General question to the thread. Do people object to CNN being spun out, or do they also object to the merger being stopped even if that does mean CNN remains with Time Warner? I'm curious.
Both. No media company should be singled out for challenging the President, as that's a violation of the 1st amendment. At the same time, I oppose the merger on consumer, market share, and company size grounds.
U.S. District Judge Richard Leon is tasked with overseeing the Justice Department’s lawsuit to block the merger of AT&T and Time Warner, but it won’t be the first time the judge has handled a mega media merger.
The senior judge at the U.S. District Court for the District of Columbia signed off on another massive vertical merger in 2011: that of Comcast and NBC. Since news broke earlier this month that the DOJ may seek to block AT&T, a service provider, and Time Warner, a content producer, from merging, lawyers and experts have pointed to the success of the Comcast deal as evidence that the DOJ may not be successful in challenging the merger. But six years ago, Leon was skeptical of the government’s conditions for Comcast.
“The government’s ability to ‘enforce’ the final judgment, and, frankly, this court’s ability to oversee it, are, to say the least, limited,” Leon wrote in a memorandum that accompanied his approval of the deal. ” … I am not completely certain that these safeguards, alone, will sufficiently protect the public interest in the years ahead.”
So it's the same judge that approved the Comcast-NBC deal after the government and Comcast came to an agreement, but he was skeptical of the safeguards and the government's ability to enforce them. Based on Comcast's behavior after it acquired NBC, it's not out of the question that the judge would accept DoJ's argument that a settlement and conditions would be insufficient protections for the public.
The Clayton Act "covers" vertical integration but it does not do so as a specific result of the legislation. Covers is in quotes because vertical integration has not been seen to or shown to or have a strong theory of why it would cause anti-competitive effects
And we are talking about the merits of the case and not simply whether or not the DoJ can make a filing with a claim. Because they can make a filing with any claim they want.
edit: The suit claims anti-competitive effect not anti-competitive practices. These are different things and different portions of the act
It's pretty straightforward. A large shoe manufacturer buying a large shoe retailer would lessen competition because the combined company would have manufacturer-distributor relationship that would give it advantage over other distributors or manufacturers. Likewise an AT&T Time Warner merger would create creator-distributor relationship that would lead to anticompetitive effects, as the complaint lays out.
Ideally, any other distributors or manufacturers would be able to form similar relationships, whether it involved mergers or just contracts. If a single vertical merger is enough to substantially reduce competition for everyone else, isn't that a sign that one of the levels is already dangerously uncompetitive even without the merger?
The Clayton Act "covers" vertical integration but it does not do so as a specific result of the legislation. Covers is in quotes because vertical integration has not been seen to or shown to or have a strong theory of why it would cause anti-competitive effects
And we are talking about the merits of the case and not simply whether or not the DoJ can make a filing with a claim. Because they can make a filing with any claim they want.
edit: The suit claims anti-competitive effect not anti-competitive practices. These are different things and different portions of the act
It's pretty straightforward. A large shoe manufacturer buying a large shoe retailer would lessen competition because the combined company would have manufacturer-distributor relationship that would give it advantage over other distributors or manufacturers. Likewise an AT&T Time Warner merger would create creator-distributor relationship that would lead to anticompetitive effects, as the complaint lays out.
Advantage is not anti-competitive advantage(also they actually don’t). And well just about every shoe brand has their own retail branches and every major retailer has their own brand of shoes...
I don’t see how this any different than Comcast-NBC and if we aren’t moving to break that up then we don’t have much to say.
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I would be happy as a consumer if AT&T had to give up DirecTV because honestly I didn't have nearly as many technical problems with it before they took it over.
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My fear is that the DoJ will ultimately be just fine with every other aspect of the merger, including the ones that are genuinely anti-competitive and/or anti-consumer, as long as FOX or someone else on that side is allowed to acquire CNN (and/or take it out back and shoot it).
And the shareholders would probably go for that.
