August 30, 2011
Miami, the NCAA, and Amateurism as Price Control
Posted by Erik Gerding

Another college football scandal, another round of calls for the NCAA to get tough on schools.

Why can’t we just admit that the NCAA is doomed to perpetual failure? Enforcing amateurism in big revenue sports is just a price control on the labor of college-age athletes. Price controls succeed mainly in creating black markets. Although, if they are effectively enforced, price controls can reduce supply.

But does the NCAA really want to reduce supply? Does it really want to enforce its rules? Miami won’t be treated like SMU and have its football program shut down because that would hurt television revenue.

There are really three explanations for why the NCAA seeks to enforce price controls:

1. It sincerely believes that doing so will encourage schools to provide the students who are generating the billions of dollars in revenue to NCAA schools with an education. (This focuses only on the supply side of education and ignores the demand side.  It also is only lightly tethered to reality.).

2. It wants to prevent rising labor prices for student athletes from eating into the revenue to schools.

3. It needs to protect the “amateur” brand that it thinks creates such strong demand for its product.

If this last assumption is true, it leads to a perverse result: demand for amateurism threatens to undermine that amateurism. As a result, the NCAA would have to do just enough enforcement to maintain a perception of amateurism.

Likely some combination of all three of the above explanations accounts for the continuing NCAA game: being “shocked, shocked” to find that college athletes are getting paid under the table and then imposing some penalties on schools, but not enough to actually hurt the egg-laying goose.

So let’s be frank. Division 1 football and basketball is about gobs and gobs of money. If universities would like to engage in a little less hypocrisy and actually serve the interests of its money-generating athletes, isn’t it time to actually test the premise of reason number three above? Is amateurism really essential to rabid demand for college football and basketball? Let’s pay college athletes a market rate for bringing in revenue to their schools. Better yet, let’s have schools sponsor professional athletic teams.

Permalink | Alliances| Antitrust| Businesses of Note| Economics| Employees| Games| Sports | Comments (0) | TrackBack (0) | Bookmark

April 07, 2010
United/US Air Part Deux
Posted by Erik Gerding

The NY Times is reporting that United and US Air are in merger talks.

Ten years ago, the last time these two airlines were courting each other, I lived in D.C., and it was that market that caused the most antitrust concerns.  United has a hub at Dulles, while US Air has one in Philadelphia and has major operations out of National.

Will this courtship turn out differently?  Are the continuing struggles of the airlines enough to overcome union and antitrust obstacles?  (Don't ask me.  I won't even pretend to be an antitrust scholar.)

Which of the potentially eight hubs of the combined airline (SF, LAX, Phoenix, Denver, O'Hare, Philly, Dulles, Charlotte) would be downgraded?  Living in the Southwest, I hope it would be none of the western ones.  Phoenix might seem like a good candidate, although the city has stealthily grown into one of the five largest in the country.  I am also rooting for Philly to remain viable.  The US Air hub there keeps prices down when we fly back to God's Country (aka New Jersey).

Permalink | Alliances| Antitrust| M&A| Travel | Comments (0) | TrackBack (0) | Bookmark

September 25, 2006
Out of Sight, Out of Mind?
Posted by Gordon Smith

Remember how GM wanted to conduct alliance talks with Renault-Nissan in private, away from the public eye? Well, not much has happened since then, and Renault thinks GM is dragging its feet. Renault is impatient enough that VP Patrick Pelata is expressing his frustration to the W$J. The timing of Palata's public statements is not accidental, of course, as GM Chairman and Chief Executive Officer Rick Wagoner and Renault-Nissan Chief Executive Officer Carlos Ghosn plan to meet tomorrow in Paris. Looks like Renault is trying to use publicity as a prod, but doesn't that tactic suggest weakness, rather than strength?

UPDATE: GM's response comes from Chief Financial Officer Fritz Henderson, who said that GM was being "thoughtful," "thorough," and "objective."

Permalink | Alliances | Comments (0) | TrackBack (0) | Bookmark

July 18, 2006
Sales Down 12% ... GM's Strategy is Working
Posted by Gordon Smith

GM CEO Rick Wagoner briefed his board of directors about his discussions with Renault/Nissan CEO Carlos Ghosn, but the companies are wading through a self-imposed quiet period while they sort things out.

In the meantime, GM's top North American sales and marketing executive claims that the company's strategy of avoiding deep discounts is working, even though sales are down 12% over last year: "First you have to stabilize it. Then you can make it go in the right direction."

How is GM going to turn this thing around? By selling lots of BIG VEHICLES:

Starting late this year, GM will start rolling out three new eight-passenger "crossover" vehicles that will offer the room and seating capacity of large sport-utility vehicles but ride smoother and consume less gas.

"Consume less gas" means they will get about 25 mpg. On the highway.

GM is also counting on Saturn to be a "conquest brand." This is the same brand that, just over two years ago, was struggling so badly that it had to surrender its independence from other GM brands. Count me skeptical, even though the Sky is a very cool car.

Permalink | Alliances| M&A | Comments (5) | TrackBack (0) | Bookmark

August 08, 2005
The Exit Structure of Strategic Alliances
Posted by Gordon Smith

One of the burdens of returning from a long absence is going through the accumulated mail, but this time, buried in the mound of junk mail at my office was a pleasant surprise: the published volume of the Illinois Law Review with papers from Larry Ribstein's Uncorporations Conference. Included in that volume is my modest piece on the Exit Structure of Strategic Alliances. Over the past couple of years, I have been focusing on exit structure as one of the crucial determinants of power in contractual relationships, and this paper is one product of that focus.

Permalink | Alliances | Comments (1) | TrackBack (0) | Bookmark

July 05, 2005
RSS Feeds
Posted by Victor Fleischer

Larry Ribstein is indeed serious about questioning the costs vs. benefits of blog mergers.  It's funny how what started off as satire has led to some interesting real world questions.

I don't think there is an easy answer to Larry's question, but It might be worth a taking a minute to explain why I think RSS technology might change the result.

RSS technology affects the way I read blogs in much the same way Tivo changes the way I watch TV.  I used to watch TV by turning it on and flipping channels.   How 20th century.  Now, based on my preferences, TiVo pulls the data for me, so I can watch at my convenience.  I can TiVo a program on PBS, and if it doesn't grab me in the first couple of minutes, I can delete and move on.  I do this a lot with Charlie Rose, for example.  In the end I have found that I don't watch less TV than pre-TiVo days, but I watch better TV. 

My RSS feeder pulls data from blogs and presents them in a way that's easy to skim.  I usually skim the first couple of sentences of each post, and then only occasionally do I click through to read the whole thing if I'm interested.  RSS feeds save time by having the information loaded up in advance -- you don't have to load a new page each time.  We are not talking about milliseconds a day per blog, but seconds a day.  Even with a fast internet connection, those seconds add up, perhaps to 10 or 20 minutes a day for me.  And as with Tivo, I add more blogs to fill up the time I saved.

As more and more readers adopt RSS, the marginal costs of an additional co-blogger go down.  Readers interested only in Gordon and Christine can avoid me more easily with RSS than without.  But not as easily as if I weren't on the blog at all.  The key assumption I make, then, is that there are marginal benefits to those readers who might rarely click through based on a link from Gordon or Christine in the pre-merger world.  I have to assume that readers benefit from my work, or else what's the point.  The hope is that to the marginal (median?) reader of Conglomerate, the marginal benefit of my posts exceed the (lower with RSS) marginal costs.  Time will tell. 

