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Media Ownership and Concentration in America$

Eli Noam

Print publication date: 2009

Print ISBN-13: 9780195188523

Published to Oxford Scholarship Online: October 2011

DOI: 10.1093/acprof:oso/9780195188523.001.0001

National Horizontal Concentration

Chapter:
(p.296) (p.297) 13 National Horizontal Concentration
Source:
Media Ownership and Concentration in America
Author(s):

Eli M. Noam

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780195188523.003.0013

Abstract and Keywords

The large number of mergers in information industries raises the question of whether the information sector as a whole, and which of its constituent industries, has become more concentrated and by how much. This chapter examines these issues and investigates horizontal concentration on a national level. To determine whether horizontal concentration has increased, Herfindahl-Hirschmann Index figures for specific industries and sectors are analyzed. The industries of electronic mass media distribution encompass radio stations, television stations, direct broadcasting satellites, and cable television. As can be seen in the chapter, all industries involved have increased in concentration after 1996, and basically have increased in concentration since 1984. This chapter also analyzes ownership concentration trends in the film industry, music industry, print and publishing, consumer electronics industry, computer and software industry, telecommunications industry, information technology, and Internet sector.

Keywords:   horizontal concentration, ownership, Herfindahl-Hirschmann Index, electronic mass media, radio stations, television stations, film industry, telecommunications industry, Internet, information technology

Horizontal Concentration trends

Concentration within the same industry, for example for film production, is generally referred to as “horizontal,” in contrast with a “vertical” concentration across the chain of production and distribution, or in contrast with “local” concentration in geographic submarkets such as a city's radio stations. The large number of mergers in information industries raises the question of whether the information sector as a whole, and which of its constituent industries, has become more concentrated and by how much. This chapter examines these questions—summarizing the results of the preceding industry chapters and aggregating them—and investigates horizontal concentration on a national level. Vertical concentration is discussed in chapter 14 and local concentration in chapter 15.

Has horizontal concentration increased? This is an empirical question that we will address by using HHI figures for specific industries and sectors. The characterizations of the index numbers as being highly concentrated, moderately concentrated, or unconcentrated follow the definitions of the Horizontal Merger Guidelines of the U.S. Department of Justice (DOJ). These characterizations should not be read as conclusive. (See the earlier discussion on the limitation of antitrust measures for media industries in chapter 1.) The measures provide a useful tool, however, for observing trends and making comparisons, if employed consistently over time and across industries, as we have tried to do.

We now proceed more methodically through the subsectors, assembling many of the earlier findings that we developed in the industry chapters, repeating some of them, and aggregating them. We begin with the mass media industries.

The Mass Media Sector

The industries of electronic mass media distribution include radio station groups, TV station groups, direct broadcasting satellite (DBS) providers, and cable TV operators. (We also include, for illustrative purposes, the category of multichannel TV, which combines cable TV and DBS.) As can be seen, all industries involved have increased in concentration after 1996, and basically have increased in concentration since 1984 (figure 13.1, table 13.1).

Most noticeable is the steep increase in concentration in radio station ownership. Clear Channel and Viacom increased their market shares significantly since 1996 as a result of a loosening of regulations by the FCC and Congress in the middle of the 1990s. Clear Channel owns over 1,200 radio stations. However, since the total number of stations is also large (12,932 in 2004), national concentration for radio still remains moderate in DOJ terms in comparison to most other media industries. Clear Channel's market share in 2004, by (p.298) revenues, was 19% (and dropped after 2007 when the company was acquired by private equity financers who sold off several hundred of its stations to pay for the purchase).

                      National Horizontal Concentration

Figure 13.1 Mass Media Distribution: Concentration Trends

Table 13.1 Electronic Mass Media Distribution (HHI Concentration)

MM Distribution

1984

1988

1992

1996

2001

2005

Radio Stations

20

20

25

75

519

545

TV Stations

73

80

88

110

199

253

DBS Providers

5,000

2,342

4,454

4,498

Cable TV Operators

162

292

430

565

1,316

1,568

(Multichannel)

162

292

430

532

876

1,189

Weighted Average HHI

91

147

237

354

1,274

1,499

Weighted Average C4

15.2

18.6

23.0

30.3

52.5

58.3

Note: Not part of weighted aggregates in this table.

The TV station industry saw its national concentration grow significantly in the period between 1984 and 2004—from 73 in 1984 to 110 in 1996 to 253 in 2005—enabled by the loosening of ownership caps set by the FCC. News Corp's acquisition of New World and Chris-Craft in particular raised concentration, with its market share increasing from 1.9% to 9.1%. Nonetheless, the industry's level of concentration remains low by DOJ terms, with an HHI of 253. The C4 was 27.7%, also a low figure.

DBS provision, in contrast, is a highly concentrated industry in which EchoStar and DirectTV (News Corp) account for over 90% of revenues. This industry exhibits huge economies of scale and high entry barriers.

Lastly, the cable TV operators experienced a dramatic increase in national concentration, far greater than that of radio or TV stations. With an HHI of 1,568 and a C4 value of 68.1, it is a (p.299) highly concentrated industry nationally (and still more so locally, as will be discussed in chapter 15). But even here, concentration levels were in the intermediate range of national concentration by DOJ definitions.

If we pool DBS providers and cable multiple system operators (MSOs) into one industry—multichannel TV—their combined national HHI is of course lower. But even so, the HHI rises steadily. We can also observe the relative size of the four industries—with cable TV accounting for one-half after 1992 (table 13.2).

In figure 13.1, the weighted average concentration for electronic mass media distribution is indicated by the bold line. It shows a steady increase from 1984, accelerating after 1996. This is mainly driven by DBS and cable TV. Radio and TV stations, which have received most of the attention in the media concentration policy debate, have contributed much less to the increase.

The preceding analysis averaged and weighted the concentration in the several industries. One can also aggregate in a different way, not by averaging several industries, but by combining the various forms of retail TV/video distribution in to one pool. This includes TV stations, cable MSOs, DBS providers, and also video stores, which are an alternative form of video distribution. We do not average separate industries but consider them to be a single video retail distribution industry with the major firms active in several of its segments. figure 13.2 and tables 13.3 and 13.4 show the trends for the pooled sector. (See also figure 4–7 for retail video distribution without video stores.)

We observe in table 13.4 that among these combined video distribution firms, cable MSOs have by far the major and fastest-growing shares: Comcast 18% and Time Warner 11.1%. No other firm has more than 10%, not even News Corp (8.5%), CBS (1.7%), or GE (also 1.7%). Mid-sized cable firms also have a presence near the top: Cox and Charter near 5% and Cablevision 2.3%.

The concentration of the pooled TV/video distribution sector shows a steady increase after 1992. But they do not show high numbers. The HHI is in low-concentration range (627, although up from 48); and the C4 is up, from 10% to 43.0%, a very high rise but still at a moderate level for most non-media industries. The overall HHI concentration is fairly low, but that could be expected in a market purposely defined quite broadly. What is striking is the decline of the share of the smaller firms, subsumed under “others.” These small broadcasters and cable firms used to account for over 70% of video distribution revenues. By 2005, this share had dropped to less than 30%.

The electronic mass media programming sector consists of the aggregators of programs: radio and TV networks, syndicators, cable (and DBS) channels, and pay-TV. The graph below shows relatively high—but declining—levels of concentration in this sector. TV networks experienced a decline in concentration since the late 1980s. For radio and pay-TV networks, and for syndication, concentration increased. Cable channels zigzagged, declining in overall concentration since 1984 but increasing after 1992 (figure 13.3, table 13.5).

Radio networks show a high level of concentration, declining after 1996. This is the result of Unistar's purchase of United and TransStar in the late 1980s and its own acquisition by West wood in 1996, enlarging the latter's market share to 31% by 2004. However, the relative importance and size of networks in radio is modest. The traditional three major TV networks, in contrast, have declined in share and even in size after Fox, WB, UPN, and Paxson, entered the market after 1988, and the demand for Spanish language networks grew. Together, these developments created a 10-network system in TV broadcasting, dominated by four firms. The industry remained highly concentrated in 2005 with an HHI of 2,159, but this is down from an HHI of 3,228 in 1984.

