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On the Profitability of Media Mergers

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Author Info
Esther Gal-Or (University of Pittsburgh)
Anthony Dukes (University of Aarhus)

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Abstract

We examine incentives for nonconsolidating horizontal mergers in commercial media industries. In a model with differentiated media and products, we show that such a merger is profitable if merging media firms gain a relative bargaining advantage vis-à-vis advertisers in the negotiations for advertising space. Whether a bargaining advantage yields profitable conditions for a merger depends on the extent of competition for audiences among media firms. Higher levels of competition make media mergers more profitable. This result contrasts those implied by oligopoly models for traditional product markets, which suggest that mergers become less profitable for higher levels of competition.

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File URL: http://www.journals.uchicago.edu/cgi-bin/resolve?JB790202
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Publisher Info
Article provided by University of Chicago Press in its journal Journal of Business.

Volume (Year): 79 (2006)
Issue (Month): 2 (March)
Pages: 489-526
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Handle: RePEc:ucp:jnlbus:v:79:y:2006:i:2:p:489-526

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Postal: The University of Chicago Press, Journals Division, P.O. Box 37005 Chicago, IL 60637
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  1. Anderson, Simon P & Gabszewicz, Jean Jaskold, 2005. "The Media and Advertising: A Tale of Two-Sided Markets," CEPR Discussion Papers 5223, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  2. Richard Schmidtke, 2006. "Two-Sided Markets with Pecuniary and Participation Externalities," Discussion Papers 133, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
  3. Suchan Chae & Paul Heidhues, 2003. "Buyers’ Alliances for Bargaining Power," CIG Working Papers SP II 2003-24, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG). [Downloadable!]
    Other versions:
  4. Reisinger, Markus, 2004. "Two-Sided Markets with Negative Externalities," Discussion Papers in Economics 478, University of Munich, Department of Economics. [Downloadable!]
  5. Schmidtke, Richard, 2006. "Two-Sided Markets with Pecuniary and Participation Externalities," Discussion Papers in Economics 963, University of Munich, Department of Economics. [Downloadable!]
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