The Clayton Act "covers" vertical integration but it does not do so as a specific result of the legislation. Covers is in quotes because vertical integration has not been seen to or shown to or have a strong theory of why it would cause anti-competitive effects
And we are talking about the merits of the case and not simply whether or not the DoJ can make a filing with a claim. Because they can make a filing with any claim they want.
edit: The suit claims anti-competitive effect not anti-competitive practices. These are different things and different portions of the act
It's pretty straightforward. A large shoe manufacturer buying a large shoe retailer would lessen competition because the combined company would have manufacturer-distributor relationship that would give it advantage over other distributors or manufacturers. Likewise an AT&T Time Warner merger would create creator-distributor relationship that would lead to anticompetitive effects, as the complaint lays out.
Ideally, any other distributors or manufacturers would be able to form similar relationships, whether it involved mergers or just contracts. If a single vertical merger is enough to substantially reduce competition for everyone else, isn't that a sign that one of the levels is already dangerously uncompetitive even without the merger?
Yep, it’s a sign of that, we're already close to dangerously uncompetitive as it gets without another merger. 3 companies control most of the US broadband and paid-TV markets, Comcast, Charter, and AT&T. Comcast has already moved from a telecommunications giant, to a telecomm-media conglomerate. Of the handful of remaining media conglomerates that control much of the US market, NBC Universal is already a part of Comcast. Letting Time Warner be swallowed by AT&T means we’re one merger away from most of the country being covered by a handful of telecomm-media conglomerates.
All media creators from there on would not be dealing with distributors, but creator-distributors that have an incentive to promote their own content above all else. And my future company that wants to establish a different kind of distribution model would not be dealing with media companies but distributors with a strong incentive to protect their distribution models from competition.
The Clayton Act "covers" vertical integration but it does not do so as a specific result of the legislation. Covers is in quotes because vertical integration has not been seen to or shown to or have a strong theory of why it would cause anti-competitive effects
And we are talking about the merits of the case and not simply whether or not the DoJ can make a filing with a claim. Because they can make a filing with any claim they want.
edit: The suit claims anti-competitive effect not anti-competitive practices. These are different things and different portions of the act
It's pretty straightforward. A large shoe manufacturer buying a large shoe retailer would lessen competition because the combined company would have manufacturer-distributor relationship that would give it advantage over other distributors or manufacturers. Likewise an AT&T Time Warner merger would create creator-distributor relationship that would lead to anticompetitive effects, as the complaint lays out.
Advantage is not anti-competitive advantage(also they actually don’t). And well just about every shoe brand has their own retail branches and every major retailer has their own brand of shoes...
I don’t see how this any different than Comcast-NBC and if we aren’t moving to break that up then we don’t have much to say.
It’s not different, that was a deal that should not have been allowed and Comcast-NBC should be broken up.
The government doesn’t get to be selective here though. If it cannot make the argument for Comcast how can it make the argument for at&t?
I don’t think there is an argument for Comcast and statements of “yea it totally does but I cannot say how” are bull.
Does Comcast exert control over other service providers due to its ownership in NBC? Is there evidence for this?
I've brought up net neutrality once already. It remains an issue.
Net neutrality is an issue but also not related to this merger as it will not be the first vertically integrated company in the sector.
Net neutrality is a problem regardless of the merger as well. (Edit: and in ways that I do not think are exacerbated by the merger)
Not being the first merger that raises concerns doesn't mean it shouldn't be blocked. It means other mergers should have been and should be broken up.
And this absolutely makes the problem worse since it creates another company that can abuse that integration, which means fixing the problem will be more work.
The government doesn’t get to be selective here though. If it cannot make the argument for Comcast how can it make the argument for at&t?
I don’t think there is an argument for Comcast and statements of “yea it totally does but I cannot say how” are bull.
Does Comcast exert control over other service providers due to its ownership in NBC? Is there evidence for this?
