Peter J. Alexander

Peer-to-Peer File Sharing: The Case of the Music Recording Industry

The music recording industry is a highly-concentratedfive firm oligopoly. Much of the dominance achievedby larger firms in the industry results from control over the distribution and promotion of theproducts of the industry. Alexander (1994b), predictedthat new compression routines would facilitate the efficient transfer of digital music across the internet.MP3 compression routines have made such transfersrelatively simple and efficient. While smaller new entrants have not yet been able to exploit this newtechnology in terms of market share, an element ofuncertainty exists regarding the sustainability of the prevailing structure, due to large scale non-sanctionedfile sharing. Despite the industrys legal efforts tosuppress non-sanctioned file distribution, peer-to-peer networks may render these efforts futile. However,peer-to-peer networks must overcome structural andinstitutional problems, in particular, free-riding.

Diversity in Broadcast Television: An Empirical Study of Local News

The relation between the structure of a market and the diversity of its product offering has been extensively explored by theorists. We develop 2 measures of diversity and explore the content of local news for 60 stations and 20 designated market areas (DMAs) in the United States. Using a relative station-level diversity metric, ordinary least squares (OLS) estimates imply that relative diversity of local news content decreases as market concentration increases. This result is not, however, robust to an instrumental variables specification. Using a total market diversity metric, the Herfindahl-Hirschman Index (Hirshman, 1964) is significant in OLS and robust to instrumental variable estimation. Because the total market diversity metric is arguably superior to the incremental metric as a measure of overall diversity, this result is useful-it suggests that the total diversity of local news content within a DMA is sensitive to the level of concentration.

Bundling in Cable Television: A Pedagogical Note With a Policy Option

Bundling can be a pricing mechanism by which monopolists capture economic surplus from consumers.We suggest that given the cost structure of media markets, channel bundling in the cable and satellite market could also emerge in a competitive environment. A la carte channel pricing on cable television may or may not increase consumer welfare and could decrease total welfare. Because bundling may create other problems, policymakers may consider allowing cable and satellite networks to sell packages of channel space to viewers at a given price, allowing viewers to choose which channels they want in their packages. We term this option quasi-bundling.

Market Structure of the Domestic Music Recording Industry, 1890–1988

Abstract The author constructed measures of market structure for the music recording industry for the years 1890 to 1988. This measure can be used both to test a variety of hypotheses about the industry itself and to serve as part of a broader study of culture-based industries. For example, data were used to test a hypothesis relating market structure to the diversity of products issued by the industry (P. J. Alexander 1997). The main finding was that a moderately concentrated market structure provided greater product diversity than an atomistic or monopolistic market structure. Whereas census data and previous studies of the industry provide some information about industry structure, these sources are severely limited in scope and detail. Finally, similar rankings in other culture-based industries (e.g., broadcast television, radio, cable television) might provide a useful index of concentration in those industries.

Horizontal Merger for Bargaining Position: Relative Size, Absolute Size, and Bargaining Power Effects

We construct a simultaneous bilateral bargaining model and demonstrate analytically that if bargaining power is any constant across a group of buyers, then bargaining position will not be improved through merger in the absence of relative size effects. However, differences in post-merger bargaining power can generate significant positive differences in post-merger bargaining position, a result that should be of interest to regulators.

Same Story Different Channel? Broadcast News and Information

We present a positive model in which consumers derive uncertain utility from media output, in particular news. We suggest that consumer welfare is enhanced by the existence of diversity in news output and that diversity of news output might be related to market structure. We employ two novel databases measuring broadcast news content at the local and national levels in order to quantify news diversity. We find evidence that measures of market structure among broadcast media firms are a statistically significant determinant of diversity, conditional upon a variety of demographic and economic determinants. We also present evidence that a broader indicator of market structure, capturing the level of competition from cable programming, displays a positive, significant, and robust relationship with diversity.

Cable Ownership Rules: A Bargaining Theory Approach

The Federal Communications Commission exercises broad regulatory authority over merger activity in the cable broadcast industry. In previous rule-makings and court proceedings, the Commission has emphasized concern about the potential for collusive behavior among cable operators in considering merger applications and horizontal ownership limits. Recent court rulings direct the Commission to develop plausible alternative economic approaches, and we explore one such alternative approach, specifically bargaining theory. We suggest that bargaining theory may offer greater insights than the collusion hypothesis for guiding policy-makers in constructing appropriate ownership limits.

Vertical Contracts and Vertical Ownership

It is well-known that a seller imposed non-discrimination clause can soften downstream price competition by constraining opportunistic pricing behavior on the part of an upstream monopolist seller. But what about about market settings in which there exists a pivotal buyer? We show that in the presence of pivotal buyers, a buyer imposed price floor may be an effective means of eliminating the dynamic inconsistency problem typically associated with the upstream seller. Moreover, a price floor may be a means to better align product selection from the perspective of the pivotal buyer on the part of the seller. We demonstrate how even a small amount of vertical ownership provides insurance for the pivotal buyer should the price floor prove ineffective, and that a partially integrated pivotal buyer can calibrate the price floor to maximize own profits in a fashion thatis also Pareto improving.