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The Department of Justice argued that the merger could hurt consumers. He went from the front anyway.
Photo: Amir Levy / Getty Images
One of the main concerns raised by the Department of Justice in its unsuccessful attempt to block the AT & T – Time Warner merger was the fact that one company held both a large number of television channels watched. by the Americans (CNN, TNT, HBO, etc.) and many systems. Americans used to have TV channels (DirecTV and U-Verse), would have the undue power to raise prices and retain content.
Of course, the President had personal concerns, but whatever his political motives, it was plausible to think that the merger was detrimental to consumer welfare and could lead to higher prices and reduced availability of content.
And now that the merger has been advanced, HBO has darkened Dish Network's customers due to a stalemate between AT & T and Dish Network over the conditions under which AT & T will sell HBO access to Dish .
AT & T does not necessarily seek an unfair advantage in its dealings with Dish Network. An HBO representative told Bloomberg News that they had offered Dish an extension of the HBO service according to their pre-existing conditions while pursuing negotiations and that Dish had rejected the offer.
Bloomberg also notes that "Dish has recently been particularly aggressive in negotiations with programmers." Univision, which is not part of a recent mega-merger, has been missing from Dish systems for months due to a similar dispute.
Nevertheless, the fact that millions of Americans who wanted to subscribe to HBO are now without access will raise reasonable concerns that the government was right in saying that media-telecommunications mergers could hurt consumers. .
The main concerns are the negotiations on postage. These fees are one of the main ways in which companies owning TV channels make money: if you have a cable or satellite system and want to offer CNN or TNT to your subscribers, you have to pay to AT & T monthly fee per subscriber. .
Of course, the most popular channels (like Disney's CNN and ESPN) are the ones that offer the highest rates.
When cable channels and cable and satellite systems are held separately, negotiations over distribution costs are relatively straightforward. Channel owners want high rates and satellite cable systems want to pay low rates, but if they can not reach an agreement on rates and the channel falls off a cable system, everyone loses : viewers switch to other channels and subscribers from other systems. This strongly encourages both parties to reach a fair deal.
But when a business has both channels and distribution systems, the incentives can become misaligned. If AT & T bears particularly high costs for its channels, it will be able to get what it wants. Otherwise, you can still win: Subscribers to systems that do not have a contract to broadcast AT & T content can switch to AT & T-owned DirecTV to watch their favorite shows.
This dynamic is not only important for the shareholders of the media and telecommunications companies. If a merged company gains market power to charge higher prices for cable systems, it will likely result in higher prices for cable subscribers.
AT & T has proposed a solution to this problem in the merger dispute: a "baseball" arbitration, in which negotiations for channel fees could be submitted to a neutral arbitrator, who would approve the conditions the most reasonable ones offered by AT & T or the cable and satellite television companies to which they sell content. But the government rejected this offer.
The failure of HBO may simply be due to a specific negotiation style at Dish Network. But consumers will have to monitor and see if there is more disruption.
* Disclosure: Since I write on telecommunications, I must note that I am a paid contributor to MSNBC and NBC News, which belong to Comcast, a merged company in the media and telecommunications sector, similar to AT & T-Time and compete with her. Warner. NBC does not exercise any editorial control over my writings for New York.
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