I've brought up net neutrality once already. It remains an issue.
Net neutrality is an issue but also not related to this merger as it will not be the first vertically integrated company in the sector.
Net neutrality is a problem regardless of the merger as well. (Edit: and in ways that I do not think are exacerbated by the merger)
Not being the first merger that raises concerns doesn't mean it shouldn't be blocked. It means other mergers should have been and should be broken up.
And this absolutely makes the problem worse since it creates another company that can abuse that integration, which means fixing the problem will be more work.
1) how?!
2) No. First best solutions are not necessarily best in imperfect markets! Additionally this isn’t even a first or second best solution. If there is an advantage, anti-competitive or otherwise, then we are simply granting it to one player.
The government doesn’t get to be selective here though. If it cannot make the argument for Comcast how can it make the argument for at&t?
I don’t think there is an argument for Comcast and statements of “yea it totally does but I cannot say how” are bull.
Does Comcast exert control over other service providers due to its ownership in NBC? Is there evidence for this?
I've brought up net neutrality once already. It remains an issue.
Net neutrality is an issue but also not related to this merger as it will not be the first vertically integrated company in the sector.
Net neutrality is a problem regardless of the merger as well. (Edit: and in ways that I do not think are exacerbated by the merger)
Not being the first merger that raises concerns doesn't mean it shouldn't be blocked. It means other mergers should have been and should be broken up.
And this absolutely makes the problem worse since it creates another company that can abuse that integration, which means fixing the problem will be more work.
1) how?!
2) No. First best solutions are not necessarily best in imperfect markets! Additionally this isn’t even a first or second best solution. If there is an advantage, anti-competitive or otherwise, then we are simply granting it to one player.
1) Like we used to do prior to 1980. See AT&T for an example. It's not going to happen under the current administration, but that doesn't mean it won't happen under future administrations.
2) Or we're setting precedent to reverse a previous poor decision.
And there's an order of magnitude difference between NBC's acquisition by Comcast, where they spent $6.5B to take control of a company worth $11B, and Time Warner which is spending $85.4B to $108.7B. This is a MUCH greater vertical integration than NBC Comcast. If you think NBC Comcast was a poor decision, AT&T Time Warner will be a disaster. And even if you think NBC Comcast was reasonable, you can still believe that AT&T Time Warner is not.
The double standard with Comcast is my main problem here (ignoring, for the moment, the political games that are probably really driving it). I object to the merger on the principle of megacorps, but taking the DOJ argument at face value, I don't necessarily see the vertical integration angle as anti-competetive, at least not to the extent it would exist, or in the context of the market in which Comcast exists.
Reason A: In the TV game, locking out non-integrated content is even potentially a competetive disadvantage. Abuse your leverage and the competition can hurt you just as badly by refusing your terms. You see this play out when affikiate fees are being negotiated, with the service and content providers blacking out content and pointing fingers at each other.
Reason B: To the extent that it is an advantage, and there are certainly some advantages, preventing vertical integration of Comcast's competitors's is only protecting Comcast from competition.
As has been said, you can't have it both ways. If it's a problem, Comcast must be broken up, if it isn't ATT has to be permitted. In either scenario, blocking the merger shields Comcast from competition in the vertical integration game; regardless of its merits.
Creating precedence where the government can punish businesses that have troubled them on free speech / media grounds so long as they can find some legal excuse is orders of magnitude worse.
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No. How does it cause an anti-comepetive effect. “It does” is not sufficient.
Because a manufacturer-distributor will always have greater market control than individual manufacturers or distributors.
Are you arguing that because NBC Comcast was allowed, any merger of distributor and content provider should be allowed?
No. Manufacutrer/distributor does not have greater market control than one individually. The problems can only arise if the manufacturer or distributor independently have enough power to force an anti-competitive effect and even then it might not be an issue
This is because costs are generally passthrough to the consumer. If a company has power to extort monopoly/monopsony prices it receives those prices regardless of whether or not it owns a production house/distributor. All owning the production house/distributor does is internalize the profit and loss on the transaction into a net which is equal to the final sale value.
