values that suggest a “regular person” and not a professional created and delivered the package. The ideas of the author are enhanced by the individual’s autonomy from a corporation, indicated by the home-made look and sound of the work. This is just one contemporary tactic though. At the other end of the spectrum are professionally produced pre-packaged news stories, distributed on DVD, tape or via the net, and delivered by local news personalities as “original” reportage, and corporate media. This content also enhances messages in the public eye, by disconnecting the audio and video elements of the program, and augmenting the “canned” images and sounds with fresh narrative. Somewhere in between lies traditional documentary and journalistic forms. One powerful solution to our “blog problem” lies close to those classic formats.

Talk radio, all-news and sports radio formats, as well as NPR programming, attract big, loyal audiences. Part of this is content driven: Sports and news junkies will always find a fix. But just as important, time and venue (car, bus, office) encourage rich audio-centric formats. Interestingly, monologues are rarely valued. While bloviators like Rush Limbaugh fill the majority of their time with their own wind, they rely in equal measure on listeners, to provide appropriate echos of their themes, or targets for their venom and reaction. When you remove the callers, talk formats only succeed through guests. Good guests draw, no guests or outside sounds drive listeners away. Really!

By contrast, even the most popular blogs have a tiny fraction of the audience of most major metropolitan radio stations. We may frequent dozens of blogs, but visit none as frequently as we hear radio, or watch my favorite network TV series’. Podcasts fare a little better since they’re “pushed” via subscription to iPods and PC music libraries, but even there time is a critical variable. Some shows are “stale” or superceded by a new episode before we ever hear them. Still, it’s the user who decides when to delete, or listen.

While I’m not suggesting blogging is dead or obsolete (quite the opposite, we’re at the front of this curve), I am saying it may not be the most effective tool to communicate with broad audiences. The intimacy and closeness of blogging can be attractive but the fact is many people already have plenty to read in their lives. Time is a real barrier. Formats that can be delivered and consumed with less active attention from the user can overcome that barrier. Podcasts can be delivered to passive users via subscription. Many people can’t read on cars, busses or trains without getting sick, but these same folks have no problem listening to music or audio programs while riding or even driving. Podcasts don’t lash the listener to a fixed seat, nor does their quality degrade over time and distance like broadcast. Programs can be shaped and sized based on the needs of the message, or the listener, or both, instead of being clocked to wastefully fill pre-determined “time slots” and program grids. Audiences for podcasts, like blogs, are self-selecting and potentially self-qualifying, but for all the reasons mentioned, capable of attracting much wider audiences in the manner of broadcast. But unlike broadcasts, the cost/eyeball is knowable, controllable and scalable.

As potential podcasters recognize these benefits, production values will certainly increase. Competition in the iTunes Music Store between free podcasts and paid video content is heating up, and more companies are tasking capable in-house production teams or freelancers with producing content. We see this already when established podcasts are “adopted” or “sponsored” by corporations. Typically the look and sound improves dramatically as a condition of sponsorship! This is good news for creatives, and savvy companies and individuals. Podcasting remains a natural meritocracy, where quality and content trump pervasive placement.

Podcasting combines the benefits of broadcasting and blogging, but it’s solutions to the biggest problems of those media is more significant than the similarities. Podcasting has evolved to encompass everything from entertainment to corporate communications, incorporating still imagery, web-links, and more recently, full-motion video. This richness expands the market for podcasts of all kinds, as do advancements in player technologies. Even many cell phones can deliver content these days. Podcasting and podcast players, along with digital video recorders (DVRs) like TiVo, shuffle the deck. While blogging remains a good way to communicate with the most engaged users and clients, podcasts hold greater potential to reach the masses. We can apply this potential to meeting their many and varied niche needs.

Dave Davis
Media Designer • Sound Images

NOTE: This post was cross-posted to dataesthetic.org by the author

We’ve sorted out the details and can finally announce our Spring 2007 Music Recording Workshop will be happening, starting March 22, 2007. Click the link in this story for details and sign up.

-d-