Thursday, May 02, 2002

"Going to the bathroom is theft" Time-Warner's Jamie Kellner is so outrageous you have to wonder if he's for real. His rant against TiVo, where he asserted TV viewers had to watch commercials (although a limited number of bathroom exceptions were OK), was priceless. Lawmeme has a good summary.

Now let's get to the economics. Broadcast TV is where programmers assemble audiences and sell them to advertisers. TV viewers may think content is made for them, but it's not, it's just bait to "aggregate monetizable sticky eyeballs" (and people thought the Internet came up with that idea!) TiVo messes this all up by fragmenting audiences and skipping ads.

So in the TiVo future, viewers will choose between paid-programming or programming with unskippable ads. Ad supported broadcast TV, a long-time political sacred cow, no longer has any economic rationale (unless viewers keep watching ads).

And now for something controversial. The Lawmeme article starts with "Top Ten New Copyright Crimes" a Letterman-esque list of price discrimination that transfers surplus from consumers to producers. But if a producer manages perfect price discrimination, the elasticity of demand for substitutes becomes infinite. This means that if content producers put in the perfect digital restrictions management systems they crave, demand will shift to content with no such restrictions.

When people ask why the web isn't filled with music from garage bands and amateur DJs, it's because the CBDTPA hasn't been passed. An unencumbered mp3 by U2 is better than an unencumbered mp3 by Nobody, but an unencumbered mp3 by Nobody starts looking pretty good when listening to U2 costs $15 a minute and percludes bathroom breaks.

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