One more point.  In an odd way, blog mergers cut against the broader effect of RSS-like technology.  Technology that aggregates data for you based on your pre-articulated prefererences make it possible for you to choose to see only what confirms your pre-existing views.  Tivo means that I rarely see new shows until someone tells me about them, since I don't flip channels any more.  You could look at my TiVo and think that HBO (Six Feet, Entourage, etc.) had extreme monopoly power.  In contrast, by merging blogs, it's more likely that someone who normally focuses on securities regulation might stumble across a post on tax policy or Google or venture capital or hedge funds or any of the other topics that I frequently dabble in.   So indeed what Christine and Gordon have done -- and I suspect that this is what is driving Larry's objection -- is force some readers to choke down my posts as spinach along with Gordon's steak and Christine's potatoes.  Well, don't worry, Larry.  RSS means that you have one bite of spinach instead of a plateful, and besides, it will make you stronger in the long run. 

Permalink | Alliances | Comments (0) | TrackBack (5) | Bookmark

Antitrust concerns
Posted by Victor Fleischer

Thanks for the kind words, Gordon.  It is a privilege to be aboard.

As for antitrust concerns and reader value, sometimes it's hard to know if Ribstein is serious. 

In any event, I will add that RSS feeds make blog mergers more sensible, not less; it's easier for readers to skim.  Without an RSS feed, I cannot imagine keeping track of 30 blogs a day. 

Just as Netflix changes the way you rent movies, Tivo changes your relationship with TV, and satellite changes how you listen to the radio, Bloglines can change your relationship with blogs. 

Permalink | Alliances | Comments (1) | TrackBack (1) | Bookmark

May 19, 2005
Netflix -- A Cinderella Story
Posted by Christine Hurt

Wal-Mart is sending its 100,000 subscribers to its online DVD-rental business to Netflix.  (Press release is here.)  For a limited time, Wal-Mart subscribers will have access to Netflix rentals at the same price it paid Wal-Mart.  By comparison, Netflix has 3 million subscribers.

On a side note, a neighbor of mine told me yesterday that they were giving up on Blockbuster.  She lamented that Blockbuster never has any popular DVDs available since it went to the "no late fees" model.  Interestingly, she said that they were probably going to switch to doing pay-per-view through her cable television package.  So many alternatives.  I told her about Netflix, even though I'm a Hollywood Video person myself.

Permalink | Alliances | Comments (0) | TrackBack (0) | Bookmark

September 18, 2004
The Problem of Joint Control
Posted by Gordon Smith

Having just written a paper about alliances, I am still sensitive to discussions about joint control. As a result, I was interested to see "equal partnerships" appearing as #3 on a list of Ten Entrepreneurial Mistakes:

Either party's veto power can stall the growth and development of your company, and neither holds enough votes to change the situation. Almost as bad is ownership split evenly among a larger number of partners, or worse, friends. Everyone has an equal vote and decisions are made by consensus. Or, worse still, unanimously. Yikes! No one has the final say, every little decision becomes a debate, and things bog down quickly.

This seems right, though some people don't want their business to proceed unless everyone is on board, in which case deadlock can be a useful device.

Permalink | Alliances | Comments (0) | TrackBack (0) | Bookmark

April 24, 2004
Uncorporations Conference
Posted by Gordon Smith

The Uncorporations Conference was a huge hit with the participants. I just returned to Wisconsin after eating a whole slab of ribs next to Steve Bainbridge and Larry Ribstein, among others. Larry assembled a great cast of participants, and I was flattered to be invited. Henry Butler and John Coates offered useful comments on my still nascent ideas on strategic alliances. This paper still needs a lot of work, but I am glad to be working on the project, which I find interesting.

Steve's paper on abolishing veil piercing generated lots of comments, including an exchange with Judge Frank Easterbrook that reminded me of being in Easterbrook's Antitrust class 15 years ago. Scary how those experiences stick with you.

Speaking of Judge Easterbrook, he gave the lunch talk. Of course, he was talking about some issues on which I have some independent views, and he seems much less intimidating than he seemed as a student. I still have a hard time calling him Frank. Anyway, his work in corporate law has always seemed a bit superficial to me, and today's talk was no exception. He asks interesting questions, but his answers are of the meat cleaver variety.

