Saturday, January 31, 2004

Antitrust: Regulatory Idol

Remember the first rule of antitrust: Anything can be an antitrust violation. Even the mind-numbingly awful Fox series “American Idol”, according to a report in Thursday’s Wall Street Journal:
European regulators assessing the proposed merger of Sony Corp.’s Sony Music Entertainment and Bertelsmann AG’s BMG appear to be grappling with a basic issue: Should the combined company be considered just a developer and marketer of artists? Or should it instead be considered an integral part of the broader media-and-entertainment empires of both parents?
. . .
A questionnaire sent by EU officials to other players in the music industry last week provides some insight into the EU’s lines of inquiry . . . [t]he document [] asks how the recorded-music market is affected by such television formats as Britain’s “Pop Idol.” A production company owned by Bertelsmann produces “Pop Idol” and its cousins, including “American Idol” on News Corp.’s Fox network in the U.S. Winners of those shows record on BMG, and their albums have been big sellers.

“The argument by opponents of the merger is that these TV shows take unknown artists and make them household names at very low cost, and that gives them an unfair advantage” over other music companies, says Lorna Tilbian, a media analyst at Numis Securities in London.
This is yet another good example of the European antitrust mentality. In the U.S., even our antitrust regulators would applaud a company that produces a popular (albeit annoying) product at low cost. Traditional “artist and repertoire” costs are the source of much of the music industry’s recent decline. The old business model for developing artists simply isn’t profitable. That’s why there are a declining number of major record producers.

But in the EU’s collective mind, there is nothing that justifies one competitor in a market acting to propel himself over other competitors. Success is an “unfair advantage” to Europe’s socialist bureaucrats. And keep in mind, this is a conservative mentality, since the regulatory objective is to keep the market where it is, free of any innovation that might disrupt the balance of power.

No comments: