Good Riddance

A beautiful post from Murdoch disclosing fully and unashamedly the big media agenda; the use of state power to shut down more efficient and better competition.

A quick reminder of the facts; newspaper advertising revenue is falling off a cliff:

This is creative destruction; and creative destruction is a wonderful force for growth and development. Times change, societies change, fortunes will be made and fortunes will be lost.

It’s in the immediate interests of the entrenched big media elite to harness the power of the state to create draconian laws to snub out the copy and paste new media culture that has developed, because that opens up a whole new revenue stream: litigation. If you can’t earn your millions, you might as well litigate your way to them.

But big media could be spending their money on creating and monetising compelling products and content delivery systems that make people want to buy, rather than trying to legislate and litigate their way to success. Look at Steam, look at Spotify, look at iTunes and the App Store. For all of the draconian measures that might be put in place to “control” the internet, if big media’s product sucks, people will still not buy it.

Newspapers can survive by being creative and compelling, Murdoch. Just because your revenues are nosediving doesn’t mean that we should all lose our freedom to pay for your success.
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Greece Defaults

From Sky News:

The talking is over; it is finally happening. For the first time since World War Two, a developed nation is going into default.

That’s the significance of the events of the past 24 hours, with Greece’s debt being classified as in “selective default” and the European Central Bank banning it from its cash window. Months of planning by both banks and policymakers have gone into ensuring that Greece’s negotiated default will be a smooth painless process. We are about to find out whether that planning pays off.

Now, we shouldn’t be surprised by Standard & Poor’s decision to cut the rating on Greece’s sovereign debt from CC to SD (which stands for “selective default”). The ratings agencies had always said that, given private investors are about to lose just over half the value of their debt (through a complex bond swap), this downgrade would be a natural consequence.

Nor should we be shocked that the ECB says it will no longer accept Greek debt as collateral: in fact, the only surprise is that it’s taken this long – on the basis of the ECB’s previous policy, the bonds should have become ineligible when were first downgraded from investment status two years ago.

Peter Tchir thinks all the hullabaloo is a lot of sound and fury, signifying nothing:

So far there are no dramatic consequences of the Greek default. The ECB did say they couldn’t accept it as collateral, but national central banks (including Greece’s somehow solvent NCB) can, so no real change. We will likely get a Credit Event prior to March 20th once CAC’s are used to get the deal fully done. Will the market respond much to that? Probably not, though there is a higher risk of unforeseen consequences from that, than there was from the S&P downgrade.

It just strikes me that Europe wasted a year or more, and has created a less stable system than it had before. A year ago, Europe was adamant about no haircuts and no default. I could never understand why. Let Greece default, renegotiate terms, stay in the Euro and move on.

I suppose the magnitude of the problem depends on just which kind of credit event. And that mostly depends on how well-insulated the financial system is, and market psychology. A full-blown Lehmanesque credit shock? Who knows — certainly banks are fearful. Certainly, the problem of default cascades has been out in the open for a while. But most of the attempts to deal with the prospect of such things have mostly been emergency room treatment, and not preventative medicine — throwing liquidity at the problem. Certainly, it is possible the system is in a worse shape than 2008.

  1. The derivatives web is (nearly) as big as ever:
  2. There are still a myriad of European housing bubbles ready to pop.
  3. American banks are massively exposed to Europe.
  4. China’s housing bubble is bursting Surely their reserves will go into bailing out their own problems, and not those of Europe and America?
  5. Rising commodity prices — especially oil — are already squeezing consumers and producers with cost-push inflation.

Meanwhile, the only weapon central bankers have in their arsenal is throwing more money at the problem.

Will throwing more money at the problem work? Yes — in the short term. The danger is that creditor nations will not be prepared to throw enough to shore up balance sheets.

Will throwing money at the problems cause more problems in the long run? Yes — almost certainly.

Ultimately, we must look at preventative medicine — to stop credit bubbles expanding beyond the productive capacity of the economy. We should also look at insulating the economy from the breakdown of any credit bubbles that do form.

The Internet Today

Today, Wikipedia, Reddit, and a variety of other websites that I use on a daily basis to stay informed and learn are offline. These sites are protesting the SOPA/Protect IP bills currently going through Congress. Jason Harvey explains why:

SOPA and PROTECT IP contain no provisions to actually remove copyrighted content, but rather focus on the censorship of links to entire domains.

If the Attorney General served [a website] with an order to remove links to a domain, we would be required to scrub every post and comment on the site containing the domain and censor the links out, even if the specific link contained no infringing content. We would also need to implement a system to automatically censor the domain from any future posts or comments. This places a measurable burden upon the site’s technical infrastructure. It also damages one of the most important tenets of reddit, and the internet as a whole – free and open discussion about whatever the fuck you want.

More or less, what is happening here is big media — a sector in decline due to new technologies, and the obsolescence of old business models — is trying to bite back through getting government to rig the market to protect their old failing business models.

Newspaper advertising is falling off a cliff:

Home movie revenue has hit a wall:

And, music sales have dramatically fallen:

More importantly, the rising trend of file sharing has given media companies the sense that they are “losing revenue”:


The trouble is file sharing isn’t “lost revenue”. There is no guarantee whatever that a file downloaded is somehow a substitute for a sale. It’s a fundamentally different kind of transaction. For a start, it’s free. Consumers will take things for free that they would never buy, because it costs them less to do so. More importantly, it’s not stealing; it’s copying, and there is a difference. It’s not taking a physical product that someone has manufactured. There’s no direct lost revenue. And ultimately, if enough people copy it, it builds exposure for a product.

There are still many ways for big media to monetise their products in this new world: the music industry can stop concentrating on record sales, and started concentrating on concert tickets. Newspapers can move their businesses online, or use Apple’s tablet distribution model. Movie distributors can focus on high-definition content like Blu Ray, which is hard to redistribute online. That’s just off the top of my head.

But of course, this is creative destruction. Times change, societies change, fortunes will be made and fortunes will be lost.

So it’s in the interests of the big media elite to harness the power of government to create draconian laws to snub out the copy and paste new media culture that has developed, because that opens up a whole new revenue stream: litigation. If you can’t earn your millions, you might as well litigate your way to them.

The problem with that is that it’s another zombie idea. Our copy and paste culture, our freewheeling culture is a huge source of innovation. Shutting down new media, and stifling creativity will just create more social stagnation, and anger and disillusionment in the young. We live in the era of the parody, the era of the remix, the era of the pastiche. This legislation poses a serious threat to that era. Are we destined to venture into a new era of beige conformity, and Chinese-style internet censorship? I hope not.

Big media should be spending their money on creating compelling products and content delivery systems that make people want to buy, rather than trying to legislate and litigate their way to success. For all of the draconian measures that might be put in place to prevent copyright “theft” and shut down alternative media, if big media’s product sucks, people will not buy it.