Table 13.2 Electronic Mass Media Distribution Revenues ($ Million)

 

1984

1988

1992

1996

2001

2005

Radio Stations

5,596

7,511

8,378

11,947

17,450

18,932

TV Stations

10,572

14,417

15,630

20,747

21,479

25,613

DBS Providers

5

1,293

10,748

15,350

Cable TV Operators

8,331

13,409

21,079

27,706

49,427

57,600

(Multichannel)

8,331

13,409

21,081

28,649

53,788

72,566

Total U. S. Rev.

24,999

35,337

45,092

61,693

99,104

117,495

Note: “Multichannel data” not used as part of total revenues and are provided for illustrative purposes only.

(p.300) (p.301)

Table 13.3 TV/Video Retail Distribution: Pooled Revenue ($ Million)

 

1984

1988

1992

1996

2001

2005

Comcast

83

402

717

1,635

5,570

18,317

  Jones Intercable

8

54

127

305

Comcast

  Lenfest Communications

75

107

190

388

Comcast

  Storer (50% interest)

KRR

316

443

Comcast

  AT&T Broadband

Comcast

    MediaOne

2,854

10,009 AT&T

Continental Cablevision

258

778

1,117

MediaOne

TCI

450

1,703

3,309

3,740

AT&T

    Viacom Cable

192

335

401

471

TCI

    TCI Entertainment/ Tempo/ Primestar

5

417

    US Satellite Broadcasting Corp

192

    Storer (50% interest)

241

316

443

TCI

    Heritage

125

TCI

    Storer Communications

350

KKR

TCI/Comcast

Time Warner

2,087

3,823

5,222

11,290

  American TV & Com

367

818

TW

  Adelphia

161

295

416

2,959

TW/Comcast

    Century

75

161

316

360

Adelphia

Newhouse (ex-TWE)/Bright House

142

241

506

TWE

1,843

Cox Communications

408

496

653

1,468

3,786

4,954

  TCA Group

25

67

148

249

Cox

  Times Mirror

250

335

443

Cox

Charter

360

3,699

4,723

  Marcus Cable

443

443

Charter

  Bresnan

40

84

249

Charter

  Falcon

83

27

42

222

Charter

Cablevision Systems

117

496

569

277

740

2,304

News Corp (Fox)

358

601

1,550

8,634

DirecTV (Hughes)/Liberty

618

News Corp

  Pegasus

6

838

News Corp

  Chris-Craft

66

250

377

446

News Corp

EchoStar/Dish Network CBS (ex-Viacom)

60

3,606

5,603 1,760

Viacom

2,790

5,655

  Westinghouse

845

420

519

Viacom

    CBS

353

382

503

Westinghouse

CBS, Blockbuster

Blockbuster (ex-Viacom)

6

284

1,024

Viacom

3,411

GE

590

585

1,000

1,233

1,743

  RCA/NBC

335

GE

Movie Gallery

22

216

315

1,402

  Video Update

8

1,137

MG

  Hollywood Entertainment

7

254

1,184

MG

Tribune

259

400

500

861

1,130

1,250

Disney

950

920

1,171

  CapCities

770

767

Disney

    ABC

482

CapCities

Mediacom

566

1,152

Insight

55

653

979

Gannett

353

367

371

641

662

821

Hearst-Argyle

NA

10

27

73

642

753

Belo

163

178

201

333

598

679

Saban Ent.

644

  Univision

NA

28

100

193

335

Saban

CableOne

117

148

169

222

348

518

Paxson

NM

NM

NM

15

200

111

Netflix

86

508

Family Video

15

134

131

Others

15,942

22,997

46,359

29,190

27,811

27,281

Total U. S. Revenue ($ million)

21,928

33,286

63,971

56,837

81,270

101,990

Note: This composite table includes TV stations, DBS, cable TV operators, and video rental.

(p.302) (p.303)

Table 13.4 Pooled TV/Video Retail Distribution: Market Shares by Revenues)

 

1984

1988

1992

1996

2001

2005

Comcast

0.4

1.2

1.1

2.9

6.9

18.0

  Jones Intercable

0.2

0.2

0.5

Comcast

  Lenfest Communications

0.3

0.3

0.3

0.7

Comcast

  Storer (50% interest)

KRR

0.5

0.8

Comcast

  AT&T Broadband

12.3

Comcast

    MediaOne

5.0

AT&T

Continental Cablevision

1.2

2.3

1.7

MediaOne

    TCI

2.1

5.1

5.2

6.6

AT&T

Viacom Cable

0.9

1.0

0.6

0.8

TCI

TCI Entertainment/ Tempo/ Primestar

0.7

US Satellite Broadcasting Corp

0.3

Storer (50% interest)

0.7

0.5

0.8

TCI

Heritage

0.6

TCI

Storer Communications

1.6

KKR

TCI/ Comcast

Time Warner

0.0

0.0

3.3

6.7

6.4

11.1

  American TV & Com

1.7

2.5

TW

  Adelphia

0.5

0.5

0.7

3.6

TW/ Comcast

Century

0.3

0.5

0.5

0.6

Adelphia

Newhouse

0.6

0.7

0.8

TWE

1.8

Cox Communications

1.9

1.5

1.0

2.6

4.7

4.9

  TCA Group

0.1

0.2

0.2

0.4

Cox

  Times Mirror

1.1

1.0

0.7

Cox

Charter

0.6

4.6

4.6

  Marcus Cable

0.7

0.8

Charter

  Bresnan

0.1

0.1

0.4

Charter

  Falcon

0.4

0.1

0.1

0.4

Charter

Cablevision Systems

0.5

1.5

0.9

0.5

0.9

2.3

News Corp (Fox)

0.6

1.1

1.9

8.5

DirecTV (Hughes)/Liberty

1.0

News Corp

  Pegasus

0.9

News Corp

  Chris-Craft

0.3

0.8

0.6

0.8

News Corp

EchoStar/Dish Network

0.1

4.0

CBS (ex-Viacom)

1.7

Viacom

4.9

7.0

  Westinghouse

3.9

1.3

0.8

Viacom

CBS

1.6

1.1

0.8

Westinghouse

    BlockBuster

0.9

1.6

Viacom

3.3

GE

1.8

0.9

1.8

1.5

1.7

    RCA/NBC

1.5

GE

Tribune

1.2

1.2

0.8

1.5

1.4

1.2

Disney

1.9

1.1

1.1

  CapCities

2.3

1.2

Disney

    ABC

2.2 C

CapCities

Mediacom

0.7

1.1

Insight

0.1

0.8

1.0

Gannett

1.6

1.1

0.6

1.1

0.8

0.8

Hearst-Argyle

0.0

0.0

0.1

0.8

0.7

Belo

0.7

0.5

0.3

0.6

0.7

0.7

Saban Ent.

0.6

  Univision

0.1

0.2

0.3

0.4

Saban

CableOne

0.5

0.4

0.3

0.4

0.4

0.5

Paxson

NA

NA

0.0

0.2

0.1

Movie Gallery

0.4

0.4

1.4

  Video Update

0.0

0.2

MG

  Hollywood Entertainment

0.4

1.3

MG

Netflix

0.1

0.5

Family Video

0.2

0.1

Others

72.8

69.1

72.5

51.4

34.2

26.7

Total U. S. Rev. ($ mil)

21,928

33,286

63,971

56,837

81,270

101,990

  C4

10.0

12.2

11.8

23.2

32.6

43.0

  HHI

48

63

55

172

381

627

Note: This composite table includes TV stations, DBS, and cable TV operators.

