Monday, February 26, 2007

Competition and the satellite radio merger

Prof. Stephen Lacy of Michigan State University is this blog's first guest commentator. He has this response to my Feb. 21 suggestion that prices will be higher if the two satellite radio companies are allowed to merge:

"The particular blog prompted an idea about substitutes. Satellite really has two submarkets -- in the home and in the car.
In the home, Sirius and XM compete with the three-dozen or so music channels on digital cable, iPods and with specialized Web sites such as In the car, the companies compete with iPods, books on tape and CDs.
These are all pretty good substitutes for music, which suggests satellite will differentiate itself with programming other than music. In other words, the potential price increase might be acceptable because of programming that might not otherwise be available."
(Full disclosure: Prof. Lacy was my dissertation advisor.)

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