I say this with pretty concrete knowledge. While not my direct field there is a reason that the large conglomerates of the 60s either became non-issues or broke up. And that reason is that vertical integration does not provide an anti-competitive effect.
No. How does it cause an anti-comepetive effect. “It does” is not sufficient.
Because a manufacturer-distributor will always have greater market control than individual manufacturers or distributors.
Are you arguing that because NBC Comcast was allowed, any merger of distributor and content provider should be allowed?
No. Manufacutrer/distributor does not have greater market control than one individually. The problems can only arise if the manufacturer or distributor independently have enough power to force an anti-competitive effect and even then it might not be an issue
This is because costs are generally passthrough to the consumer. If a company has power to extort monopoly/monopsony prices it receives those prices regardless of whether or not it owns a production house/distributor. All owning the production house/distributor does is internalize the profit and loss on the transaction into a net which is equal to the final sale value.
I say this with pretty concrete knowledge. While not my direct field there is a reason that the large conglomerates of the 60s either became non-issues or broke up. And that reason is that vertical integration does not provide an anti-competitive effect.
Manufacturer/distributor absolutely gives you more market control. Look at glasses for an example of this. Luxottica grew to monopolistic control through vertical integration.
Do you really believe that a company with 30% control of manufacturing for a market and 30% control of distribution has the same market control as either of two companies, one with 30% control of manufacturing and one with 30% control of distribution? It should be obvious that policies from the first company will have more of a market effect than policies at either one of the individual companies.
There are many, many examples of how vertical integration can lead to anti-competitive efforts. Wal-mart has the Great Value brand because it makes them more money and lets them undercut competition. CVS provides CVS branded OTCs because it lets them undercut the competition.
The very fact that you can take a markup that would exist between a manufacturer and distributor and eliminate it from your final sales price gives you a huge competitive advantage; to the point that those that are not able to so will not be able to survive.
This is because costs are generally passthrough to the consumer.
what
that's not how costs or prices usually work
it depends on the demand curve
I'm trying come up with an example of an angle in the cable TV world and failing.
Affiliate fees are where the money gets made, and the primary cost driver on the consumer: Charging themselves nothing is neither here nor there. Using this to charge consumers less cuts into their profits just the same.
Charging others more is really just charging less than the market will bear, see above.
Cutting off content from competitor providers also costs them money (no affiliate fees), and in a world with Comcast/NBC, opens them up to a reprisal in kind, which their subscribers won't like.
So I don't see the inappropriate advantage there.
Post-Net Neutrality Internet, however, seems like a similar system, but more problematic because there are more vectors for fuckery, lots of content producers who are simply not structured for pay-to-play that would fail, and even more who would never get started if internet service became gated off like TV is.
The competitive advantages in TV are limited by the competition being almost entirely made up of other megacorporations; the internet is millions of little guys.
Edit: However, that has less to do with ATT being integrated with a trivial array of content producers and more to do with the power of any ISP not bound by NN. Google, Amazon, or Netflix they are not.
This is because costs are generally passthrough to the consumer.
what
that's not how costs or prices usually work
it depends on the demand curve
That is precisely how it works yes. You’re confusing the relationship between prices and quantity and total price. We’re also looking at supply effects and not demand effects. And supply price changes are shifts up in the entire curve. They add like that just perfectly.
In this situation though there is no modification to the final price of the item rather it’s an accounting change from who gets the profit margin, nothing else.
EG suppose you’re a monopsony and you’re able to bid down the cost of your input from 2 per unit to 1 per unit. Now suppose you buy that supplier and you say that you get the cost per unit for free! Do you make the final product cheaper or do you simply shift who pays the price?
