Hollygopoly: Oligopolistic Competition for (Hollywood) Movies

Information Economics and Policy, 2005

The paper asks how a for-profit cable or satellite operator allocates a fixed channel capacity to different program types and how the different channels are bundled and priced. It also addresses the question how channel allocation and bundling decisions made by a for-profit firm differ from the decisions a welfare-maximizing firm would make. It also examines the effect on profits and welfare of two regulatory constraints that limit the operator's choices in regard to the number of distinct bundles that may be offered to subscribers.

1989

Bundling, a practice which has increased dramatically in the television and cable industries in recent years, occurs when program distributors package groups of movies and episodes of series, and then sell licenses to use these packages to TV stations and cable channels. Typically, such bundled packages include both highly desirable and less desirable films or episodes of off-network series. Bundling can easily turn into block booking, the illegal practice of making programming available in indivisible units that harm competition. Litigation continues to occur in the motion picture industry as a result of block booking and is beginning to occur in the cable industry, where it is often called "tying." Tying occurs when a programming service requires a system to take an unwanted channel to attain a desired channel; litigation is being directed at services tying cable programs, motion picture studios, and cable operators. Such practices limit the ability of programmers to negotiate prices based on the economic forces of supply and demand. As a result, many stations are forced to pay higher pric!es for products they would prefer to reject. In addition, bundling and block booking limit the ability to bargain for discounts for using programming in several markets in which a broadcaster may own properties and to barter advertising time for programming. With mergers such as that of Time and Warner Communications creating vertical integration in the programming industry, the linkages of program production, distribution, and exhibition grow stronger and provide more incentive for distributors to engage in economic practices that disadvantage local firms who provide delivery to audiences. (NKA)

The paper asks how a for-profit cable or satellite operator allocates a fixed channel capacity to different program types and how the different channels are bundled and priced. It also addresses the question how channel allocation and bundling decisions made by a for-profit firm differ from the decisions a welfare-maximizing firm would make. It also examines the effect on profits and welfare of two regulatory constraints that limit the operator's choices in regard to the number of distinct bundles that may be offered to subscribers.

Review of Industrial Organization, 1997

In the recent past, the cable industry has exhibited a pronounced tendency toward increased vertical integration and concentration of cable system ownership. As a result, the 1992 Cable Act proposed and the Federal Communications Commission implemented restrictions on such activity. Two antitrust concerns include the size of programming discounts offered to large multiple-system operators and price and carriage discrimination by vertically integrated programming networks. The empirical model in this paper attempts to systematically measure the effect of ownership concentration and vertical integration on the programming cost and price of cable operators. We find that concentration and integration lower the programming cost to cable systems affiliated with larger multiple-system operators. These discounts are partially passed along to consumers in the form of lower prices.

In this article, we address three policy questions regarding the Portuguese cable televi- sion industry. First whether the high concentration in the industry has a technological justi…cation. Second what is the level of market power that the cable television …rms exercise? Third, what is the impact on prices and welfare of two acquisitions an- nounced recently? We develop a structural model of the cable television industry that includes both a demand and a supply side. The model is estimated for a rich panel of Portuguese …rm level data, and used to address these policy questions. The demand is described by a nested logit model model. Consumers have elastic demands. The costs are described by a …xed eects cost frontier with a Cobb-Douglas speci…cation. Cable television services and broadband access to the internet services are characterized by increasing returns to scale, and economies of scope. Firms exercise more market power than if they played a Nash equilibrium, but less market...

Université du Québeca Chicoutimi, 2006

We look at the competition and the welfare effects of bundling in the context of vertically differentiated communication services (eg Television, Telephone and Internet). We consider a two-stage game with two asymmetric firms (eg Telecom and Cable Operator). ...

Telematics and Informatics

Using the United Kingdom (UK) as a case study, this article analyses the growing commercial and regulatory significance of broadcaster-distributor relations within the contemporary television industry. The first part of the article argues that despite important changes in broadcast delivery technology, more recently shaped by the growth of the Internet, and the associated growth of options of receiving television content, the traditional delivery platforms (digital terrestrial, satellite and cable) remain by far the preferred choice for viewers in Britain. At the same time, public service broadcasters continue to be the biggest investors in domestic original non-sport content and account for over half of all television viewing. The strength of PSBs in content and their growing reliance on commercial proprietary subscription platforms (cable and satellite) and gradually on the Internet presents challenges in the nexus between broadcasters and distributors. The article focuses on the debate over retransmission fees between PSBs and Sky, and on the question of whether Sky should be required to offer some of its premium content to rival pay-TV platforms. These two examples highlight the impact regulatory intervention can have on the balance of power between broadcasters and distributors. The article concludes that such debates concerning the commercial relations between content providers and distributors will remain pivotal and become more heated given that similar issues are raised in the Internet environment.

SSRN Electronic Journal, 2006

A new regulatory debate has sprung up around the pricing of TV networks on cable and satellite systems. Many argue that bundling networks on tiers, rather than selling channels individually, is anti-consumer and forces families to purchase programming they don't value and often find offensive. The Federal Communications Commission, after issuing sharply conflicting reports on the subject, is considering measures to enforce a la carte pricing. This paper explains the economics of multi-channel video distribution, showing that network cost conditions dictate reliance on bundling. Consumers do, in fact, purchase programs they find valuable, with operators effectively throwing in additional content for free. This outcome is dictated not by market power, as competitive entrants bundle just as aggressively as do incumbents, but by the underlying economic conditions: cable TV network are distributed to additional households at zero marginal cost. Restricting the basic tier from, say, 60 channels to just those, say, 20 channels a given subscriber prefers is actually more expensive than providing the large tier to all. The upshot is that the goal of reduced retail prices under a la carte is a chimera.

Regulating Innovation, 2009