The Satellite TV Providers industry is in the midst of a revolution, supplying popular family shows, news, movies, sports, documentaries and other products to a growing swarm of eager subscribers willing to pay for in-home entertainment. For example, the introduction of high-definition (HD) TV vastly improved the quality of shows and attracted subscribers even as disposable income dropped during the Great Recession. “In addition to a dramatically improved reputation for quality, new networks, channel offerings and bonus features are strengthening the industry’s appeal to consumers,” says IBISWorld industry analyst Doug Kelly. Higher spending on industry services is anticipated to result in 5.6% annualized revenue growth to $41.4 billion in the five years to 2012. This climb includes an expected 3.8% increase in 2012 as more consumers continue subscribing to satellite TV…
Over the next five years, the industry will face escalating competition from other media.
Have I mentioned Hulu TV and YouTube and Netflix, especially the non-broadband requiring discs? How about reading the internet? How about using your iPad to watch downloaded movies and TV shows? New social media for sharing? “Let them download somewhere else”? There is a reason why “cable” and “cord cutting” appear so frequently in the same sentence.
There is no big deal with Comcast acquiring Time Warner, also because the two companies serve separate districts. If anything the new consolidated entity will have stronger monopsony power over programs and can bid their prices down. (Isn’t ESPN with its sports contracts a monopoly of sorts, just as the sports leagues are?) We all know that monopolists facing lower marginal costs tend to lower price (contrary to Tim Wu), even if not by as much as we might like. Krugman worries that “This would, in turn, make it even harder for potential competitors to enter markets served by ComcastTimeWarner, strengthening its monopoly position.” A better sentence would have been “No five year period has so increased the contestability of the cable sector than the last five years in the United States.”
One might also add that if ComcastTimeWarner can bid down prices on programs, this need not keep out other competitors. Those programs are non-rivalrous in consumption, and the sellers can extend whatever price discounts they might wish to new competitors, to increase the demand for their products. The final equilibria here are complex, but in general the ability of a strong firm, in this setting, to bid down input prices is not a bad thing.
Addendum: If you wish to worry about something, it is how to get more competition within a single market, as you might for instance do through municipal wi-fi, the successor to 4G, and so on. Worrying about the horizontal spread of trading in one monopoly for another is beside the point. What I am seeing in various comments on Twitter is people with objections to cable monopolies, some of them valid objections, then objecting to possible changes in the market out of basic mood.