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Vertical integration in the TV market: Exclusive provision and program quality

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  • D’Annunzio, Anna

Abstract

We study how vertical integration in a media market affects investments in premium content. We show that a content provider provides the premium content exclusively to a platform, regardless of the vertical structure of the industry. However, a vertically integrated content provider has lower incentives to invest in quality than an independent one. With asymmetric platforms, the platform with a competitive advantage in the advertising market obtains the exclusive content, and the content provider invests even less when it is integrated with it. We show that the content provider prefers to merge with the platform with a competitive advantage in the advertising market. Vertical integration reduces both consumer and total surplus. Our results suggest that authorities should carefully assess the effects of vertical mergers on the incentives to invest in content quality, incorporating non-price measures in merger analysis. An intervention at the distribution stage that enforces non-exclusive provision reduces quality and may have adverse effects on consumer and total surplus.

Suggested Citation

  • D’Annunzio, Anna, 2017. "Vertical integration in the TV market: Exclusive provision and program quality," International Journal of Industrial Organization, Elsevier, vol. 53(C), pages 114-144.
    • Handle: RePEc:eee:indorg:v:53:y:2017:i:c:p:114-144
    DOI: 10.1016/j.ijindorg.2017.05.002
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    More about this item

    Keywords

    Exclusive contracts; Premium content; Quality investment; Media; Two-sided markets; Vertical merger;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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