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Carriage of TV Channels in the UK: policy options and implications Report for the Department for Culture, Media and Sport

In the following, we identify the unique subgame perfect equilibrium of the sequential game described above. Furthermore, government’s regulation is shown to reduce the diversity in the programs offered by the channels at equilibrium: the lower the upperlimit imposed by the government to the ad- vertising rate, the weaker the diversity in the programs! There are at least three papers closely related to the present analysis. Vaglio (1995) proposes a Hotelling-type model of the audience for TV- broadcasting which shares several properties with ours. 3 In particular, he also supposes that consumers are advertising-averse and notices that, due to this aversion, TV-channels face the dilemma of either making money with. | iatique Carriage of TV Channels in the UK policy options and implications Report for the Department for Culture Media and Sport July 2012 Mediatique Limited is a registered Limited company in England and Wales. Company No. 4575079. VAT registration 927 5293 00 Mediatique Limited is authorised and regulated by The Financial Services Authority Q liatỉque Contents Abstract.4 Executive summary.5 1. Introduction.9 Background.9 Overview of this report.13 Sources and acknowledgements.15 2. Estimating benefits and payment flows arising from carriage.18 Benefits at stake.19 From benefits to fair share payments.22 Preliminary implications.24 3. Impact on content and consumers of a change to carriage regulation.25 Summary and overview.25 The public service broadcasters.29 Platform operators.31 Conclusions.33 4. Practical considerations arising from a carriage consent regime.36 Uncertainty about the outcome of commercial negotiations and content impacts.36 Potential tensions with other aspects of PSB policy.38 Open platforms free-to-air signals and the TPS regime.39 Long-term considerations.43 Summary.46 5. Policy options.47 Options involving carriage consent options A-D .48 Options not involving carriage consent options E-F .51 Other considerations.52 Summary.53 Appendix A Quantitative model.55 Analytical framework.55 Estimation of key parameters.60 Appendix B The US regime.64 Legal and regulatory regime.64 Negotiations in practice.64 Key differences versus the UK.65 Further reading.66 Appendix C Glossary of terms.67 Mediatique Limited is a registered Limited company in England and Wales. Company No. 4575079. VAT registration 927 5293 00 Mediatique Limited is authorised and regulated by The Financial Services Authority 2 iatỉque Disclaimer The sources used by Mediatique in the compilation of this report are believed to be accurate but Mediatique takes no responsibility for the accuracy of information derived from third-party sources. Mediatique has not undertaken legal or .