response 11 of 107:

Nov 24 20:05 UTC 1997

Rogue slipped in with #9.  The barriers to entry seem pretty 
overwhelming to me, given that they are completely unrelated to the 
inherent cost of operating a radio station.  Witness the recurring
issue of pirate radio stations, run out of a van somewhere.  
The inherent cost of entering the radio market is peanuts -- probably 
a few thousand dollars, if that.  But the price of that government 
license is in the millions, many orders of magnitude more.

response 13 of 107:

Nov 24 22:43 UTC 1997

we have plenty of classical radio stations in NYC...

back in Georgia in my hometown, the biggest outcry over a format switch
was when the local country station switched to a 24-hour Elvis Presley
format.  (Im not making that up...it became all Elvis and Elvis covers
all the time...on christmas they played Elvis singing christmas carols
for 24 hours!)  They stuck with the all Elvis format for two years
until the station changed ownership and went to top 40 rock.  I hear
its back to country again now though.

response 15 of 107:

Nov 24 23:06 UTC 1997

#10: I hate to state the obvious, but advertisers do see the listeners'
     only as consumers, of beer or whatever. Remember the golden rule:
     Those who have the gold make the rules. The advertisers have the gold
     in this case and they make the rules.

#11: Assuming the bandwidth for radio is limited (probably an accurate
     assumption), someone has to regulate it. Because the bandwidth is 
     limited, it is valuable to businesses. You seem to harbor some 
    bitterness towards the government for making money from the licensing
     of the bandwidth. Would you rather have anarchy on the radio waves?
     Seeking rents from this licensing is only reasonable -- as a matter
     of fact, if the government gave bandwidth away, the same liberals
     bitching about barriers to entry would be bitching about how the
     government is subsidizing corporations by giving away bandwidth -- owned
     by "everyone" -- for free (very legitimate argument). Do you have
     an idea what you are talking about?

#12: You just don't get it. If Mother Theresa were running a charity in
     Calcutta, only a fool would ask her if she's making a profit or 
     what the return on investment is. If a corporation were running a
     for-profit radio station in Detroit, only a fool would bring up the
     issue of "love of music" when talking about major decision making.
     We know what Mother Teresa's motivation is; We need not question it.
     We know what a corporation's motivation is; We need not question it.
     

response 17 of 107:

Nov 25 04:43 UTC 1997

Hmm... I work for a for-profit corporation.  I also do stuff I enjoy.  There
are probably other businesses where I could make more money, but I wouldn't
find it as interesting.  Certainly some companies do whatever they have to
do to maximize profits, regardless of whether it's what they like doing. 
Other people or companies can have different motivations, or overlapping
motivations.

I don't deny that in most businesses, as long as there is nothing harmful
about what a company is doing, they should probably allowed to do what they
want, or what will bring in the most profit.  I see radio as somewhat
different because it is a scarce resource, limited to those with government
licenses, and there is a finite amount of licenses.  It may well be that the
most money can be made by having all the radio stations havin gan almost
identical format, but in radio licensing the government should also be taking
the greater public good into account, and mandating some variety.

response 19 of 107:

Nov 25 14:42 UTC 1997

 re #9:

 > Just because the bandwidth is regulated it does not mean it is not a 
 > free market. There are barriers to entry but they are not overwhelming.

  Umm..  Sure.  I'll just get together a bunch of friends, we'll pool
  our and buy a transmitter and start broadcasting, then..  And when the
  FCC comes to shut us down because all of the broadcasting licenses in
  this area are already allotted and no more competitors are allowed to
  enter the market I'll just explain to them that Jemmie said it was OK.
  Why do I get the idea that Jemmie's idea of a "free market" is one that's
  free to operate the way he likes?

 > A plant to manufacture memory chips costs over $1 billion. The cost of
 > developing the next Intel chip is going to be about $10 billion. Those
 > are severe barriers to entry.

  Yes, and if I had $1 billion dollars I could presumably build a chip
  fabricating plant.  However, a billion dollars wouldn't guarantee me a
  radio station in Detroit unless someone else agreed to sell their license.
  If the other owners were all billionaires who wanted to keep their radio
  stations the government wouldn't let me broadcast, period.  Surely you
  can see the difference?

 re #15: 
 > Remember the golden rule: Those who have the gold make the rules.
 > The advertisers have the gold in this case and they make the rules.

