Horizontal Integration - 6633 Words

EUROPEAN COMMISSION Competition DG Information, communication and multimedia Media Vertical and horizontal integration in the media sector and EU competition law Miguel Mendes Pereira* â€Å"The ICT and Media Sectors within the EU Policy Framework† U.L.B.-SMIT (Studies on Media, Information and Telecommunications) CEAS-Norwegian School of Management, Oslo Telenor Broadcast Brussels, 7 April 2003 OUTLINE Introduction I. Convergence and integration 1. Technical convergence 2. Economic convergence 3. Efficiencies II. Competition issues 1. The competitive arena 2. Foreclosure 3. The dominance test III. Vertical integration 1. 2. 3. 4. The gate-keeper issue Foreclosure of input markets Leveraging Network effects IV. Horizontal†¦show more content†¦In order to have an idea of the recent increase in the price for audio-visual contents it is sufficient to compare, for example, the price paid for broadcasting rights of the Football World Cups of 1990, 1994 and 1998 – 241 million ECU – with the price paid for the same rights in respect of the World Cups of 2002 and 2006 – 1,7 billion Euro. Only large companies seem to be able to afford such astronomical costs. 2 â€Å"Vertical and horizontal integration in the media sector and EU competition law† - M. Mendes Pereira In face of economic barriers of such dimension, media companies have shown a trend towards concentration. 3. Efficiencies What appeared to be particularly new about these alliances and mergers in the media industry was the search of not only the traditional economies of scale but, above all, the search of economies of scope. This translated into an attempt to use the same product in a number of different ways: pure entertainment and telecommunication, or entertainment and information, or information and telecommunication. From an economic point of view, economies of scope basically translate in lower Average Total Costs as a result of producing a wide range of products. The main feature of this type of concentrations is the vertical integration of the different levels of production and distribution of media products that leads to companies which are ableShow MoreRelatedHorizontal And Vertical Integration For A Profitable Business Model1251 Words   |  6 PagesHorizontal Vertical I ntegration to Compete Porter’s five forces provide a methodology to evaluate the external markets. Its consideration of substitutes, threats and power of buyer and supplier assists with the development of an integration strategy. 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