                      National Horizontal Concentration

Figure 13.2 Concentration of Pooled Retail Distribution of TV/Video (Including Retail Home Video)

The cable TV channels industry grew enormously in size and scope. It saw its concentration levels reaching a low of 906 in 1992. Subsequently, concentration increased through acquisitions, especially of Turner by Time Warner. As a result of additional entries, the HHI declined again some what and the industry remained moderately concentrated by DOJ standards.

Pay TV (table 13.6) was increasingly dominated by Time Warner, whose market share in 2005 was 38%. After 2001, digital cable, with its added options such as video-on-demand, began to eat into this market share.

Figure 13.3 shows the average weighted concentration of the overall electronic mass media programming sector as the bolded line. The overall (p.304) trend has been downward after 1984, from a high HHI of 2,233 in 1984 to a moderate-level 1,771 in 1996 and 1,633 in 2005. As broadcast TV networks and cable channels make up the bulk of the subsector, the overall trend is downward, in spite of the increase in concentration in radio, syndication, and pay-TV.

                      National Horizontal Concentration

Figure 13.3 Electronic Mass Media Programming Concentration

Table 13.5 Electronic Mass Media Networks (HHI Concentration)

HHI

1984

1988

1992

1996

2001

2005

Radio Networks

1,380

1,728

2,055

2,309

2,141

1,736

TV Networks

3,228

2,775

2,474

2,234

2,168

2,159

TV Syndication

345

911

854

1,145

1,024

1,079

Cable TV Channels

1,403

992

906

1,443

1,244

1,214

Pay TV Channels

738

776

924

1,489

2,143

2,282

Weighted Average HHI

2,233

1,811

1,601

1,771

1,639

1,633

Weighted Average C4

77.4

71.8

70.2

73.4

71.9

71.6

Whereas so far we averaged the several industries’ concentration, we now proceed again also somewhat differently, by aggregating all TV/video program provisions into a single “pooled TV/video programming networks” market, which combines TV broadcast networks, cable channels, TV syndicators, and pay-TV channels. In other words, we look at all types of TV channels as one market and measure the share of major media companies in it (tables 13.713.10, figures 13.4, 13.5).

We observe that the concentration has been zigzagging within a fairly steady band, holding steady by the HHI measure, an increasing in C4 and C6 over the 20-year period. Both HHI and C4 measures show declines after 1996. The top firms in 2005 were Time Warner and GE (both at 17%); and CBS, Viacom, News Corp, and Disney with 10–14% each. Together, these top six firms account for 82% of the overall TV/video network market. This is not a low concentration. But it has not been increasing over the 20 year period. Of the six major TV channel companies, five are vertically integrated into production. Sony is the one major Hollywood production/distribution company with no role in the TV channel markets. Conversely, CBS owns none of the major Hollywood film production studios.

(p.305)

Table 13.6 Electronic Mass Media Network Revenues ($ Million)

 

1984

1988

1992

1996

2001

2005

Radio Networks

388

382

377

465

919

1,081

TV Networks

8,318

9,320

10,149

13,081

14,300

16,713

Syndication

420

901

1,370

2,218

3,102

3,674

Cable TV Channels

2,466

4,261

6,504

10,906

22,917

26,879

Pay TV Channels

3,410

4,491

5,140

4,757

5,873

6,778

Total U. S. Rev.

15,002

19,355

23,540

31,427

47,111

55,125

Table 13.7 Pooled TV/Video Programming Networks ($ Million)

 

1984

1988

1992

1996

2001

2005

CBS (ex-Viacom)

6,337a

Viacom

843

1,356

1,725

6,161

10,609

6,200

Westinghouse

2,736

Viacom

CBS

2,390

2,602

2,955

Westinghouse

King World

80

280

503

663

CBS

UPN

883

Viacom

Paramount

600

Viacom

Spelling Ent.

100

120

258

Viacom

Republic

3

13

45

Viacom

Time Warner

810

1,122

1,776

5,326

8,715

9,296

Turner

672

1,264

1,745

TW

Newline Cinema

4

12

45

TW

WBb

(680)

(910)

(1,290)

Lorimar Telepic

494

TW

Telepictures

73

TW

Lorimar

206

TW

GE/Universal

3,107

2,970

4,430

5,161

9,201

RCA/NBC

2,425

GE

Vivendi

931

GE

USA

99

170

260

502

Vivendi

Seagram

Vivendi

Universal/MCA

163

200

Matsushita

Seagram

News Corp

757

1,713

2,472

4,076

5,329

Disney

760

747

1,061

4,871

6,972

7,745

Cap Cities

2,660

2,612

Disney

ABC

2,800

CapCities

Discovery Networks

9

194

473

1,223

1,717

Liberty Media

157

199

863

1,022

Cablevision

360

501

750

PBS

163

194

236

285

348

445

Sony

97

119

154

199

Columbia Pictures

79

Sony

TriStar

64

Sony

Gannett

150

155

181

Multimedia

40

66

129

Gannett

Paxson

10

103

56

Saban

257

Univision

57

116

Saban

Comcast

100

200

Others

6,317

8,954

8,925

5,137

5,751

4,389

Total U. S. Rev. ($ mil)

14,767

19,927

21,700

30,552

44,773

53,324

Note: This Table is a composite or TV networks, cable networks, pay-TV networks, and syndication.

(a) Viacom and CBS, although separated, were still controlled by the National Amusements Co., Sumner Redstone's investment entity.

(b) WB is part of TW and included in the parent company. Its revenues were $684 mil in 1992, $966 mil in 2001, and $1,187 mil in 2005. It subsequently merged with UPN into a joint channel, The CW.

(p.306)

Table 13.8 Pooled TV/Video Programming Networks (Market Shares by Revenues)

 

1984

1988

1992

1996

2001

2005

CBS (ex-Viacom)

11.8a

Viacom

5.7

6.8

7.9

20.3

23.2

11.6

  Westinghouse

9.0

   CBS

16.2

13.1

13.6

Westinghouse

    King World

0.5

1.4

2.3

2.2

CBS

  UPN

2.9

Viacom

  Paramount

2.8

Viacom

  Spelling Ent.

0.7

0.6

1.2

Viacom

   Republic

0.1

0.2

Viacom

Time Warner (TW)

5.5

5.6

8.2

17.4

19.0

17.4

  Turner

4.6

6.3

8.0

TW

   NewLine Cinema

0.1

0.2

TW

  WBb

(2.2)

(2.2)

(2.3)

  Lorimar Telepic

2.5

Time Warner

   Telepictures

0.5

TW

   Lorimar

1.4

TW

GE/Universal

15.6

12.8

14.5

11.3

17.2

  RCA/NBC

16.4

GE

  Vivendi

2.0

GE

   USA

0.7

0.9

1.2

1.6

Vivendi

   Seagram

Vivendi

    Universal/MCA

1.1

1.0

Matsushita

Seagram

News Corp

3.8

7.9

8.1

9.1

10.3

Disney

5.1

3.7

4.9

15.9

15.2

14.5

  Cap Cities

13.3

12.0

Disney

   ABC

19.0

CapCities

Discovery Networks

0.9

1.5

2.7

3.2

Liberty Media

0.7

0.7

1.9

2.8

Cablevision

1.2

1.1

1.4

PBS

1.1

1.0

1.1

0.9

0.8

0.8

Sony

0.4

0.4

0.3

0.4

  Columbia Pictures

0.4

Sony

   TriStar

0.4

Sony

Gannett

0.5

0.3

0.4

  Multimedia

0.3

0.3

0.6

Gannett

Paxson

0.03

0.2

0.1

Saban

0.5

  Univision

0.2

0.3

Saban

Comcast

0.2

0.4

Others

20.9

23.5

13.0

2.8

12.6

8.2

Total U. S. Rev. ($ mil)

14,767

19,927

21,700

30,552

44,773

53,558

  C4

57.3

48.8

46.6

68.0

68.7

60.9

  C6

67.9

60.8

62.6

85.1

80.3

82.4

  HHI

1,007

750

793

1,342

1,355

1,206

Note: Table is composite ot TV Networks, Cable Networks, Pay-TV Networks, and Syndicators.

