Market foreclosure and vertical merger

A case study of the vertical merger between Turner Broadcasting and Time Warner

Research output: Contribution to journalArticle

13 Citations (Scopus)

Abstract

We employ an event-study methodology, the event being the vertical merger between Time Warner and Turner Broadcasting, distribution and programming, respectively, in the cable television industry. We assess the effects of the merger on final prices, subscriptions, and carriage and marketing decisions of Time Warner. The analysis finds several interesting facts. First, foreclosure in Time Warner markets following the merger is observed for the rival channels that are not integrated with any cable distributors. Second, the Turner Broadcasting channels that increased market shares because of this merger appeared to be foreclosed by Time Warner prior to the merger. The preference for own channels by Time Warner persisted, despite a lower quality of channel bundles in its markets; efficiency gains from the merger were not passed on to consumers.

Original languageEnglish
Pages (from-to)532-543
Number of pages12
JournalInternational Journal of Industrial Organization
Volume27
Issue number4
DOIs
Publication statusPublished - 2009 Jul

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Broadcasting
Cables
Electronics industry
Marketing
Vertical merger
Foreclosure
Mergers

Keywords

  • Antitrust
  • Foreclosure
  • Vertical integration

ASJC Scopus subject areas

  • Industrial and Manufacturing Engineering
  • Industrial relations
  • Strategy and Management
  • Aerospace Engineering

Cite this

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AB - We employ an event-study methodology, the event being the vertical merger between Time Warner and Turner Broadcasting, distribution and programming, respectively, in the cable television industry. We assess the effects of the merger on final prices, subscriptions, and carriage and marketing decisions of Time Warner. The analysis finds several interesting facts. First, foreclosure in Time Warner markets following the merger is observed for the rival channels that are not integrated with any cable distributors. Second, the Turner Broadcasting channels that increased market shares because of this merger appeared to be foreclosed by Time Warner prior to the merger. The preference for own channels by Time Warner persisted, despite a lower quality of channel bundles in its markets; efficiency gains from the merger were not passed on to consumers.

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