Out of the blue I received a call from a reporter from a Bay Area publication. I was too surprised -- since when am I a source for media inquiries with regard to high tech antitrust? -- to be quick enough to jot down _what_ publication. I did manage to say "I know very little about this," but nonetheless offered to give some very general comments. I dearly hope she doesn't use them, but if she does, this one is surely the money quote: "I would guess Apple will have a little less swagger walking into future negotiations with content providers."
Okay, I'm the antitrust dilettante in this bunch, but my instinct on this is that this case illustrates the serious threat that internet technology poses to competition. This was being discussed during the early years of the internet, but was largely forgotten. The internet has the potential to turn vast numbers of traditionally competitive, decentralized industries into natural monopolies. Gotta run, but more on this in a separate post . . .
Looking forward to that follow-up post. I think of natural monopoly as an industry with huge fixed costs. The fixed costs for electronic publishing, or internet sales, seem to me to be small. Am I wrong?Now, the internet certainly does pose a serious threat of increasing collusion or collusion-like interdependence, which is worse.
Did anyone notice that both the plaintiff's and defendant's experts are affiliated with Compass Lexecon? Isn't that peculiar? I assume both sides consented but could they have done so if that was a law firm and not an econ consulting firm?
Re. Natural monopoly, the usual case is power generation, or long line telephony, so the "huge fixed costs" description is apt. If you define publishing as the delivery of content, then the cost of entry is low, as is the marginal cost. On the other hand, if you define publishing as a bundled product that includes identification of authors, editing and marketing, then the distribution network and costs of publishing gave the publishers the ability to recoup. E-delivery allows the debundling of the product in a way that eliminates the ability for publishers to recoup their costs.