For most of the day, I sat between Steve and Saul Levmore, dean of my alma mater, the University of Chicago Law School. (He didn't hit me up for a donation.) I was interested to see that both are two-fingered typists. Can you believe that? How does Steve produce all of that volume with two fingers? By the way, he is a two-forefingered typist, but Saul uses one forefinger and one middle finger. As you can see, I was immersed in the presentations.

During his talk, Saul mentioned how much he "loved that term 'sacred space' coined by Steve Bainbridge." I am happy to report that Steve and Lynn Stout and others immediately corrected him, pointing to my paper with Bob Thompson as the source of that term. Steve disagrees with the notion of sacred space, which he finds inconsistent with director primacy. I am not sure I see the conflict, but I will leave that for another day.

Two other papers deserve special mention. First, I very much enjoyed was Rob Sitkoff's paper on trusts. He has found a nice niche, and he is teaching all of us some new things. Second, my longtime friend Kim Krawiec and her UNC colleague Scott Baker presented a paper on the conversion of New York law firms from general partnerships to limited liability partnerships. Most interesting was their finding that many firms have resisted converting out of reputational concerns.

There was a lot more, but I am too tired to write it up at the moment. Time to sleep.

Permalink | Alliances | Comments (0) | TrackBack (2) | Bookmark

March 19, 2004
Academic Economists Need Lawyers
Posted by Gordon Smith

There is an old joke among academic lawyers that goes something like this: when a legal scholar needs economics, he adds a co-author; when an economist needs law, she buys a lawyer lunch. The grain of truth is that academic economists often treat academic lawyers badly. Not that we don't sometimes deserve it ... but now is as good a time as any for some payback.

I take some inspiration here from Kate Litvak, who at the recent conference on Venture Capital After the Bubble excoriated several financial economists for misreading venture capital fund agreements. I have had similar experiences with financial economists misreading venture capital investment agreements, so her complaints rang true. The root problem is that economists are more concerned with aggregation than nuance, but nuance is critical to contract interpretation.

Another example of this arose yesterday, as I was writing my paper on strategic alliances for Larry Ribstein's Uncorporation Conference. As lawyers are wont to do, I decided to offer a description of "strategic alliances" so that people who are new to the area could have some idea what kind of relationships I am discussing. The definition does not need to be too precise, as it has no legal significance (we do not regulate strategic alliances any differently than other long-term contractual relationships), but I am looking for something that will show the distinctiveness of strategic alliances.

As is often the case, the economists have beaten us to the punch and have been studying strategic alliances for some time now, so I decided to review the economics literature for some guidance. Here are two offerings:

* “A strategic alliance is an agreement between legally distinct entities that provides for the sharing of costs and benefits of some (significantly costly) mutually beneficial activity.”

* A strategic alliance is an arrangement "whereby two or more firms agree to pool their resources to pursue specific market opportunities."

Other definitions exist, all equally unhelpful. I am not saying that this is easy; I am struggling right now to come up with my own definition that is more useful than these. But the problem should be obvious: other than indicating that strategic alliances are contracts between firms (rather than individuals), these definitions do almost nothing to limit the field.

Oliver Williamson grabbed the study of contract structure from Ian Macneil in the early 1970s, and lawyers have not seen much of it since. Sure, we still have symposia about relational contracting, but lawyers are too attached to judge-made law. We have largely forgotten to study contract structure, ceding that to financial economists. Unfortunately, our experience in venture capital studies has shown that we cannot trust the economists to do it right. My immediate research agenda, therefore, is designed to take back some of the lost ground.

Permalink | Alliances | Comments (0) | TrackBack (0) | Bookmark

Recent Comments
Popular Threads
Search The Glom
The Glom on Twitter
Archives by Topic
Archives by Date
January 2019
Sun Mon Tue Wed Thu Fri Sat
    1 2 3 4 5
6 7 8 9 10 11 12
13 14 15 16 17 18 19
20 21 22 23 24 25 26
27 28 29 30 31    
Miscellaneous Links