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Module 4 - Closing Case. Proposed Merger of Comcast and Time Warner Cable

What do you think are the advantages and disadvantages of Vertical Integration between content producers and distributors?

Advantages:

· Cooperative energies: Vertical integration can make collaborations between the content and dispersion organizations, considering that account cross-advancement and packaged contributions.

· Control: Vertical integration can provide an organization with more relevant command over the content it circulates, allowing it to ensure quality and consistency.

· Cost reserve funds: Vertical integration can decrease costs by taking out the requirement to buy content from outside producers, as well as diminishing conveyance costs. This can result in lower costs for customers.

· Product bundling: Vertical integration allows for offering customers a range of products for a single, combined price. This makes the customers more used to dealing with only one company and its representatives.

· Cross-Selling: A company can take advantage of an established relationship with customers by acquiring different product lines or new categories that it can sell to them.

Disadvantages:

· Diminished advancement: Vertical integration can lessen advancement assuming the organization becomes careless and neglects to enhance because of deficiency of contest.

· Hostile to meaningful way of behaving: Vertical integration can give an organization a lot of force on the lookout, allowing it to take part in cutthroat behavior, for example, inclining toward its own content over rivals or restricting admittance to dispersion channels.

· More exorbitant costs: Vertical integration can result in more exorbitant costs for customers assuming the organization adopts its market potential to increase costs.

Were the two companies above minimum efficient scale? If so, what does that suggest about whether and where they would reap savings from the merger?

The two companies were above the minimum efficiency size, considering they are among the best in their industries. If the merger had been approved, the combined resources would have resulted in an extraordinarily strong competitive position in which to control the industry. The constructive collaboration would allow both companies to realize savings in operational and advertising expenses. The merger of both companies is expected to result in approximately $1.5 billion in savings from operations. There are significant operational cost savings as both companies can begin consolidating resources and sell excess assets. Aside from that, both companies can save significantly on advertising costs as they can advertise the company as a single entity if the merger goes through.

Do you think the merger would have been good for consumers? Why or why not?

The result of the two companies, Comcast and Time Warner Cable, merging would ultimately have a negative impact on consumers. The merger would make Comcast and Time Warner Cable a one-stop-shop for nearly all media consumption by consumers. The savings available to consumers through bundling of services, as well as goodwill gained through customer service being offered all in one place for all their offerings, create a convincing argument for the merger, but the near monopoly would prevent competition from maintaining a fair market without government intervention. The would-be merger would similarly act as a gatekeeper to other internet-based providers in or entering the industry. With reduced industry rivalry, Comcast and Time Warner Cable would limit consumers’ bargaining power and increase costs in their products and services. Consumers of telecommunications and cable television would be forced to pay higher prices for their products and services due to the two industry dominating companies. The Department of Justice and the Federal Communications Commission raised the issue of the merger being of no benefit to consumers, which put a halt to Comcast’s integration with Time Warner Cable.