Vertical Integration and Concentration in Cable Television Markets, the Accuracy and Entertainment in Local Newspapers, and Effects of Movie Stars on the Volatility of Box Office Revenue

This issue of Journal of Media Economics has studies on three important media industries: cable television, newspapers, and motion pictures. The first study presents evidence that vertically integrated cable providers may increase the carriage of their own channels at the cost of reducing carriage of rival networks. The second study looks at the endogenous decision of local newspapers regarding the accuracy (or “quality”) of their newspaper and how the incentives to invest in reporting accuracy depend on the reading habits of consumers. The final study shows that while movie stars may not guarantee profits for the studio, their presence may lower the volatility of revenue. This is an important consideration for movie studios given the risk and uncertainty associated with expensive movie productions. The first study, “Vertical Integration, Regional Concentration, and Availability in Cable Programming Networks,” is by Sung Wook Ji. This study examines the impact of two trends that have been observed over the past two decades in cable provision. The first trend is the increased vertical integration between content providers (cable television networks) and content distributors (cable systems). An example of this trend is Comcast’s merger with NBC Universal, the owner of cable channels such as the USA Network and MSNBC. Such vertical integration aligns the ownership of the television channel with the cable provider distributing the channel. The second trend is the regional clustering of cable providers that has occurred, creating large geographically contiguous cable systems. Both trends potentially change the dynamics of competition in the cable industry. Given the focus on vertically integrated and regionally-concentrated cable operators, the author chooses to examine the 122 metropolitan areas (DMAs) in which either Comcast or Time Warner, the two largest traditional (i.e. non-satellite) cable providers in the United States, have a presence. The author uses Warren Publishing’s 2009 Television & Cable Factbook to compile information on the carriage of certain cable networks and the various tiers of programming offered by each cable provider.