(a) Viacom and CBS, although separated, were still controlled by the National Amusements Co., Sumner Redstone's investment entity. If one considers them to be a single company, the C4 and the HHI rise to 72.5 and 1,480.

(b) WB is part of TW and included in the parent company. Its revenues were $684 mil in 1992, $966 mil in 2001, and $1,187 mil in 2005. It subsequently merged with UPN into a joint channel, The CW.

(p.307) (p.308) (p.309)

Table 13.9 Pooled TV/Video Mass Media Programming and Distribution ($ Million)

 

1984

1988

1992

1996

2001

2005

Time Warner

810

1,122

3,863

9,149

13,937

20,586

    American TV & Comms

367

818 818

TW

    Newhouse Broadcasting

142

241

506

TWE

1,843

    Adelphia

161

295

416

2,959

TW/Comcast

      Century

75

161

316

360

Adelphia

    Turner

663

1,084

1,505

TW

    Newline Cinema

4

12

45

TW

    Lorimar Telepic

494

TW

    Telepictures

73

TW

    Lorimar

206

TW

Comcast

83

402

717

1,635

5,670

18,517

    Jones Intercable

8

54

127

305

Comcast

    Lenfest Communications

75

107

190

388

Comcast

    Storer (50%)

KKR

316

443

Comcast

    AT&T Broadband

10,009

Comcast

      MediaOne

2,854

AT&T

        Continental Cablevision

258

778

1,117

MediaOne

    TCI

450

1,703

3,309

3,740

AT&T

      Viacom Cable

192

335

401

471

TCI

      TCI Entertainment/ Tempo/ Primestar

5

417

        US Satellite Broadcasting Corp

192

    Storer (50% interest)

241

316

443

TCI

    Heritage

125

TCI

      Storer Communications

350

KKR

TCI/Comcast

News Corp

757

757

2,071

3,073

6,244

13,963

    DirecTV (Hughes)a/Liberty

618

News Corp

      Pegasus

6

838

DirecTV

    Chris-Craft

66

250

377

446

News Corp

GE/Universal

3,697

3,355

5,430

6,394

10,944

    RCA/NBC

2,760

GE

    Vivendi

931

GE

      USA

99

170

260

502

Vivendi

      Seagram

Vivendi

        Universal/MCA

163

200

Matsushita

Seagram

CBS (ex-Viacom)

6,960

Viacom

843

1,356

1,725

6,161

10,981

6,200

    Westinghouse

845

2,736

Viacom

      CBS

2,743

2,984

3,458

Westinghouse

        King World

80

280

503

663

CBS

    UPN

883

966

1,137

    Paramount

600

Viacom

    Spelling Ent.

100

120

258

Viacom

      Republic

3

13

45

Viacom

    Group W

345

420

519

809

Viacom

Disney

760

747

1,061

5,971

7,892

8,916

    CapCities

3,430

3,379

Disney

      ABC

3,282

CapCities

2,660

Cox Communications

408

496

653

1,468

3,786

4,954

    TCA Group

25

67

148

249

Cox

    Times Mirror

250

335

443

Cox

Charter

360

3,699

4,723

    Marcus Cable

443

443

Charter

    Bresnan

40

84

249

Charter

    Falcon

83

27

42

222

Charter

Cablevision Systems

117

496

569

277

740

2,304

Discovery Networks

9

194

473

1,223

1,717

Tribune

259

400

500

861

1,130

1,250

Mediacom

566

1,152

Insight

55

653

979

Liberty Media

157

199

863

964

Gannett

353

367

371

641

662

821

    Multimedia

40

66

129

Gannett

Hearst-Argyle

10

27

73

642

753

Belo

163

178

201

333

598

679

Saban Ent.

644

    Univision

28

100

193

335

Saban

CableOne

117

148

169

222

348

518

PBS

163

194

236

285

348

445

Sony

97

119

154

199

    Columbia Pictures

79

Sony

      TriStar

64

Sony

Paxson

25

303

167

EchoStar

60

3,606

5,603

All Others

19,365

26,775

29,080

29,093

30,196

30,260

Total U. S. Revenue ($ mil)

37,374

51,839

64,237

83,812

121,193

158,568

Note: Table includes the following industries: TV networks, syndication, cable TV channels, pay TV, TV stations, cable TV operators, and DBS providers.

(a) In 2007, News Corp sold DirecTV to Liberty Media in exchange for News Corp stock held by Liberty.

(p.310) (p.311)

Table 13.10 Pooled TV/Video Programming and Distribution (Market Shares by Revenues)

 

1984

1988

1992

1996

2001

2005

Time Warner

2.2

2.2

6.0

10.9

11.5

13.0

  American TV & Comms

1.0

1.6

TW

  Newhouse Broadcasting

0.4

0.5

0.8

TW

1.2

  Adelphia

0.3

0.5

0.5

2.4

TW/Comcast

    Century

0.2

0.3

0.5

0.4

Adelphia

  Turner

1.8

2.0

2.3

Time Warner

  Newline Cinema

0.01

0.02

0.1

Time Warner

  Lorimar Telepic

1.0

Time Warner

  Telepictures

0.2

Time Warner

  Lorimar

0.6

Time Warner

Comcast

0.2

0.8

1.1

2.0

4.7

11.7

  Jones Intercable

0.1

0.2

0.4

Comcast

  Lenfest Communications

0.2

0.2

0.3

0.5

Comcast

  Storer (50% interest)

KKR

0.5

0.5

Comcast

  AT&T Broadband

8.3

Comcast

    MediaOne

3.4

AT&T

      Continental Cablevision

0.7

1.5

1.7

MediaOne

    TCI

1.2

3.3

5.1

4.5

AT&T

      Viacom Cable

0.5

0.7

0.6

0.6

TCI

      TCI Entertainment/ Tempo/ Primestar

0.01

0.5

       U. S. Satellite Broadcasting Corp

0.2

      Storer (50% interest)

0.5

0.5

0.5

TCI

    Heritage

0.3

TCI

    Storer Communications

0.9

KKR

TCI/Comcast

News Corp

1.5

3.2

3.7

5.2

8.8

  DirecTV (Hughes)

0.7

News Corp

    Pegasus

0.6

DirecTV

  Chris-Craft

0.2

0.5

0.6

0.5

News Corp

GE/Universal

6.5

6.1

4.3

5.3

4.3

5.1

  RCA/NBC

0.9

GE

    USA

0.3

0.3

0.4

0.6

Vivendi

    Universal/MCA

0.4

0.4

Matsushita

Seagram

CBS (ex-Viacom)

4.6

Viacom

2.3

2.7

2.7

7.4

9.1

8.2

  Westinghouse

2.3

Viacom

    CBS

7.4

5.9

5.4

Westinghouse

      King World

0.2

0.5

0.6

0.8

CBS

  UPN

1.1

0.8

0.7

  Paramount

0.9

Viacom

  Spelling Ent.

0.3

0.4

Viacom

    Republic

0.1

Viacom

Disney

2.1

1.5

1.6

7.1

6.5

5.6

  CapCities

6.7

5.2

Disney

    ABC

8.9

Cap Cities

Cox Communications

1.1

0.9

0.7

1.6

2.8

3.3

  TCA Group

0.1

0.1

0.2

0.2

Cox

  Times Mirror

0.7

0.7

0.7

Cox

Charter

1.1

1.0

1.0

1.8

3.1

3.1

  Marcus Cable

0.7

0.5

Charter

  Bresnan

0.1

0.1

0.3

Charter

  Falcon

0.2

0.3

Charter

Cablevision Systems

0.3

1.0

0.9

0.3

0.6

1.5

Discovery Networks

0.02

0.3

0.6

1.0

1.1

Tribune

0.7

0.8

0.8

1.0

0.9

0.8

Mediacom

0.1

0.5

0.7

Insight

0.1

0.5

0.6

Liberty Media

0.2

0.2

0.7

0.6

Gannett

1.0

0.7

0.6

0.8

0.5

  Multimedia

0.1

0.1

0.2

Gannett

Hearst-Argyle

0.02

0.0

0.1 0.1

0.5

0.5

Belo

0.4

8.3

0.3

0.4

0.4

0.4

Saban Ent.