A: you shift who “pays” the price. You don’t make any change in the price of the item to consumers but you now have additional capital expenditure in exchange for the margin on the sale... from input to 1. Imagine for a second you were not a monopsony and were paying 2.... now the capital expenditure brings the difference from price to 2. Either of which was the same value the original company had when it was producing for you.
Walmart and other in store brands like Costco do not exist for vertical integration reasons. They exist for supply variance and price discrimination reasons. Specifically Walmart et al do not own the suppliers of their store brand(doing so would lose them money because they’re monopsony buyers). Rather they contract excess capacity from brand suppliers so that brand suppliers can effectively price discriminate without losing value in their primary brand
This is because costs are generally passthrough to the consumer.
what
that's not how costs or prices usually work
it depends on the demand curve
That is precisely how it works yes. You’re confusing the relationship between prices and quantity and total price.
Probably it's fairer to say that you misused a term of art
No. It is not so. Supply costs are indeed passed through. That can have quantity effects but this is not some elasticity of demand question for tax incidence. There is no tax here.
This is especially true because the final price isn’t changing in this situation. The issue is one of what happens to the accounting profit that firms generate.
The Walt Disney Co. has struck a deal valued at $52.4 billion to acquire much of the Hollywood holdings of 21st Century Fox, the global television and entertainment conglomerate controlled by Rupert Murdoch and his family. The deal occurs against a backdrop of swift changes to the industry's finances and uncertainty about succession plans at both companies.
The sale represents a stunning turn of events for Murdoch, a reversal of decades of alternately calculated and impulsive expansion of a sprawling media empire that started with a single afternoon paper in a forgotten city on the southern coast of his native Australia.
The most profitable and controversial part of the Fox empire — Fox News —would not be part of the deal. Yet the family is selling off other defining properties, including the movie studio 20th Century Fox. The deal is expected to face regulatory scrutiny, as it would greatly concentrate similar holdings in Disney.
The following story is based on interviews with outside industry analysts and current and former executives for the Murdochs and for Disney.
Now is the start of Disney & Fox publicly campaigning for why the deal is pro-consumer and shouldn't come under regulatory scrutiny. Iger's argument is that Disney and Fox studios need to combine forces to have the scale necessary to compete with Netflix, Amazon, and maybe Apple. How consumers benefit from an always expanding Disney, pacman-like swallowing ever larger media companies is a bit hazy because it is mostly bullshit. Disney would like to do it, therefore it is good for consumers might as well be the argument. If there is a worry that distributors aren't being fair, then that's a regulatory issue that shouldn't be solved by the creation of whatever is bigger than a megacorporation.
I know I'm worried about what this means for Hulu. Will DisneyFox close it off? Will NBC (and, to a lesser extent, CBS) decide to stop playing ball with them? The damn thing has managed to evolve into a cheap cable replacement for me.
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The Walt Disney Co. has struck a deal valued at $52.4 billion to acquire much of the Hollywood holdings of 21st Century Fox, the global television and entertainment conglomerate controlled by Rupert Murdoch and his family. The deal occurs against a backdrop of swift changes to the industry's finances and uncertainty about succession plans at both companies.
The sale represents a stunning turn of events for Murdoch, a reversal of decades of alternately calculated and impulsive expansion of a sprawling media empire that started with a single afternoon paper in a forgotten city on the southern coast of his native Australia.
The most profitable and controversial part of the Fox empire — Fox News —would not be part of the deal. Yet the family is selling off other defining properties, including the movie studio 20th Century Fox. The deal is expected to face regulatory scrutiny, as it would greatly concentrate similar holdings in Disney.
The following story is based on interviews with outside industry analysts and current and former executives for the Murdochs and for Disney.
Now is the start of Disney & Fox publicly campaigning for why the deal is pro-consumer and shouldn't come under regulatory scrutiny. Iger's argument is that Disney and Fox studios need to combine forces to have the scale necessary to compete with Netflix, Amazon, and maybe Apple. How consumers benefit from an always expanding Disney, pacman-like swallowing ever larger media companies is a bit hazy because it is mostly bullshit. Disney would like to do it, therefore it is good for consumers might as well be the argument. If there is a worry that distributors aren't being fair, then that's a regulatory issue that shouldn't be solved by the creation of whatever is bigger than a megacorporation.
