March 2010

Hoyts has applied to the Commerce Commission for clearance to acquire the business and assets of Berkeley cinemas. Berkeley operates a few cinemas in Auckland and so does Hoyts. There are a number of other competitors in Auckland including Village, Rialto and some independent cinemas. The application claims that the acquisition will not substantially lessen competition in any market because:

• There are a large number of competitors already in the market and the merged entity will face intense competition from them.
• Barriers to entry and expansion are low; a cinema is a commodity.
• Consumers are highly price sensitive and also sensitive to quality differences.
• There is a significant competitive threat from alternative forms of entertainment.
• Film studios and distributors have countervailing market power.
• The merged entity will be better able to fund the costs of converting its cinemas to digital technology.

There is relatively little data available about the New Zealand aviation sector from public sources. What is available is summarised in a report I wrote recently.

This report was produced as part of a project funded by the Foundation for Research, Science and Technology, and the Ministry of Tourism. We are working on it jointly with the Centre for Air Transport Research at Otago.

The main conclusion of the report is that, in contrast with what is available in Australia from the BTRE, for example, there is relatively poor public information about New Zealand aviation. This inhibits stakeholders (e.g. the tourism sector) from fully understanding New Zealand aviation. It is also likely to be an impediment to the development of more intense competition.

We are going to summarise and publish what public data is available — watch this space. The existing data is scattered over a number of different sources and so we are going to pull it together into one place which will at least make it easier to access.

The coathangers, designed so that you can’t steal them, are highly annoying to use.

The astronomical prices for internet in your room that New Zealand hotels charge can’t be sustained for much longer. I just plug my 3G phone into my computer instead.

The difference between a happy customer and an unhappy customer is often a few relatively minor things.

Framing on the breakfast menu … $19 for continental breakfast or $27 for full breakfast. Both are expensive, but the full breakfast looks like a good deal relative to the continental.

I think it’s only a matter of time before consumers become accustomed to paying subscription fees for online services that they use regularly. Dave McClure agrees in an entertaining rant about subscriptions.

His basic argument is that susbcriptions are a good revenue model, but to make them work you’ve got to get people to pay, and there’s a lot of friction (i.e. costs, perceived and actual) in that process — most notably the problem that people forget their passwords. This means that services for which people actually remember their passwords (i.e. those they use often, like Facebook and iTunes) have an advantage in online payments. In other words, a service for which people remember their password has some market power.

Some quotes:

Newsflash folks: The Internet does NOT want to be FREE… It wants to GET PAID on Fucking Friday, just like everybody else on the damn planet. …

Surprise, surprise… most people don’t like to pay you squat unless they have no other choice. And aside from the user’s disinclination to pull out their wallet, there’s also the problem of wallet friction itself — payment conversion is shitty for many reasons other than just price. Mainly it’s because we can’t remember our password. …

The key to success — one might even say DOMINANCE — in payment systems is to begin with the foundation of frequent-use products, so that users won’t forget their passwords. Whether intentional or not, Facebook has played this game to perfection.

Suppose you want to make a nine-minute full-HD music video extravaganza. Should you:

(a) Sell it on iTunes for $3.99 per download; or

(b) Give it away for free and sell ads?

This question is worth 10 million dollars.