Barriers To Entry Are Falling So The AT&T-Time Warner Merger Will Probably Not Damage Competition

See Antitrust Case Against Merger of AT&T and Time Warner Feels Stuck in the Past: Trump administration says the entity could be a monopolist, but the internet is eroding barriers to entry in filmed content by Greg Ip of The WSJ. Excerpts:

"For AT&T to exercise monopoly power in the sale of content such as HBO and CNN, alternative suppliers of content must face steep barriers. Those barriers are falling."

Since 2005, University of Minnesota economist Joel Waldfogel has shown, plunging prices for high-end digital cameras slashed the cost of producing high-quality filmed entertainment, leading to an explosion in the volume of new movies with no loss of quality. Meanwhile broadband internet has provided a distribution alternative to movie studios, television networks and cable. Since 2009, the number of original scripted series produced by online houses such as Amazon, Netflix and Hulu has soared from one to 117, now accounting for a quarter of all U.S. studio-produced series."

"In 2009 Netflix, then mostly still a distributor of disks by mail, was worth 8% as much as Time Warner in 2009; it’s now worth 84% more.

The Justice Department argues that a combined AT&T-Time Warner will have both the incentive and the ability to charge rival distributors, both traditional and internet-based, more by threatening to withhold content. AT&T says this is ridiculous: Cutting off other distributors would cost it dearly in lost revenue, and its leverage is minimal, because “an expanding array of content sources” means no content is “genuinely essential for any given distributor.”"

"By delivering its content over AT&T’s wireless network, Time Warner would, as Amazon and Netflix now do, gain valuable insight into subscribers, which it can use to improve its offerings. That isn’t feasible with Time Warner’s existing model, AT&T says.

“AT&T’s overriding economic objective is to encourage consumers to use its networks, no matter whose programs they watch,” the company adds. If owning Time Warner accomplishes that, its network becomes more valuable—and encourages it to expand."