Wednesday, February 20, 2008

Next up: Amazon sides with Blu-ray


Posted by Caroline McCarthy (CNET)

On Wednesday, online retailer Amazon.com became the latest to declare its support for the victorious high-definition technology, announcing that it "will more prominently promote Blu-ray hardware and software products on its Web site." The company will not, however, discontinue its sales of HD DVD products. "The high-definition landscape is rapidly changing, and consumers are looking for guidance on how to make the best high-definition buying decisions," Peter Faricy, Amazon's vice president of movies and music, said in a statement from the company. "Our customers have clearly voiced their support for the Blu-ray format." But in a sense, Amazon is also an indicator that Blu-ray's struggles aren't quite over. With its Unbox movie download service, Amazon is among a number of major Web retailers that offer digital downloads of movies and TV shows. Some have said that with all the bickering over HD DVD and Blu-ray for so many months, digital downloads from companies like Amazon, Netflix, and Apple's iTunes were able to find a steadier footing. Luckily for Blu-ray overlord Sony, your average digital movie download isn't nearly up to par in the quality department.

Antitrust Fears Few in Airline Deal

By SUSAN CAREY (Wall Street Journal)

A merger between Delta Air Lines Inc. and Northwest Airlines Corp. -- which could be announced as early as this week -- has less to fear from antitrust enforcers than past aviation deals, unless regulators grow uncharacteristically squeamish about the combination's sheer size. If the airlines can reach an accord with their unionized pilots and hammer out the final details of a deal to create the world's largest carrier by traffic, the U.S. Department of Justice will be the ultimate judge of whether the merger can proceed. The department, which would be likely to review the case before a new administration arrives in Washington in January, has been kind in the past to deals like this one that don't involve a lot of overlap. A transaction -- as well as any airline mergers that could follow a Delta-Northwest deal -- is certain to face political opposition from some members of Congress, and could run into turbulence with Northwest's other labor unions. Delta's pilots are its only major union. Rep. James Oberstar, a Minnesota Democrat who is chairman of the House Transportation and Infrastructure Committee, has warned that he will oppose big airline mergers. "We can't stop a merger ourselves," said Jim Berard, spokesman for the House committee. "But we can make a lot of noise." AFL-CIO union leaders met in Washington last week to develop strategies on possible mergers, and issued a statement saying they were "united in our commitment to protect airline employees from the severe harm that may stem from poorly conceived airline consolidations that ignore the needs of employees and the flying public." In assessing proposed airline mergers, the Justice Department reviews nonstop and connecting routes between cities where the two carriers overlap, as well as whether their respective hubs are close enough to make them dominant in a region. The department also weighs the likelihood of rivals starting service within two years on city-pairs where the merged airline would have increased market power, potentially reining in the new carrier's ability to raise prices.

Delta, the world's No. 3 airline by traffic, has a big market share in the Southeastern U.S., in New York, and on trans-Atlantic routes. Northwest, which is ranked sixth globally and fifth in the U.S., is strong in the upper Midwest and on trans-Pacific routes. "There isn't that much overlap between Northwest and Delta," said Andrew Steinberg, a former airline antitrust lawyer who recently stepped down as the Department of Transportation's assistant secretary for aviation and international affairs. If another airline merger is proposed soon, that doesn't mean the regulators will automatically reject the first, he said. "They analyze each transaction separately." The last time the Justice Department shot down a big merger proposal was in 2001, when it identified competitive problems in the proposed combination of UAL Corp.'s United Airlines and US Airways Group Inc. At the time, the government found the two were the only significant providers of nonstop flights from Washington, D.C., to a number of cities, were the most significant carriers on a number of nonstop routes between their hubs, and would have had undue concentration along the East Coast. The department in 2005 approved a merger of US Airways and America West Airlines, whose operations had little duplication. Delta and Northwest see their proposed marriage as a merger with little overlap domestically and none on overseas routes, said people familiar with the matter. The two also don't anticipate reducing a lot of capacity, shuttering existing hubs or laying off many front-line workers.

In the past, Justice Department officials have said that if a merger brings cost and operational efficiencies, regulators could perceive those benefits as outweighing a merger's anticompetitive impact. Diana Moss, vice president of the nonprofit American Antitrust Institute, which advocates aggressive antitrust enforcement, said that because the big carriers now have marketing alliances with rivals domestically and internationally, regulators "will need to look at claimed efficiencies closely in light of anticompetitive effects." William Swelbar, an airline researcher at the Massachusetts Institute of Technology, says there are parallels between the current merger fever and the wave of combinations that occurred in the late 1980s. "In 1985, the industry was in its infancy and the focus was on the domestic market," he said. The same is true today, "but now we're talking about network size in the global marketplace."

Antitrust Fears Few in Airline Deal

By SUSAN CAREY (Wall Street Journal)

A merger between Delta Air Lines Inc. and Northwest Airlines Corp. -- which could be announced as early as this week -- has less to fear from antitrust enforcers than past aviation deals, unless regulators grow uncharacteristically squeamish about the combination's sheer size.