Which is hilarious. If any company has the resources to compete with Apple and Netflix, it's Disney.
Didn't I hear that Fox News was financially consistently in the red, and only surviving because it's Murdock's pet news station and he was using funds from the rest of his empire to keep it afloat?
If that's the case, and now Disney is buying all of Fox except the news, that means they can no longer stay afloat, right?
Please someone tell me this deal will kill Fox News.
I thought this was originally just for Fox's movie division, which would have been a big enough deal.
After Disney's strong arm tactics with Star Wars and the theaters that want to show it, this is probably bad news for theater chains and especially smaller venues that would like to be able to show a movie without a ton of strings attached.
Between all the television, movies, and Hulu this adds to their already considerable collection it's also gotta be bad news for Netflix. If they want to put up a strong competitor they're not going to have to do much to build a sizeable catalog
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KoopahTroopahThe koopas, the troopas.Philadelphia, PARegistered Userregular
Honestly the only good thing about this deal is the acquisition of film & TV rights (Marvel, Star Wars originals, Aliens, Firefly, etc...) Everything else is pretty dirty looking.
There is a planned 2019 launch of a Disney branded streaming service. Hulu is going to be the outlet for Fox programming that doesn't fit the family friendly image of Disney. The sports streaming service, launching next year, will now presumably cover ESPN & Fox Sports streaming.
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As a reminder, scheduled for today after the NN vote is the FCC 'quietly' changing the rules to allow Sinclair to acquire more than 39% of country-wide local market share
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Both. No media company should be singled out for challenging the President, as that's a violation of the 1st amendment. At the same time, I oppose the merger on consumer, market share, and company size grounds.
So it's the same judge that approved the Comcast-NBC deal after the government and Comcast came to an agreement, but he was skeptical of the safeguards and the government's ability to enforce them. Based on Comcast's behavior after it acquired NBC, it's not out of the question that the judge would accept DoJ's argument that a settlement and conditions would be insufficient protections for the public.
Ideally, any other distributors or manufacturers would be able to form similar relationships, whether it involved mergers or just contracts. If a single vertical merger is enough to substantially reduce competition for everyone else, isn't that a sign that one of the levels is already dangerously uncompetitive even without the merger?
Advantage is not anti-competitive advantage(also they actually don’t). And well just about every shoe brand has their own retail branches and every major retailer has their own brand of shoes...
I don’t see how this any different than Comcast-NBC and if we aren’t moving to break that up then we don’t have much to say.
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And the shareholders would probably go for that.
Yep, it’s a sign of that, we're already close to dangerously uncompetitive as it gets without another merger. 3 companies control most of the US broadband and paid-TV markets, Comcast, Charter, and AT&T. Comcast has already moved from a telecommunications giant, to a telecomm-media conglomerate. Of the handful of remaining media conglomerates that control much of the US market, NBC Universal is already a part of Comcast. Letting Time Warner be swallowed by AT&T means we’re one merger away from most of the country being covered by a handful of telecomm-media conglomerates.
All media creators from there on would not be dealing with distributors, but creator-distributors that have an incentive to promote their own content above all else. And my future company that wants to establish a different kind of distribution model would not be dealing with media companies but distributors with a strong incentive to protect their distribution models from competition.
It’s not different, that was a deal that should not have been allowed and Comcast-NBC should be broken up.
I don’t think there is an argument for Comcast and statements of “yea it totally does but I cannot say how” are bull.
Does Comcast exert control over other service providers due to its ownership in NBC? Is there evidence for this?
I've brought up net neutrality once already. It remains an issue.
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Net neutrality is an issue but also not related to this merger as it will not be the first vertically integrated company in the sector.
