IS CONTENT REALLY KING? The Effect of Vertical Integration in the Media, Entertainment and Telecommunications Industries on Content Producers’ Stock Prices

Abstract

This paper analyzes the effect of vertical mergers and acquisitions in the media, entertainment and telecommunications industries on the stock prices of content producers. Specifically, the analysis applies an event study methodology using a list of announced transactions from 2000 to 2016 as well as an index of content producers that was constructed for this study. The results show that on average, vertical integration in these industries does not have a meaningful impact on content producers’ stock prices. However, the index reacted significantly less negatively to transactions that were announced after smartphones became widely used. These results are particularly relevant given the current discussion among antitrust regulators over whether approving the acquisition of Time Warner Inc., a content producer, by AT&T, a telecommunications company, would have an anticompetitive effect on the media and entertainment industry.