FCC releases experimental study
By Bill McConnell -- Broadcasting & Cable, 6/3/2002 1:19:00 PM EDT
Fewer programming networks achieve profitability in markets dominated by one or two multichannel distributors with limited channel capacity, according to an experimental study released by the Federal Communications Commission Monday.
The study was launched to assist the FCC as it reworks rules limiting the size of cable distributors.
The study -- conducted by FCC staff and a researcher from Penn State University -- examined the behavior of individuals playing the roles of executives from programming networks and multichannel distributors.
Buyers' decisions were examined under three scenarios. In one, there were two major cable operators with market shares of 44 percent and 39 percent, respectively, and a direct-broadcast satellite operator. Another consisting of a single large cable operator with 51 percent market share and several smaller pay TV distributors.
Finally, there was a market of two moderately sized cable operators with shares of 27 percent and 24 percent and several smaller distributors.
According to the findings, only the most popular networks achieved profitability when the number of programmers was greater than cable operators' channel capacity.
When channel-capacity constraints were removed, however, all programming networks were consistently able to earn a profit.
The DBS operator's bargaining power to negotiate price reductions decreased when two cable operators had major shares of the market.
Greater DBS operators' programming fees could result in an increase in subscriber fees paid by DBS customers, the study predicted.
Comments on the study are due to the FCC July 18; replies Aug. 2.
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