If the airlines can reach an accord with their unionized pilots and hammer out the final details of a deal to create the world's largest carrier by traffic, the U.S. Department of Justice will be the ultimate judge of whether the merger can proceed. The department, which would be likely to review the case before a new administration arrives in Washington in January, has been kind in the past to deals like this one that don't involve a lot of overlap.

A transaction -- as well as any airline mergers that could follow a Delta-Northwest deal -- is certain to face political opposition from some members of Congress, and could run into turbulence with Northwest's other labor unions. Delta's pilots are its only major union.

Rep. James Oberstar, a Minnesota Democrat who is chairman of the House Transportation and Infrastructure Committee, has warned that he will oppose big airline mergers. "We can't stop a merger ourselves," said Jim Berard, spokesman for the House committee. "But we can make a lot of noise."

AFL-CIO union leaders met in Washington last week to develop strategies on possible mergers, and issued a statement saying they were "united in our commitment to protect airline employees from the severe harm that may stem from poorly conceived airline consolidations that ignore the needs of employees and the flying public."

In assessing proposed airline mergers, the Justice Department reviews nonstop and connecting routes between cities where the two carriers overlap, as well as whether their respective hubs are close enough to make them dominant in a region. The department also weighs the likelihood of rivals starting service within two years on city-pairs where the merged airline would have increased market power, potentially reining in the new carrier's ability to raise prices.

Delta, the world's No. 3 airline by traffic, has a big market share in the Southeastern U.S., in New York, and on trans-Atlantic routes. Northwest, which is ranked sixth globally and fifth in the U.S., is strong in the upper Midwest and on trans-Pacific routes.

"There isn't that much overlap between Northwest and Delta," said Andrew Steinberg, a former airline antitrust lawyer who recently stepped down as the Department of Transportation's assistant secretary for aviation and international affairs. If another airline merger is proposed soon, that doesn't mean the regulators will automatically reject the first, he said. "They analyze each transaction separately."

The last time the Justice Department shot down a big merger proposal was in 2001, when it identified competitive problems in the proposed combination of UAL Corp.'s United Airlines and US Airways Group Inc. At the time, the government found the two were the only significant providers of nonstop flights from Washington, D.C., to a number of cities, were the most significant carriers on a number of nonstop routes between their hubs, and would have had undue concentration along the East Coast.

The department in 2005 approved a merger of US Airways and America West Airlines, whose operations had little duplication.

Delta and Northwest see their proposed marriage as a merger with little overlap domestically and none on overseas routes, said people familiar with the matter. The two also don't anticipate reducing a lot of capacity, shuttering existing hubs or laying off many front-line workers.

In the past, Justice Department officials have said that if a merger brings cost and operational efficiencies, regulators could perceive those benefits as outweighing a merger's anticompetitive impact.

Diana Moss, vice president of the nonprofit American Antitrust Institute, which advocates aggressive antitrust enforcement, said that because the big carriers now have marketing alliances with rivals domestically and internationally, regulators "will need to look at claimed efficiencies closely in light of anticompetitive effects."

William Swelbar, an airline researcher at the Massachusetts Institute of Technology, says there are parallels between the current merger fever and the wave of combinations that occurred in the late 1980s. "In 1985, the industry was in its infancy and the focus was on the domestic market," he said. The same is true today, "but now we're talking about network size in the global marketplace."

Dollar Advances Against Euro, Yen Before U.S. Inflation Report

By Kim-Mai Cutler

Feb. 20 (Bloomberg) -- The dollar rose against the euro and yen before a government report that may show U.S. inflation accelerated last month, giving the Federal Reserve less reason to lower interest rates. The dollar rose against 13 of the 16 most-active currencies tracked by Bloomberg today as traders pared bets the Fed will reduce its benchmark rate by three-quarters of a percentage point next month. Crude oil traded below yesterday's record $100.10 a barrel in New York. The U.S. dollar index traded on ICE Futures in New York, which tracks the currency against its six major counterparts, rose 0.2 percent to 76.1. ``There's a distinct possibility inflationary pressures could grow and grow,'' said Simon Derrick, the London-based head of currency strategy at Bank of New York Mellon Corp. ``There is a risk we could see a high CPI number today.'' The U.S. currency rose to $1.4658 by 7:10 a.m. in New York, from $1.4725 yesterday. Against the yen, it climbed to 107.87 from 107.78. The euro fell 0.4 percent to 158.11 yen. Consumer prices rose at an annual rate of 4.2 percent in January from a year earlier, compared with 4.1 percent the previous month, according to the median forecast of economists surveyed by Bloomberg News. The Labor Department will release the report at 8:30 a.m. today in Washington. Interest rate futures on the Chicago Board of Trade show a 4 percent chance the Fed will lower rates by three quarters of a percent to 2.25 at its March 18 meeting, down from 32 percent odds a week ago. The remaining odds are for a half-point reduction.