Question 1 ) (answer 80-100words for each question)
The following are two key reasons why the DoJ is opposing the AT&T Time Warner merger:
- AT&T could use Turner’s “must have” content to increase costs for other distributors (i.e., Spectrum, for example, has to pay a higher affiliate fee for Turner, Spectrum would then pass on these costs to their subscribers)
- AT&T’s DirecTV could become a monopoly by not offering its content (Turner, HBO, etc.) to other distributors.
Your reaction to the above? Would the video programming and distribution industry be drastically reshaped (against consumers’ interests) if the merger was allowed?
Question 2)
Examine the relationship between video distributors (the cable companies) and video content aggregators (the networks). According to the 5-forces model, the content aggregators are suppliers to the video distributors. Who has the higher bargaining power?
Q3)
In his ruling, the judge points out three important trends reshaping the video programming and distribution industry:
- Rise and innovation of over-the-top, vertically integrated video content services (such as Netflix and Hulu)
- Declining MVPD subscriptions resulting from an increasingly competitive industry landscape
- Shift toward targeted, digital advertising
If you are on AT&T’s top management team (after the merger goes through), which of the three above trends would be the biggest threat to your company’s prospects?
_______________________hint for Question2________________
here is some answers for Q2: ( you can take the idea and write your own words)
I feel that video content aggregators have a much higher bargaing power because they can decide who they give the content to and how much they can charge for everything they want to sell. Disney, I believe would count as a network that does video content aggregation, and they use to sell some of there products to different streaming or direct television services. The chose who to sell which product to and and created a price the felt was right ffor their product. Although once they created their own streaming service they ended all the contracts they could and removed their content from other distributors. I fully believe the aggregators have all the power and the distributors know this and try to out bid eachother for the best products.
RE: Question 2 of 3
Morgan, I really like your point about the effect of losing a certain network through a black out. Subscribers may ultimately question staying with their distributor if it loses certain licesning rights. I think that really plays a factor in negotatiaions, especially when aggregators become larger and produce more premium cotent and a distrubtor relies on that content to attract customers.
RE: Question 2 of 3
The content aggregators have more bargining power. According to the case, it is a loss for both sides when they have content “blackouts”. That being said, it makes sense that the content aggregators, the people who own and have the power to charge whatever they want for their content would have the upper hand in these negotiations. The video distributors know that their subscriptions rely on having good content. They will not be able to generate enough customers, nor enough profit if they don’t have good content to offer. At the end of the day it is really important for them to close the deal, and that is why negotiations take so long. Both sides what to avoid blackouts, but the content aggregators are like the gate keepers of this content.
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