Monday, 25 February 2013
Today's FT article provides a striking tale on the reasons behind the US' dismal rank in Internet broadband service quality within the OECD. In less than twenty years, the US has moved from #1 to #16, advanced by most European countries, including Hungary and Estonia. The article argues that regulation is the root cause of this slide: the Obama administration systematically protects the Cable industry from competing technologies. Cable is now dominated by a duopoly, Comcast and Time Warner, who between them, basically share the entire US market, keeping prices high for mediocre quality. They have little incentive to invest as have competitors with insufficient scale to justify large capital expenditures needed for laying fibreoptic cable. The choice of the new FCC chief can be decisive in changing the status quo. But don't hold your breadth. Given the huge lobbying efforts of Comcast and its support for the current administration, it is unlikely that things will change.
Monday, 18 February 2013
With new media consumption patterns emerging, measuring media audiences has become a challenge. Yet, solving the problem is critical because without sound understanding of media consumption it is hard to justify advertising budgets, which in the U.S. today, stand at around half a trillion dollars (all media confounded). Just TV advertising, which is traditionally driven by media ratings, represents some $75 billion. The industry faces three broad problems related to measurement. First. little is known about consumers' behavior on new media. Take online video that seems to take off fast, yet there are huge differences in the estimates on how much time consumers spend watching it (for 2012, comScore estimated 4.2 billion hours while Nielsen's guess was a little more than 1 billion hours). The second problem concerns traditional media (mostly Television) and relates to time-shifted viewing. Consumers save shows for later viewing and devices often screen out the advertising. It is difficult to estimate the proportion of consumers affected but if time-shifted viewing becomes general, the implications are dramatic for the advertising industry. The final problem relates to the trend that, increasingly, consumers are connected to multiple devices (e.g., while they watch TV, they do other things on their tablets or smartphones). The industry talks about the "second screens" phenomenon. Here, it is not even clear how to measure the impact. Consumers watch the show, but are they turning to their i-Pads during the ads?
Tuesday, 12 February 2013
Last week, news emerged that Standard & Poor, one of the three major credit rating agencies (CRAs) has been sued by the US government for misleading investors. A summary of the case by The Economist can be found here. The multi-billion dollar suit caused S&P's shares to drop some 25% while other ratings agencies' shares suffered similar losses. I have criticized CRAs many times in this blog and elsewhere, and the loosely surfaced evidence from the filing does support the broad criticism concerning CRAs in general. Yet, this heavy handed approach is quite unsettling. First, it seems that the government really went out of its way to punish S&P. The Economist's article highlights that the charges filed in California concern civil fraud, which is important because it is outside the protection of the First amendment that has effectively protected CRAs in the past. More worrying is that among the three main CRAs only S&P has been sued, the only one that has downgraded the US government. When I asked a friend about the case, his reaction was immediate: "the message is: 'Down't dare downgrading the US!'".