Effects of Mergers and Competition on Consumer Benefits in the Multi-Channel Video Programming Industry in Korea

Abstract

This article examines the welfare benefits of cable television (CATV) merger and acquisitions in the multi-channel video programming distribution (MVPD) market. In particular, it seeks to answer whether cable subscribers are better off in competitive markets than in concentrated markets. This article estimates the impact of mergers by examining Korea's regional market-share data for MVPD operators with a hierarchical-choice model. First, the estimation results show that the consumer value of the CATV platform, in terms of the category values in a nested logit model, was significantly lower in the concentrated markets than in the more competitive markets. Second, the study compares these findings with those in the literature about the U.S. market. The following question is prompted: Why is direct broadcast satellite competitive with CATV in the United States but not in Korea? This article points out that differences in regulatory policies, particularly as they relate to the treatment of vertically integrated networks, do have significant effects on the effective boundary of MVPD competition across platforms. To support this argument, this article provides details on the policies and market characteristics of the Korean MVPD industry.