0.4

  Univision

0.1

0.1

0.2

0.3

Saban

CableOne

0.3

0.3

0.3

0.3

0.3

0.3

PBS

0.4

0.4

0.4

0.3

0.3

0.3

Sony

0.1

0.1

0.1

0.1

  Columbia Pictures

0.2

Sony

    TriStar

0.2

Sony

Paxson

0.03

0.3

0.1

EchoStar

0.1

3.0

3.5

All Others

59.9

55.6

60.2

38.4

24.5

21.0

Total U. S. Revenue ($ mil)

37,0374

51,839

64,237

83,812

121,193

158,568

  C4

25.1

22.0

21.7

30.7

35.3

41.7

  C5

27.3

24.7

26.0

35.1

40.5

47.3

  HHI

205

155

173

325

440

572

Note: Table includes the following industries: TV networks, syndication, cable TV channels, pay TV, TV stations, cable TV operators, and DBS providers.

(p.312)

                      National Horizontal Concentration

Figure 13.4 Pooled TV/Video Programming Networks

                      National Horizontal Concentration

Figure 13.5 Pooled TV/Video Distribution

Figure 13.4 shows that the pooled TV/video programming networks industry (including cable TV networks) has been zigzagging and declining (p.313) after 1996 to an HHI of about 1,200. In contrast, the pooled TV/video retail distribution sector (TV stations, cable MSOs, DBS providers) has steadily increased in concentration after 1996. But it is much less concentrated, reaching an HHI of about 777 in 2005. Thus, after 1996 the two trends have run in opposite directions. How do they add up when pooled, as the major media firms tend to be on both sides? Taken together, TV/video programming and retail distribution is not concentrated, reaching 572 in 2005. However, the trend has been upwards since 1988, when the HHI was 155.

Moving to the film industry: The subindustries are film production/distribution (the two are functionally too intertwined in Hollywood to separate); TV prime-time production; movie theaters; home video distribution; and video rental. figure 13.6 shows the concentration trends (see also table 13.11).

The key industry—movie production/distribution—has been moderately concentrated since the 1970s by DOJ standards, divided among six main “studio” companies, controlled today by Disney, Time Warner, Viacom, News Corp, GE, and Sony. Some independent studios were acquired by the main firms, but new ones also entered. The HHI for this oligopolistic distribution industry has remained moderately concentrated and remarkably stable over most of the two-decade period at an HHI of about 1,250 and a C6 of 80%.

                      National Horizontal Concentration

Figure 13.6 Film Sector Industries: Concentration Trends

Table 13.11 Film Sector HHI Concentration

HHI

1984

1988

1992

1996

2001

2005

Film Production/Distribution

1,262

1,146

1,198

1,245

1,278

1,248

TV PrimeTime Production

681

618

991

1,119

1,005

1,223

Movie Theater Chains

182

286

288

249

509

490

Home Video Distribution

1,048

702

1,191

1,516

1,347

1,443

Video Rental

27

199

679

2,201

3,346

Weighted Average HHI

620

513

712

958

1,306

1,581

Weighted Average C4

34.4

33.5

40.4

48.4

57.3

60.9

Weighted Average Production and Distribution HHI, without Retailing (film theaters and video rental)

1,054

868

1,131

1,299

1,226

1,347

(p.314) After the FCC’s 1995 repeal of rules preventing vertical integration, the major Hollywood firms acquired the major TV networks or created new ones and also became dominant in TV prime time production. News Corp and Disney became the largest in that industry, with about 19% each, followed by Viacom (14%), Time Warner (10%), and GE (10%) in 2005. The shift of production toward these five companies led to a doubling of the HHI for TV prime time production from 681 in 1984 to an intermediate level of 1,223 in 2005 and to significant vertical integration with TV networks.

Movie theater chains experienced a significant increase in concentration, primarily as a result of the trend to large multiplex chains. Regal and AMC acquired several smaller theater owners and reached market shares of 19.4% and 13%. Concentration grew from a low HHI of 182 in 1984 to a still low 490 in 2005. Concentration slightly declined after 2001. The industry remains nationally unconcentrated despite this increase.

Video rental shows the steepest increase in concentration. The industry formerly comprised thousands of mom-and-pop stores. Blockbuster had an insignificant market share of 0.2% in 1985, but grew to 53% in 2004. With the purchase of Hollywood Entertainment by Movie Gallery, raising its share to 22%, the HHI increased further to 3,346 in 2005. But the industry as a whole was in decline, and Viacom spun off Blockbuster in 2005 (table 13.12).

In the aggregate (the bold line of figure 13.6), the film industry has grown steadily in average concentration, shifting from unconcentrated to moderately concentrated, in DOJ terms (HHI = 1,581 in 2005). Much of that increase came from the retailing segment, that is, from home video rentals and movie theaters. Without these retail industries the film sector would have increased modestly in concentration from 1,054 to 1,347, mostly from TV production.

Most print publishing industries are only moderately concentrated by DOJ standards. Educational books and online book retailing are the exception. Book retailing has grown significantly in concentration but is still in the DOJ’s moderately concentrated range. Although trade and paperback, other books, academic journals, printing services, daily newspapers, and magazines all show fluctuations in concentration, none of them became significantly more concentrated over the 20-year period on the national level (figure 13.7, tables 13.13 and 13.14).

Trade and paperback books reached in 2005 an HHI of 693, about the same as in 2001 and in 1988. The largest firm, Bertelsmann, has a market share of 16.1%. The academic journals industry has two strong players, Reed Elsevier and Wolters Kluwer, but here, too, there are many other small participants. The HHI tripled from 110 to 347. However, this understates reality since there are many specialized segments in which concentration is much higher. In contrast, educational books show a high degree of concentration, after a series of acquisitions by Pearson, Reed Elsevier, Scholastic, and McGraw-Hill.

Newspaper concentration is low on the national level. A similar trend is observable for magazines. But newspapers are highly concentrated locally, as discussed in chapter 15.

The weighted average concentration trend line for the print publishing industry is shown in figure 13.7. With daily newspapers and magazines representing the bulk of this sector, their HHI values weight is heaviest. Average concentration remains well below the DOJ threshold of moderate concentration, doubling from 217 in 1984 to 512 in 2005, although still a low number.

Table 13.12 Film Industries: Revenues ($ Million)

 

1984

1988

1992

1996

2001

2005

Film Production/Distribution

4,031

4,458

4,871

5,912

8,413

9,406

TV PrimeTime Production

2,236

3,122

4,358

6,083

6,430

6,776

Movie Theater Chains

3,116

4,460

4,870

5,910

8,410

9,530

Home Video

1,014

2,773

4,616

6,530

8,146

18,515

Video Rental

2,900

5,460

7,260

7,710

9,551

8,200

Total U. S. Revenue

13,297

20,273

25,975

3,2145

40,950

52,427

(p.315)

                      National Horizontal Concentration

Figure 13.7 Print and Publishing Sector Industries: Concentration Trends

Table 13.13 Print and Publishing HHI Concentration

HHI

1984

1988

1992

1996

2001

2005

Daily Newspapers

155

176

200

230

208

191

Educational Books

1,024

1,148

1,061

1,458

2,061

2,046

Trade and Paperback

505

692

518

588

704

693

Other Books

214

208

164

104

127

127

Retailing Books

109

376

438

612

1,330

1,025

Magazines

146

157

220

276

355

347

Academic Journals

110

132

179

215

312

347

Weighted Average HHI

217

270

303

371

547

512

Weighted Average C4

24.4

26.6

28.6

30.9

36.7

35.2

Print Publishing Weighted Average HHI (All Print w/o Retailing)

