Vertical Integration in Multichannel Television Markets: A Study of Regional Sports Networks

Regional sports networks (RSNs) have become among the most important and expensive programming carried by multi-channel video programming distributors (MVPDs), many of which have acquired RSNs in whole or in part. Under Nash bargaining theory, vertical integration creates incentives to charge downstream distribution rivals license fees in excess of what an independent RSN would negotiate. We show that the Nash framework also implies that this premium increases with the size of the MVPD’s local downstream footprint, and we estimate a reduced-form econometric model of RSN affiliate fees, which yields results consistent with theory. Finally, we discuss various policy implications.