We have all been taught that monopolies are bad and competition is always good for consumers. Or is it not? Ok there are certain scenarios where monopolies are justified such as when there is a high startup costs where with 2 producers, the high price charged will cause 0 demand.

But what about satellite or cable tv services? DirectTV is one such provider in the US. But in many countries, premium TV programming are at times controlled by only 1 major company. Is the consumer better off that way? Or will they benefit more if we have more Directv System in place?

Let me quote an example in both Malaysia and Singapore. Both countries have predominantly 1 major cable or satellite TV player, namely Astro in Malaysia and StarHub in Singapore. Malaysia is not very well known for liberal anti-competition laws and as of today, there is no real challenger to Astro in the cable TV market. There are small competitors like MiTV but they did not last long.

Singapore on the other hand liberalised their cable TV market and in came SingTel with mioTV to challenge StarHub. So there is competition through SingTel to break the monopoly cartel held by StarHub. The consumers will definitely gain right?

NOT!

You see what happened next is really interesting. There are certain channels and programmes that consumers really consider to be essential and is a “must-have”. Examples English Premier League (EPL) and Champions League soccer. Whichever cable TV company that holds the right to broadcast these programmes will win a significant market share.

StarHub used to be the sole broadcaster of both soccer programmes. SingTel came in and started a bidding war to broadcast the EPL and Champions League. At the end of the bidding war, StarHub have to fork out over S$250million (more than 4 times the previous price paid just to outbid SingTel and ESPN StarSports) to host the EPL while at the same time losing the rights to broadcast the Champions League.

For the consumers, this only means 2 things.

2) Now I have to subscribe to both StarHub and SingTel if I want to watch EPL and Champions League soccer. More $$$ to be paid.

What the hell?

Did the government go wrong when they say the consumers will benefit with increased competition? Well the government can only say they erred in this situation because this is a unique situation where it is an Exclusive broadcast right. Well the only real winner was the EPL and Champions League broadcaster and eventually the football clubs.

Consumers do win of course - more variety of channels to watch albeit at a higher price. Any takers for Direct TV in the intense US market?

Sometimes I am happy Malaysia only has Astro I can watch all my soccer programmes on one cable TV operator. Hmmm, but it begs the question. Is Astro overcharging me? They have increased their price successfully over the year. I gotta do more research. Perhaps a good start would be their financial statement. If their average profit per user is constantly increasing over years perhaps it’s good to buy Astro stocks….

I wanna get a satellite TV in the US soon to entertain myself in uni. Perhaps I seriously consider Directv Service.

This entry was posted on Friday, June 5th, 2009 at 3:40 pm and is filed under Economics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.