Net neutrality is a problem regardless of the merger as well. (Edit: and in ways that I do not think are exacerbated by the merger)
Not being the first merger that raises concerns doesn't mean it shouldn't be blocked. It means other mergers should have been and should be broken up.
And this absolutely makes the problem worse since it creates another company that can abuse that integration, which means fixing the problem will be more work.
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Eric Schneiderman is the Attorney General of New York.
The FCC doesn't care about issues like this, why would they care about corporate monopolies.
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1) how?!
2) No. First best solutions are not necessarily best in imperfect markets! Additionally this isn’t even a first or second best solution. If there is an advantage, anti-competitive or otherwise, then we are simply granting it to one player.
1) Like we used to do prior to 1980. See AT&T for an example. It's not going to happen under the current administration, but that doesn't mean it won't happen under future administrations.
2) Or we're setting precedent to reverse a previous poor decision.
And there's an order of magnitude difference between NBC's acquisition by Comcast, where they spent $6.5B to take control of a company worth $11B, and Time Warner which is spending $85.4B to $108.7B. This is a MUCH greater vertical integration than NBC Comcast. If you think NBC Comcast was a poor decision, AT&T Time Warner will be a disaster. And even if you think NBC Comcast was reasonable, you can still believe that AT&T Time Warner is not.
Reason A: In the TV game, locking out non-integrated content is even potentially a competetive disadvantage. Abuse your leverage and the competition can hurt you just as badly by refusing your terms. You see this play out when affikiate fees are being negotiated, with the service and content providers blacking out content and pointing fingers at each other.
Reason B: To the extent that it is an advantage, and there are certainly some advantages, preventing vertical integration of Comcast's competitors's is only protecting Comcast from competition.
As has been said, you can't have it both ways. If it's a problem, Comcast must be broken up, if it isn't ATT has to be permitted. In either scenario, blocking the merger shields Comcast from competition in the vertical integration game; regardless of its merits.
Creating precedence where the government can punish businesses that have troubled them on free speech / media grounds so long as they can find some legal excuse is orders of magnitude worse.
Because a manufacturer-distributor will always have greater market control than individual manufacturers or distributors.
Are you arguing that because NBC Comcast was allowed, any merger of distributor and content provider should be allowed?
No. Manufacutrer/distributor does not have greater market control than one individually. The problems can only arise if the manufacturer or distributor independently have enough power to force an anti-competitive effect and even then it might not be an issue
This is because costs are generally passthrough to the consumer. If a company has power to extort monopoly/monopsony prices it receives those prices regardless of whether or not it owns a production house/distributor. All owning the production house/distributor does is internalize the profit and loss on the transaction into a net which is equal to the final sale value.
I say this with pretty concrete knowledge. While not my direct field there is a reason that the large conglomerates of the 60s either became non-issues or broke up. And that reason is that vertical integration does not provide an anti-competitive effect.
what
that's not how costs or prices usually work
it depends on the demand curve
Manufacturer/distributor absolutely gives you more market control. Look at glasses for an example of this. Luxottica grew to monopolistic control through vertical integration.
Do you really believe that a company with 30% control of manufacturing for a market and 30% control of distribution has the same market control as either of two companies, one with 30% control of manufacturing and one with 30% control of distribution? It should be obvious that policies from the first company will have more of a market effect than policies at either one of the individual companies.
There are many, many examples of how vertical integration can lead to anti-competitive efforts. Wal-mart has the Great Value brand because it makes them more money and lets them undercut competition. CVS provides CVS branded OTCs because it lets them undercut the competition.
The very fact that you can take a markup that would exist between a manufacturer and distributor and eliminate it from your final sales price gives you a huge competitive advantage; to the point that those that are not able to so will not be able to survive.
I'm trying come up with an example of an angle in the cable TV world and failing.
Affiliate fees are where the money gets made, and the primary cost driver on the consumer: Charging themselves nothing is neither here nor there. Using this to charge consumers less cuts into their profits just the same.
