Vertical Integration in Multichannel Television Markets: Revisiting Regional Sports Networks Using Updated Data
In an article published in 2013, Kevin Caves, Chris Holt, and Hal Singer analyzed data on regional sports networks (RSNs) to assess the Federal Communications Commission’s (FCC’s) bargaining-theory-based prediction that affiliate fees charged by a vertically integrated RSN to downstream distribution rivals would be higher than what an independent RSN would charge. They estimated an econometric model built on prior modeling by the FCC and found empirical evidence supporting the FCC’s prediction, with an economically and statistically significant vertical integration premium. As a result, they claimed that “any potential efficiencies arising from vertical integration in the industry should be weighed against the prospect of increased content costs and the potential for reduced output and economic welfare.” In this article, we show that those results do not hold up to updates in the underlying data—either on the original time period (given revisions to the data) or on a more recent time period, or a combination of the two. Indeed, overall, the results are more consistent with lower prices due to vertical integration than with higher prices. Consequently, the 2013 study’s policy conclusions are not, in fact, supported by the updated data.
Georgi Giozov, Nauman Ilias, Mark Israel & Allan Shampine, Vertical Integration in Multichannel Television Markets: Revisiting Regional Sports Networks Using Updated Data, 4 Criterion J. on Innovation 1 (2019).