Essays on the economics of television program supply

In this dissertation, I study the economics of the television program supply market. The market changes considerably in the 1990s. In the first half of the decade, regulatory limits on vertical integration relaxed. Deregulation followed in 1995. The first essay measures the market's response to these regulatory shifts. The market consolidated in ways that would have been prohibited earlier. Networks vertically integrated into the production and ownership of television series. Networks owned 11% of their show-hours in 1991 and 60% in 2001. Also, Hollywood studios and television networks formed tighter ties via merger and entry. These ties contributed to the shrinking of the independent production sector. Its market share fell from 20% in 1991 to less than 10% in 2001. The second essay examines vertical integration and show renewal decisions. A network renews a show more often if it produced it. A dynamic discrete choice model calculates how much vertical integration must be worth for networks to exhibit the degree of self-preference observed in renewal decisions. Vertical integration appears to be worth 20% of the typical new show's budget. The third essay models the search process for new shows. I show that option contracts and renegotiation partially mitigate a market failure caused when networks cannot appropriate all the returns to successful search. Because regulation prevented networks from owning residual rights in much of their programming, networks might have had less incentive to search for highly profitable programs. The data follow this predicted pattern. Networks searched more intensively among new programs after deregulation. Over 40% of externally supplied new shows in 1991–1994 reached a second season, while fewer than 25% did so in 1995–2000.