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The effects of mergers on product positioning: evidence from the music radio industry

Authors


  • This article is a revised version of Chapter 3 of my MIT PhD thesis. I thank Glenn Ellison, Paul Joskow, Jerry Hausman, Whitney Newey, Nancy Rose, Aviv Nevo, Igal Hendel, Jimmy Roberts, Tom Hubbard, Brent Goldfarb, Greg Crawford, Rob Porter, Simon Anderson, Alan Sorenson, Charles Romeo, Joel Waldfogel, Stephen Coate, two anonymous referees, and seminar participants at several schools, the 2005 NBER Summer Institute, and the FTC for useful comments. Stephen Finger, Daniel Szoke, and Jake Zahniser-Word provided excellent research assistance. This article has had a number of previous titles, including “Too Much Rock and Roll? Station Ownership, Programming and Listenership.” I thank Rich Meyer of Mediabase 24/7 for providing access to the airplay data and the National Association of Broadcasters (NAB) for funding the purchase of BIAfn's Media Access Pro database. All views and any errors in this article are my own.

Abstract

This article shows that mergers between close competitors in the music radio industry lead to important changes in product positioning. Firms that buy competing stations tend to differentiate them and, consistent with the firm wanting to reduce audience cannibalization, their combined audience increases. However, the merging stations also become more like competitors, so that aggregate variety does not increase, and the gains in market share come at the expense of other stations in the same format. The results shed light on the effects of mergers and, more broadly, on how multiproduct firms may use product positioning as a competitive tool.

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