229

259

286

337

420

424

Table 13.14 Print Publishing Revenues ($ Million)

 

1984

1988

1992

1996

2001

2005

Daily Newspapers

25,170

32,280

30,639

38,075

44,300

46,700

Educational Books

2,469

3,034

4,165

5,373

7,652

8,820

Trade and Paperback

3,217

4,043

5,914

7,159

8,657

9,044

Other Books

3,903

4,490

5,664

7,697

9,787

9,787

Retailing Books

5,163

5,900

8,433

11,767

17,239

19,412

Magazines

8,191

11,681

14,284

21,498

29,479

31,611

Academic Journals

2,247

2,782

3,317

5,237

6,506

7,368

Total U. S. Revenue

50,360

64,210

72,416

96,806

123,620

132,743

(p.316) This increase in concentration is partly the result of the increase in consolidation and revenue growth in educational books and academic journals. But even more, it is driven by the increase in retailing concentration in traditional and online book retailing. The book distribution channels are consolidating more than the any other part of the print publishing industry. If one excludes these retail channels, the concentration in the print and publishing sector is lower, although still doubling, rising from 229 in 1984 to 424 in 2005.

In the music sector, concentration has increased slightly, except for performance rights. Music cable channels show a steep increase. The remainder of the industries show a more stable and intermediate trend line. Record labels/distributors, music publishing, and music retailers all steadily increased in concentration during the period but are not at high levels in DOJ terms (figure 13.8, table 13.15).

Music publishing is a fairly unconcentrated industry whose concentration peaked in 1996. The performance rights industry has historically known only three serious participants, and the decrease of the HHI for this industry is the result of a reshuffling of the market shares among those firms. The key music industry is record labels/distribution, which has been controlled by four to five firms with fairly similar market shares. This resulted in moderate but not high HHI numbers in DOJ terms. In 2004, after several attempts by EMI to merge, the consolidation of Sony's and Bertelsmann's music production and distribution raised concentration substantially. In addition, both EMI and Warner Music (which had been sold off by Time Warner) were seeking to buy each other. The trend line for this industry shows a steady increase after 1996, approaching the DOJ’s high concentration range.

                      National Horizontal Concentration

Figure 13.8 Music Sector Industries: Concentration Trends

Table 13.15 Music Industry HHI Concentration

HHI

1984

1988

1992

1996

2001

2005

Music Publishing

541

778

1,066

1,081

941

920

Performance Rights

5,340

5,256

4,810

4,445

4,273

3,855

Record Labels/Distributors

1,389

1,203

1,420

1,221

1,525

2,224

Music Retailers

74

106

183

278

339

456

Music Cable Channels

4,096

3,864

3,737

3,700

7,225

7,054

Weighted Average HHI

899

823

1,012

988

1,352

1,790

Weighted Average C4

42.9

42.1

47.7

48.0

56.6

61.5

Music Industry Weighted Average HHI without retailing

1,554

1,411

1,619

1,437

1,662

1,871

(p.317) Music retailing increased steadily in concentration. However, it is still low, with an HHI of 447. The smallest industry in the music sector (table 13.16), music cable channels, shows by far the highest concentration levels, because of Viacom's dominance.

From 1984 to 1996 the weighted average concentration of the music industry stayed fairly stable, hovering below the threshold for moderate concentration. After 1996, this was followed by a significant rise. If we omit the music retailing industries—retail stores/online and cable channels—from the averaging, the HHI increases from 1,554 in 1984 to 1,871 in 2004, reaching a high level of concentration by DOJ standards.

We can now aggregate the results of all 27 mass media industries into an overall trend for the entire mass media sector (figure 13.9, table 13.17) and compare the trends of different mass media categories such as print and music.

Table 13.16 Music Industries Revenues ($ Million)

 

1984

1988

1992

1996

2001

2005

Music Publishing

523

641

1,007

1,462

1,939

1,314

Performance Rights

319

414

640

921

1,301

1,537

Record Labels/Distributors

4,109

5,697

7,468

10,425

12,389

11,449

Music Retailers

4,370

6,435

7,941

10,758

12,389

11,053

Music Cable Channels

113

211

388

698

1,260

1,470

Total U. S. Rev.

9,435

13,397

17,443

24,264

29,278

26,823

                      National Horizontal Concentration

Figure 13.9 Mass Media Sectors: Concentration Trends

(p.318)

Table 13.17 Mass Media Sectoral and Overall Concentration (HHI)

Mass Media Sector (HHI)

1984

1988

1992

1996

2001

2005

Mass Media Electronic Distribution

91

147

237

354

1,274

1,499

MM Electr Prog

2,233

1,811

1,601

1,771

1,639

1,633

Film

620

513

712

958

1,306

1,581

Print

217

270

303

370

547

512

Music

899

823

1,012

988

1,352

1,790

Weighted Average HHI

564

520

580

693

1,084

1,209

Weighted Average C4

32.2

32.8

36.1

40.2

50.4

52.9

                      National Horizontal Concentration

Figure 13.10 Content Media: Weighted Average Concentration

The average trend line in figure 13.16 indicates that until 1996, the weighted average concentration in the mass media sector industries had been low by DOJ antitrust standards. It was basically stable from 1984 to 1992. It even declined slightly during that period. However, after 1992, concentration of the mass media sector accelerated and rose to 1,202 by 2004. The primary spurt was between 1996 and 2001. Overall concentration is still in the moderate range by DOJ standards.

Although many industries contribute to the overall trend, this aggregate growth trend in concentration of the mass media sector is driven primarily by concentration increases for TV stations and cable TV operators, which exhibit both rising concentration and large size.

We can also report concentration trends in somewhat different ways. First, we can aggregate just the “content media industries,” leaving out retailing but also including video games and software (which are discussed further below, under IT). The result of this aggregation, figure 13.10, shows that the average concentration for these content industries has slightly but steadily increased but is at an unconcentrated level.

(p.319)

                      National Horizontal Concentration

Figure 13.11 News Media: Average Concentration

A second way to aggregate media industries is to group together the set of “news media” and exclude pure entertainment media. Here, we skate on methodologically thin ice and provide at this time no more than a brief suggestion to respond to a frequently raised question. News media here include newspapers, magazines, TV networks and stations, cable networks, and radio networks and stations. We first use their relative revenues as the weight. If we proceed in that fashion, averaging and weighting these media, we find a low concentration and a flat trend, not indicating a rise in concentration (figure 13.11, the lower line).

On the other hand, the news component of these news media differs considerably. TV, radio, and cable channels are to a substantial extent entertainment media, with news a modest component. Therefore, we also use a somewhat different weighing scheme, according to a medium's importance as a news vehicle. How can one determine this importance? One way is to look at the users’ news-gathering activities. To do so, we use the news weight of media, according to periodic surveys conducted by the Pew Research Center and the Project of Excellence in Journalism on news habits of Americans.1 The results, using these weights in the averaging of the news media, are also shown in figure 13.11. They, too, do not indicate high or rapidly rising concentration in news media. This analysis requires additional work to be more definitive.

Finally, we also pool all mass media industries—electronic, print, film, music—and determine the various companies’ overall shares in the total mass media industry. (This is developed and discussed in chapter 14.)

Telecommunications

Figure 13.12 shows the concentration trends in telecommunication services. We include calculations up to the year 2006, when SBC absorbed AT&T and Bell South, and Verizon acquired MCI. The 1984 breakup of AT&T transformed the telecommunications services industry from a virtual nation-wide monopoly to a set of medium-large companies which were at times rivals to each other, such as in mobile telephony. This trend reversed itself in the mid-1990s (see also table 13.18).