Charging others more is really just charging less than the market will bear, see above.
Cutting off content from competitor providers also costs them money (no affiliate fees), and in a world with Comcast/NBC, opens them up to a reprisal in kind, which their subscribers won't like.
So I don't see the inappropriate advantage there.
Post-Net Neutrality Internet, however, seems like a similar system, but more problematic because there are more vectors for fuckery, lots of content producers who are simply not structured for pay-to-play that would fail, and even more who would never get started if internet service became gated off like TV is.
The competitive advantages in TV are limited by the competition being almost entirely made up of other megacorporations; the internet is millions of little guys.
Edit: However, that has less to do with ATT being integrated with a trivial array of content producers and more to do with the power of any ISP not bound by NN. Google, Amazon, or Netflix they are not.
That is precisely how it works yes. You’re confusing the relationship between prices and quantity and total price. We’re also looking at supply effects and not demand effects. And supply price changes are shifts up in the entire curve. They add like that just perfectly.
In this situation though there is no modification to the final price of the item rather it’s an accounting change from who gets the profit margin, nothing else.
EG suppose you’re a monopsony and you’re able to bid down the cost of your input from 2 per unit to 1 per unit. Now suppose you buy that supplier and you say that you get the cost per unit for free! Do you make the final product cheaper or do you simply shift who pays the price?
A: you shift who “pays” the price. You don’t make any change in the price of the item to consumers but you now have additional capital expenditure in exchange for the margin on the sale... from input to 1. Imagine for a second you were not a monopsony and were paying 2.... now the capital expenditure brings the difference from price to 2. Either of which was the same value the original company had when it was producing for you.
Walmart and other in store brands like Costco do not exist for vertical integration reasons. They exist for supply variance and price discrimination reasons. Specifically Walmart et al do not own the suppliers of their store brand(doing so would lose them money because they’re monopsony buyers). Rather they contract excess capacity from brand suppliers so that brand suppliers can effectively price discriminate without losing value in their primary brand
Probably it's fairer to say that you misused a term of art
No. It is not so. Supply costs are indeed passed through. That can have quantity effects but this is not some elasticity of demand question for tax incidence. There is no tax here.
This is especially true because the final price isn’t changing in this situation. The issue is one of what happens to the accounting profit that firms generate.
https://www.npr.org/sections/thetwo-way/2017/12/14/568829541/this-mouse-swallows-part-of-a-fox-disney-buys-much-of-murdoch-empire
Now is the start of Disney & Fox publicly campaigning for why the deal is pro-consumer and shouldn't come under regulatory scrutiny. Iger's argument is that Disney and Fox studios need to combine forces to have the scale necessary to compete with Netflix, Amazon, and maybe Apple. How consumers benefit from an always expanding Disney, pacman-like swallowing ever larger media companies is a bit hazy because it is mostly bullshit. Disney would like to do it, therefore it is good for consumers might as well be the argument. If there is a worry that distributors aren't being fair, then that's a regulatory issue that shouldn't be solved by the creation of whatever is bigger than a megacorporation.
I heard the deal gives Disney 50% share of the film market.
This is not good for consumers, this much concentration.
Which is hilarious. If any company has the resources to compete with Apple and Netflix, it's Disney.
If that's the case, and now Disney is buying all of Fox except the news, that means they can no longer stay afloat, right?
Please someone tell me this deal will kill Fox News.
After Disney's strong arm tactics with Star Wars and the theaters that want to show it, this is probably bad news for theater chains and especially smaller venues that would like to be able to show a movie without a ton of strings attached.
Between all the television, movies, and Hulu this adds to their already considerable collection it's also gotta be bad news for Netflix. If they want to put up a strong competitor they're not going to have to do much to build a sizeable catalog
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Gigacorporation?
Is all of Disney's growth over the past few years driven by acquisitions? If so, that's a troubling trend.