An Economic Overview of the Implications for Online Video of the Proposed Comcast-NBCU Transaction
Technology Policy Institute
Scott J. Wallsten
July 2010

Wallsten analyzes the vertical merger of NBC-Comcast.  Because Comcast will retain free over-the-air broadcast of NBC, the horizontal merger areas are not of major concern.  “The vertical aspect is the combination of a video producer (NBCU) and a video distributor (Comcast),” which is the area Wallsten focuses.  He is of the opinion that vertical mergers can have both pro-competitve and anti-competitive effects.

Pro-Competitive effects include:

• Aligning Incentives
• Eliminating Double-Marginalization
• Lowering Costs and Prices
• Reducing Transaction Costs

Anti-Competitive effects include:

• Negative effects from possible foreclosure
• Raising Rivals Costs
• Potential Market Power in Downstream Market Leveraging Power Against Upstream Market

Wallsten concludes that mergers have benefits and costs.  He believes that in this case determining an estimate of benefits or costs is difficult because of the fluctuating business of online video.  Though he calls for a careful empirical study and analysis from the Federal Communications Commission.

You can read the potential positive and negative effects of the merger in detail here.