  Last time I checked we were not yet *officially* living in a
  plutocracy.  According to my admittedly naive notions of government
  the public is supposed to have some say in how broadcast spectrum,
  which has been deemed to be public property (and rather valuable
  property, at that..) is put to use.  The people, or their representatives,
  make the rules.  If enough of the people believe that radio licenses
  should be allotted for reasons other than strictly financial then that
  should be the way that it's done.

response 21 of 107:

Nov 25 14:52 UTC 1997

#19: You can't operate a bar with licensing. Are bars not "free market"? 
     Is any industry that is not regulated not a "free market"? Do you know
     what a "free market" is?

     $1 billion would not guarantee you a bar. You still have to jump 
     through hoops. Again, do you know what a "free market" is?

     The people have the ultimate say in how the broadcast spectrum is
     used -- they vote with their ears and they vote with their wallets. 
     That's obviously not good enough for you because the Nanny State knows
     better, right?

(First paragraph should say, "Is any industry that is regulated not a 
 "free market"?)

response 23 of 107:

Nov 25 17:27 UTC 1997

(Digression: are you really a Chinese opera fan, rogue?  
 If so, please come write something about it for the music conference
 or the Classical music conference some time...)

I guess we'll just have to agree to disagree on what a barrier to entry
is.  Inherently, radio is a business which can be run by high school 
student, or run out of the back of a truck.  A government license which
has to be purchased for $20-$30 million seems like a huge barrier to me,
relative to the normal cost of operation.  Last I heard, liquor 
licenses were generally priced in the tens of thousands of dollars, 
which is not an amount exorbitant to the cost of operating the 
business.

When you write:  "The people have the ultimate say in how the broadcast
spectrum is used -- they vote with their ears and they vote with 
their wallets" well, I have to disagree there.  The ADVERTISERS have 
the ultimate say in how the spectrum is used, and to the advertisers,
some ears are more equal than others.
 
I am not the customer of radio.  I can't go buy the radio programming 
I want -- the closest I can get is to give money to the local 
public radio station.  

WQRS had plenty of listeners -- it was quite a profitable station.
Free market theory claims that all profitable projects will be 
done; yet here, a profitable business was destroyed and its 
listeners -- and its customers too, because WQRS had advertisers
who are unlikely to follow to the new format -- were discarded 
as worthless.  What's wrong here?

(Nothing is wrong, says Dr. Rogue Pangloss!  This is the best of 
all possible worlds!!  :)    )

So, yes, Rogue, I do believe there is a role for Nanny State to 
play in the allocation of radio, at least until the next-generation
digital radio service, which may allow many more players, comes 
into production.

response 25 of 107:

Nov 25 18:41 UTC 1997

#22: Grex is not a for-profit enterprise -- note that in my messages I used
     the phrase "for-profit corporation" many times. You cannot compare Grex
     to a radio station a corporation paid $33 million for. They have 
     different goals. Judging the corporation's actions with the goals of
     Grex is as pointless as judging Grex's actions with the goals of a 
     for-profit corporation. That is the point.

#23: I am not a Chinese opera fan. I don't like it. :-)

     Free market states that participants want to *maximize* profits, not 
     that "all profitable projects will be done." One of the calculations for
     whether a project is worth doing is the standard NPV (Net Present Value)
     calculation. It's rather simple but a key number included is the
     *cost of capital*. Cost of capital tends to increase as profitable
     opportunities increase. An 8% ROI in one decade may be acceptable while
     at least a 15% ROI (Return on Investment) is demanded in another decade,
     depending on the economy.
 
     $1 million a year profit for a $33 million investment is not good -- 
     the corporation/individual could have purchased mutual funds and got
     about 20%, or $6.5 million last year. And that's at a lower tax rate
     because capital gains is taxed lower than profits. 

#24: When analyzing business decisions, one must primarily use money as a 
     scorecard. This is why I brought up the Mother Teresa example -- when
     analyzing charitible organization, one cannot use profit as a 
     scorecard.

     I did not say the station made a good decision. What I am pointing out
     is that a small piece of a big pie may be bigger than an entire small
     pie. If it is, then it is only in the interest of the for-profit 
     corporation to go after the small piece of a big pie. Music is a 
     product.

response 27 of 107:

Nov 25 18:46 UTC 1997

(Jemmie slipped in.)

response 29 of 107:

Nov 25 19:47 UTC 1997

Public radio, in rogue's model, is a terribly inefficient waste of 
resources.  Those public radio licenses, which were given away for 
free, should be auctioned off to the highest bidder.
 
