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Thursday, July 3, 2008

Rush's New Contract and Free Markets: My Contrarian Argument

I want to congratulate Rush Limbaugh on his new contract. The deal is for an extraordinary amount of money. It includes a signing bonus that is nine figures, or something more than $100,000,000. Now, I suspect that someone like Barack Obama would bemoan...

the U.S. becoming what he called a "winner-take-all" economy, where the gains from economic growth skew heavily toward the wealthy.

I believe this contract shows the power of our markets and many lessons of capitalism are learned by it. Rush Limbaugh grew out of the after math of the repeal of the Fairness Doctrine.

In 1984, Limbaugh returned to radio as a talk show host at KFBK in Sacramento,
, where he replaced Morton Downey, Jr.[5]

The repeal of the Fairness Doctrine—which had required that stations provide free air time for responses to any controversial opinions that were broadcast—by the FCC in 1987 meant stations could broadcast editorial commentary without having to present opposing views. Daniel Henninger wrote, in a Wall Street Journal editorial, "Ronald Reagan tore down this wall (the Fairness Doctrine) in 1987...and Rush Limbaugh was the first man to proclaim himself liberated from the East Germany of liberal media domination." [10]

On August 1, 1988, after achieving success in Sacramento and drawing the attention of a former president of ABC Radio, Edward F. McLaughlin, Limbaugh moved to New York City and began his national radio show. His show debuted just weeks after the Democratic National Convention, and just weeks before the Republican National Convention. Rush Limbaugh's radio home in New York City was the talk-format station WABC-AM, 770 AM, and continues to this day as his flagship station.[

Rush rushed used the vacuum of the repeal of that law to lead a revolution of Conservatives on talk radio. Everyone from Sean Hannity, to Laura Ingraham, to others like Mike Gallagher all followed in the footsteps In other words, he created a niche in media.

A niche market is a focused targetable portion (subset) of a market.

By definition, then, a business that focuses on a niche market is addressing a need for a product or service that is not being addressed by mainstream providers. A niche market may be thought of as a narrowly defined group of potential customers.

A distinct niche market usually evolves when a potential demand for a product or service is not met by any supply, or when a new demand arises due to changes in society, technology, or the general environment.

Niche market ventures may become profitable even though they are by nature small in comparison to the mainstream marketplace, due to the benefits of specialization and focus on small identifiable market segments; even without the benefit of economy of scale. Niche markets may be ignored or discounted by large businesses due to what they consider to be small potential; this in turn is part of the process that makes the niche market available to smaller businesses. The key to capitalizing on a
niche market is to find or develop a market niche that has customers who are
accessible, that is growing fast enough, and that is not owned by one established vendor already.

That is the sort of entrepreneurial spirit we want to be rewarding in our society. A couple days ago, it was rewarded in a way that will motivate other innovators and entrepeneurs. Entrepeneurs and innovators are the key to our economy.

What Rush's contract showed is that if you take the right sort of risk in our economy there is an enormous amount of reward. That's the best thing our markets could have happen in them.

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