This development applied to the subindustries of telecommunications. Cellular (mobile) carriers (p.320) experienced the biggest growth in size and concentration after 1996, shifting from a regionalized and nationally unconcentrated industry that was a result of the licensing system to consolidated national footprints. The paging industry also saw its overall concentration quadruple, although its overall size collapsed as cell phones became ubiquitous.

                      National Horizontal Concentration

Figure 13.12 Telecommunications Services Sector Industries: Concentration Trends

Table 13.18 Telecommunications Service Concentration (HHI)

HHI

1983

1984

1988

1992

1996

2001

2004

2005

2006

Local Service

7,841

1,080

1,155

1,038

1,119

2,262

1,867

2,062

2,850

Long Distance Service

7,311

4,760

3,322

2,675

2,226

1,967

1,917

2,172

2,218

Long Distance Private Line

8,146

8,146

5,722

3,597

2,385

1,971

2,008

2,097

2,140

International Service

5,518

5,518

5,047

4,877

3,802

2,815

3,166

3,166

3,166

Mobile Telephony

2,035

341

362

627

602

1,642

1,697

2,469

2,469

Paging

273

84

108

324

665

606

3,791

3,791

3,791

Weighted Average HHI

7,475

3,216

2,475

1,955

1,745

2,027

1,877

2,269

2,528

Weighted Average C4

94.2

69.4

65.9

62.4

63.5

78.5

75.8

81.8

83.3

Notes: The source is chapter 11 of this book. 2005 and 2006 data incorporate only mergers (SBC/AT&T; Verizon/MCI, AT&T/BellSouth), and spin-offs (Sprint/Embarq).

Likewise, an increase in national concentration took place in the local services as several of the Baby Bells merged with each other and their competitors. SBC tripled its market after 1996, and Verizon served almost a third of the U. S. by 2006.(table 13.19).

These telecom service industries are averaged into one trend line, shown in figure 13.12 in bold. The aggregate concentration drops steeply in 1984 due to the AT&T divestiture, followed by a period of declining concentration until (p.321) 1996 to an average HHI of 1,745. It then rose again in steps to 2,528 by 2006. The drivers of the aggregate concentration trend were primarily the mergers in the local services (nationally) and mobile services industries, which make up the bulk of the revenue (table 13.19). Mobile service, having become the largest segment of the telecom sector, is pulling down average industry concentration, since even after its consolidation it is still less concentrated nationally than local service is nationally.

Table 13.19 Telecom Services Revenue ($ Million)

 

1983

1984

1988

1992

1996

2001

2004

2005

2006

Local

49,243

50,871

58,066

72,120

80,453

99,300

98,504

98,504

98,504

Long Distance

48,767

51,200

62,250

71,900

93,300

99,301

83,697

83,697

83,697

Long Distance Private Line

5,743

5,743

6,889

7,543

10,665

16,402

16,618

16,618

16,618

International

2,610

2,610

3,431

7,477

16,262

12,810

9,178

9,178

9,178

Mobile

200

340

1,959

12,253

26,415

61,051

102,121

108,535

108,535

Paging

1,065

1,200

1,332

2,261

4,410

2,197

1,050

1,050

1,050

Total U. S.

107,628

111,964

133,927

173,553

231,505

291,061

311,168

317,582

317,582

Note: 2005 and 2006 data incorporate only mergers (SBC/AT&T; Verizon/MCI, AT&T/BellSouth), and spin-offs (2006 Sprint/Embarq).

Concentration of local services is actually higher on the local level, which is the more meaningful market measure for users. This is discussed and analyzed in chapter 15. That concentration, while high, has been declining due to the emergence, in particular, of mobile and cable telephony as viable options.

Telecom companies tend to be active in several subindustries, and increasingly so. Table 13.20 incorporates all telecom services in one big “pooled” market and shows overall market shares. The development is depicted in figure 13.13. Here, too, can we observe a strong U-trend. After 1984 and the AT&T Divestiture, the pooled industry concentration dropped steadily until 1996, almost reaching an unconcentrated level. Thereafter, concentration rose again pronouncedly until 2005 with an HHI level of almost 2,100, into the DOJ’s range of high concentration.

For customer telecom equipment, all five major segments have had a stable but high level of concentration since 1996 (figure 13.14, table 13.22).

Telecommunications customer equipment (consumer and business) is moderately concentrated, with a flat trend around HHI = 1700. In contrast, telecommunication network equipment industries are highly concentrated, as can be seen in figure 13.15 and table 13.23. AT&T saw its market share halved between 1983 and 1988, and Nortel gained tremendously. In 2006, Siemens partnered with Nokia and Lucent with Alcatel, and control shifted to the new partners. The average concentration of all industries in the telecom networking equipment sector stabilized after 1992 at a high level of about 2,500. Most of these industries remained heavily concentrated.

We can now aggregate concentration for the entire telecom sector (figure 13.16, table 13.24). Telecom services show a trend line similar to that of telecom equipment. The overall trend shows a U-shape, dropping radically from 1983 to 1984 as a result of the AT&T divestiture. After the divestiture, concentration kept dropping with liberalization and deregulation, but rose again after 1996 with the mergers among the Baby Bells and the consolidations in the cellular industry. In 2006 the HHI stood at a high 2,475. This sector has become highly concentrated again, after briefly flirting with entering (almost) moderate concentration, around 1996.

(p.322) (p.323) (p.324)

Table 13.20 Pooled Telecommunications Services ($ Million)

 

1983

1984

1988

1992

1996

2001

2005

2006

SBC Communication (AT&T)

6,027

7,143

8,664

12,524

43,068

96,999

96,999

  Ameritech

8,168

8,623

10,211

11,956

SBC

  PacTel

1,792

2,148

2,157

1,213

SBC

  SNET

640

664

772

1,060

1,310

SBC

  AT&T

85,300

42,059

42,773

44,572

52,800

50,968

SBC

    AT&T Wireless (McCaw)

27

72

1,384

3,020

8,547

Cingular

    AT&T CallVantage

53

SBC

    AT&T Broadband

101

590

SBC

    Vanguard/Cellular One

  BellSouth

9,031

10,453

12,674

28,589

20,576

37,691

37,691

    Cingular (Bell S. 40%, SBC 60%) a

(12,119)

(38,204)

(38,204)

Verizonb

57,416

86,832

86,832

  VoiceWing (Verizon)

(10)

(10)

  Air Touch (Pac Tel)

24

139

1,262

2,906

  Verizon

  Bell Atlantic

8,988

8,878

11,449

14,226

  Verizon

    NYNEX

6,898

10,321

11,488

11,485

Bell Atlantic

    Metro Mobile

4

12

63

319

660

Bell Atlantic

  GTE (incl Contel)

4,005

4,152

6,631

9,983

12,999

  Verizon

    GTE Mobilenet/Contel

14

23

143

1,078

2,377

  MCI Worldcom (MFS)

2,074

2,157

5,971

12,355

23,363

29,720

  Verizon

    RCA Globecom

177

177

130

MCI

    Western Union International

54

54

153

MCI

    Metromedia

215

MCI

    ITT

168

168

78

3

LDDS

    Comsystems

97

174

LDDS

  Alltelb

3

5

500

753

931

3,968

7,252

7,252

Qwest

93

324

1,363

12,854

11,610

11,616

  LCI

219

760

3,070

Qwest

  U. S. West

6,111

7,350

8,340

9,072

Qwest

    U. S. West New Vector

19

80

478

Airtouch

Citizens Telecom/Frontierb

58

161

1,291

4,236

4,236

  Global Crossing

324

1,586

2,515

1,745

1,745

    Frontier (Rochester)

149

421

2,014

Global Crossing

Broadwing

730

896

896

  Cincinnati Bell

345

509

377

433

563

Broadwing

Embarq

4,236

Sprint (incl Contel and United)

1,191

1,242

3,962

8,053

13,750

21,367

34,955

30,754

  Contel

88

429

Sprint

  Sprint PCS

(2)

(3)

(20)

(564)