I would argue instead that perhaps we need additional public radio 
licenses.
 
-----

Back to rogue in #25, where he argues that a $1 million return on a 
$33 mil investment isn't very good performance.  I won't disagree with 
that.  However, let's look at what that investment really consists of.
My guess is that the physical assets of WQRS would be under $5 million
-- offices, studios, transmitter.  That's just a guess.  The value of 
WQRS as an ongoing business -- well, it can't be too high, because 
the owner just threw it away.  So that leaves $28 million as the 
value of the government license.    You can tweak that figure up or 
down, it doesn't affect my argument.

But the government license can only be worth $28 million because there 
are such a limited number of them!  Essentially, we have had an 
ever-increasing pot of money bidding up the price on a finite supply 
of licenses -- the license, of course, being a government artifact.
 
If we were dealing with a "normal" commodity, the pot of money would have
gone into capital investments to produce "more" radio.  
Instead of spending $33 mil to buy a business whose tangible assets 
are $5 mil, producing revenue of $1 mil, General Media would have gone 
off and built a station from scratch; QRS would still be broadcasting 
classical music; we would not be having this friendly argument.

As for "all profitable projects," all I can say is that we had different
economics teachers.  "All profitable projects will be done" falls directly
out of the definition that entry into the market is easy.  If General 
Media stops broadcasting classical music while it is still a 
profitable business, someone else steps into that market niche.  
But it's not a free market; there's that damn $28 million
license, price derived above.  But on this point it seems we have no 
common ground.

response 31 of 107:

Nov 26 20:37 UTC 1997

#26: Public radio is good. People who want to hear their stuff can contribute
     to public radio and use their weight there.

#28: She didn't say anything I didn't already say. The business world has
     different goals and plays by a different set of rules than what a lot
     of Ann Arborites (computer geeks, academics, visionaries, wanderers,
     hobos, etc.) are used to. It's hard to accept but it is reality.

#29: This is an interesting discussion. There are several issues of note:

1) With regards to doing "all profitable projects." I hope your economics
   instructor also taught that the only true scarce skill is entrepreneurial
   ability -- for economics sakes, all other skills are commodities. 
   Entrepreneurial ability is finite because time is finite and there are a
   finite number of people; It is impossible to do "all profitable projects."
   You probably are not familiar with NPV calculations because they are 
   financial rather than economic calculations, but they are simple 
   calculations used to determine whether a project is a "profitable" one or
   not. A *very* important number in that calculation is "cost of capital."
   In other words, if I get get 25% return/year in a mutual fund, a 
   project that returns 15% is *not* profitable. In your definition, you do
   not take cost of capital into account. There are an infinite number of
   "profitable" projects by your definition but using the financial/economic
   definition, there more profitable projects there are, the greater that
   "cost of capital" number becomes -- the benchmark increases. One of the
   greatest errors made by non-professionals in doing profitability 
   calculations is their failure to take into account the complete 
   opportunity cost (or cost of capital).

2) I don't know if more radio licenses can be issued. I do not know all the
   reasons why they are not if they can be -- I can think of a couple of 
   reasons. I am not sure how much the radio license is worth, but $28 
   million seems high. Not all of the price outside of tangible assets can 
   be attributed to the cost of the license. 
 
   There are classical music stations all over the country. There are none
   in Detroit. Why attribute this to the evil FCC or evil capitalists? Why
   can't it simply be because there is not enough interest in SE Michigan?

#30: Where your analogy fails is that desert buyers will bid up the price of
     deserts to the point if supply is reduced; Classical music listeners will
     not buy any more or less products from the advertiser of the station 
     they are listening to whether there is 1 or 100 stations. That is the
     problem.
 
     The Chinese bakery store in Ann Arbor charges much higher prices than
     the one in Windsor, but has much fewer clients. The classical music
     station cannot charge advertisers more for advertising if the number
     of listeners decrease -- there is no cause-and-effect relationship 
     there (as a matter of fact, the opposite is true). 

response 33 of 107:

Dec 1 03:52 UTC 1997

   if only cabs had cd or tape players. wqrs was the *only* radio
station i listened to in my cab. now that i know the company which
killed wqrs also owns wcsx, i'm going to be hard put to find something
worth listening to during the 40-60 hours a week i spend driving. this
format change has left me close to heartbroken.

response 35 of 107:

Dec 1 07:09 UTC 1997

   now there's a thought. thanks, rcurl.