Whenever a company has no viable business model, they give up on trying to survive on their profit margin and start trying to manipulate the market.
This has already happened in the recording industry. Music labels couldn’t make their old profit margins because customers outwitted them and stopped buying products that were not priced according to their actual market value.
So, then the RIAA had to start suing music listeners and making moral appeals to make them feel guilty. Is it because the music recording industry has lost property and is being victimized by a more powerful entity? No, it’s because the true value of their product is now being reflected in the market. Is it because the music recording industry is a righteous arbiter of moral values that does everything possible to support musicians’ rights to their music and their profits? No, it’s because it is a huge scam and since their claims have no intrinsic moral value, they have to demonize all their potential customers as criminals.
Likewise for the movie industry and the book publishing industry. When Amazon tried to create a market for new media products by lowballing the prices of e-books, this aggravated the book publishers. Not because they were losing money on the deal, but because it emphasized the huge scam they were running. So now they are fighting to stuff the genie back in the bottle and pretend that they are being victimized by low prices on e-books. Bull. They are doomed to suffer the same market declines as the recording industry, and they know it for certain now, as evidenced by their panicky behavior.
Newspapers have already learned the same lesson about the intrinsic value of their product. Note that they are hoping that with Apple’s help they will be able to lock in paying customers again and revive the myth of their indispensability. After this strategy fails, I predict they will move to get local or national government to enact laws giving them monopolies on news distribution, on the principle that they are essential to the political process.
Again, look at the auto industry and the housing industry. In both cases the products were being priced way beyond any intrinsic value. In both cases they have persuaded the federal government to step in with price supports because the market values are below the arbitrary price levels they had set. I don’t know about the auto industry, but the housing industry (as represented by real estate agents, banks, builders, and mortgage companies) is still working full-time to get more price supports from government.
As with the music recording industry, the mortgage companies are also demonizing potential customers, claiming that they are morally obligated to pay on a secured loan when in fact they are not. Note that no business observes any “moral obligation” to pay on a secured loan; if an asset isn’t worth the expense to own, they just dump it.
Health insurance companies also don’t have a working business model, so they need to manipulate their markets. Note that despite the exaggerated claims of the phony conservatives, the US healthcare market is not primarily supported by “private” money:
For all the hue and cry over a government takeover of health care, it’s happening anyway.
The tipping point is likely to come next year, Truffer said. For technical reasons, the report assumes that Congress is going to allow Medicare to cut doctor fees by 20 percent later this year, as required by a 1990s budget law. But lawmakers have routinely waived such cuts, and they’re not likely to allow them in an election year. So government probably will end up picking up most of the nation’s medical costs in 2011, instead of 2012.
The US private health insurance business model is breaking down. It was premised on the idea that all voters have lifelong full-time jobs making higher than average pay, and everyone else will die miserably, painfully, and quietly. Unfortunately, not only do some obnoxious people make less than average pay and work less than full time, but some of them retire:
Long in coming, the shift to a health care sector dominated by government is being speeded up by the deep economic recession and the aging of the Baby Boomers, millions of whom will soon start signing up for Medicare.
Therefore it is not at all surprising that the deal they cut with Democrats is to mandate coverage: that is not a “socialist” program, it is a blatant attempt to manipulate the market to guarantee them income despite their faulty business model.
The worst nightmare of the health insurance companies is the same as for the music recording companies, the book publishers, and the newspapers: that the majority of potential consumers will discover that they are not indispensable and will simply bypass them entirely if given a chance.
For other points of view on the question of e-books, see these items: