Economic Perspectives on Media Mergers and Consolidation

This article synthesizes several existing economic perspectives on the incentives for and consequences of media consolidation. Because of the two-sided nature of media markets, media mergers may lead to unexpected effects, which may not be deduced from common notions of industrial economics. We explore three such effects. In particular, we illustrate that media consolidation may lead to a reduced level of content diversity. Also, we present a recent theory that suggests conditions when a politically biased media may actually prefer competition. Finally, we illustrate how a media merger, or media consolidation in general, may lead to stiffer competition in the markets in which advertisers compete. This article is written for practitioners and regulators in the media and advertising industries. Furthermore, it is not intended to push a particular viewpoint or perspective. While non-technical, the arguments in the paper assume a background in introductory microeconomics.