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Mec1339 Oxford Media Convention January 19 2006 Competition in Television Production, Creativity and Independence Martin Cave Warwick Business School,

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Presentation on theme: "Mec1339 Oxford Media Convention January 19 2006 Competition in Television Production, Creativity and Independence Martin Cave Warwick Business School,"— Presentation transcript:

1 mec1339 Oxford Media Convention January Competition in Television Production, Creativity and Independence Martin Cave Warwick Business School, UK

2 2 mec What are the competition problems? How do they adversely affect consumers? The link between independence and innovation. What is the added value of diversity?

3 3 mec Standard Competition Issues A. Bargaining power Market structure -Highly concentrated buy-side: -4 main terrestrial broadcasters account to 79% of first run non-news origination -Fragmented independent supply side -3 firms account for 10% of total supply -25 firms account for 25% of total supply

4 4 mec What can go wrong? An analogy: UK supermarkets 5 major multiples buying 76% of groceries from suppliers have sufficient buyer power to make their practices adversely affect the competitiveness of suppliers and distort competition in the supplier market, and in some cases the retail market * Practices included requiring discounts, changes without notice, unreasonable risk transfer.

5 5 mec The solution For both supermarkets, and television production; statutory codes of practice. In each case, the code provides a focal point/fall back for negotiations

6 6 mec Problems How prescriptive to be How to deal with changes (the rights windows question): -regulators goal should be to mimic the representative/model contract absent unequal bargaining power -this implies regulation should not seek to protect particular income streams absent an over-riding motive, best achieved by this means (very unlikely)

7 7 mec Standard competition issues B.Vertical integration Not normally a problem in commercial environments, except those involving regulator or public enterprises. Counter-example: BT BT is regulated in its wholesale activities. It is an efficient retailer. It therefore may seek to retain retail supremacy, which also deters threats to its upstream assets (cf.Microsoft)

8 8 mec Vertical integration in programme procurement BBCITV ObjectiveOutput maximisationProfit Exclusionary motive for self-supply short term No Cost Buy/make testBias towards self- supply Cost minimisation (own marginal cost vs. external price) Incentive to over-invest in capacity PresentAbsent Need for regulationYes?No? Implications for WOCCNot good

9 9 mec What do we know about innovation? The inverted U curve monopoly oligopoly fragmented competition Implications: Self supply created bilateral monopolies Small independents may bring little benefit innovation


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