(1,321)

(6,838)

(20,513)

(20,513)

    Nextel

380

1,030

4,701

Sprint

  United Telephone

1,017

1,394

1,731

Sprint

McLeodUSA

1,390

1,675

1,675

Electric Lightware

99

136

136

Commonwealth Tel

80

Alascom

4

352

344

418

Level 3

11

1,347

1,347

  WillTel

324

199

Level 3

XO

298

335

  Allegiance

298

XO

ICG

397

84

84

FTC Communications

21

21

27

TRT Telecom

64

64

72

66

US Liberia

0

0

0

IXC

172

T-Mobile

3,602

6,404

6,404

  Voice stream

53

T-Mobile

Century

2

4

20

49

79

427

760

760

US Cellular (TDS)

110

264

2,015

3,582

3,582

USA Mobility (prev. Arch Wireless)

27

322

363

624

624

Cablevisions Systems

71

246

1,608

1,608

Skype (eBay)

169

169

Vonage

79

120

120

Primus (Lingo)

20

20

Packet8

16

16

VocalTec (DT)

3

26

NetSpeak

2

VoxWare

2

Net2Phone (Liberty Media)

3

53

7

7

Covad

29

133

286

286

Comcast

74

370

3,345

3,345

AOL Time Warner

172

748

1,974

1,974

Cox Communications

97

347

1,250

1,250

Adelphia Communications

19

149

650

650

HughesNET (prev. DIRECWAY)

67

223

223

WildBlue

1

1

Total U. S. Revenue ($ million)

94,066

100,077

119,665

151,811

214,386

269,849

306,925

306,631

Note: Data reflect mergers and spin-offs up to 2006.

(a) Ownership of Cingular is split between Bell South (40%) and SBC (60%). Cingular revenues have been proportionately allocated.

(b) Alltel was acquired by Verizon in 2009. Verizon sold off parts of its local wireline operations to Frontier and FairPoint in 2009 and 2008.

(p.325) (p.326) (p.327)

Table 13.21 Pooled Telecommunications Services (Market Shares by Revenues)

 

1983

1984

1988

1992

1996

2001

2006

SBC Communication (AT&T)

6.0

6.0

5.7

5.8

16.0

31.6

  Ameritech

8.2

7.2

6.7

5.6

SBC

  PacTel

1.8

1.8

1.4

0.6

SBC

  SNET

0.7

0.7

0.6

0.7

0.6

SBC

  AT&T

90.7

42.0

35.7

29.4

24.6

18.9

SBC

    AT&T Wireless (McCaw)

0.0

0.1

0.9

1.4

3.2

Cingular

    AT&T CallVantage

0.0

SBC

    AT&T Broadband

0.0

0.2

SBC

    Vanguard/Cellular One

0.0

  BellSouth

9.0

8.7

8.3

13.3

7.6

12.3

    Cingular (Bell S. 40%, SBC 60%) a

(4.5)

(12.5)

Verizonb

21.3

28.3

  VoiceWing(Verizon)

0.003

  Air Touch (Pac Tel)

0.0

0.1

0.8

1.4

Verizon

  Bell Atlantic

9.0

7.4

7.5

6.6

Verizon

    NYNEX

6.9

8.6

7.6

5.4

Bell Atlantic

    Metro Mobile

0.0

0.1

0.2

0.3

Bell Atlantic

  GTE (incl Contel)

4.3

4.1

5.5

6.6

6.1

Verizon

    GTE Mobilenet/Contel

0.0

0.0

0.1

0.7

1.1

Verizon

  MCI/Worldcom (MFS)

2.2

2.2

5.0

8.1

10.9

11.0

    RCA Globecom

0.2

0.2

0.1

MCI

    Western Union International

0.1

0.1

0.1

MCI

    Metromedia

0.2

MCI

    ITT

0.2

0.2

0.1

0.0

LDDS

    Comsystems

0.1

0.1

LDDS

  Alltelb

0.4

0.5

0.4

1.5

2.4

Qwest

0.0

0.1

0.2

0.6

4.8

3.8

  LCI

0.0

0.2

0.5

1.4

  U. S. West

6.1

6.1

5.5

4.2

    U. S. West New Vector

0.0

0.1

0.3

Airtouch

Citizens Telecom/Frontierb

0.0

0.1

0.5

1.4

  Global Crossing

0.2

0.7

0.9

0.6

    Frontier (Rochester)

0.1

0.3

0.9

0.0

0.0

Broadwing

0.3

0.3

  Cincinnati Bell

0.4

0.5

0.3

0.3

0.3

   Broadwing

Embarq (out of Sprint)

1.4

Sprint (incl Contel and United)

1.3

1.2

3.3

5.3

6.4

7.9

10.0

  Centel

0.1

0.3

Sprint

  Sprint PCS

0.0

0.4

0.6

2.5

6.7

    Nextel

0.3

0.5

1.7

Sprint

  United Telephone

1.0

1.2

1.1

Sprint

McLeodUSA

0.5

0.5

Electric Lightware

0.0

0.0

Commonwealth Tel

0.0

Alascom

0.4

0.3

0.3

0.0

Level 3

0.4

  WillTel

0.3

0.1

Level 3

XO

0.1

X0

  Allegiance

0.1

ICG

0.1

0.03

FTC Communications

0.02

0.02

0.02

TRT Telecom

0.1

0.1

0.1

0.04

IXC

0.1

T-Mobile

1.3

2.1

  Voicestream

0.02

   T-Mobile

Century

0.02

0.03

0.04

0.2

0.2

U. S. Cellular(TDS)

0.1

0.1

0.7

1.2

USA Mobility (prev. Arch Wireless)

0.02

0.2

0.1

0.2

Skype (eBay)

0.05

Vonage

0.03

0.04

Primus (Lingo)

0.01

Packet8

0.01

VocalTec (DT)

0.01

NetSpeak

0.0008

VoxWare

0.0008

Net2Phone (Liberty Media)

0.02

Covad

0.01

0.05

0.1

Comcast

0.03

0.1

1.1

Time Warner

0.1

0.3

0.6

Cox Communications

0.05

0.1

0.4

Adelphia Communications

0.01

0.1

Cablevision Systems

0.03

0.1

0.5

HughesNET (prev. DIRECWAY)

0.02

0.1

WildBlue

0.00

0.0004

Total U. S. Revenue ($ million)

94,066

100,077

119,665

151,811

214,386

269,849

306,631

C4

98.4

68.2

60.3

53.4

55.5

67.1

84.7

HHI

8,248

2,145

1,681

1,299

1,148

1,364

2,176

Note: Data reflect mergers and spin-offs up to 2006.

(a) Ownership of Cingular is split between Bell South (40%) and SBC (60%). Cingular revenues have been proportionately allocated.

(b) Alltel was acquired by Verizon in 2009. Verizon sold off parts of its local wireline operations to Frontier and FairPoint in 2009 and 2008.

(p.328)

                      National Horizontal Concentration

Figure 13.13 Pooled Telecommunications Services: Concentration Trend

                      National Horizontal Concentration

Figure 13.14 Telecommunications Customer Equipment Industries: HHI Concentration Trend

(p.329)

Table 13.22 Telecommunications Customer Equipment HHI Concentration

HHI

1983

1984

1988

1992

1996

2001

2004

2006

Corded Handsets

3,829

3,829

2,882

2,060

1,122

1,145

1,162

1,162

Cordless Handsets

1,879

1,879

1,517

1,396

1,130

1,552

1,618

1,618

Fax Machines

938

938

938

1,054

1,507

1,618

1,471

1,471

Mobile Handsets

1,186

1,186

1,345

1,914

1,960

1,558

1,712

1,712

Private Branch Exchanges

1,401

1,201

1,543

1,844

2,028

2,173

1,640

1,640

Weighted Average HHI

1,913

1,785

1,605

1,700

1,761

1,689

1,685

1,696

Weighted Average C4

68.0

67.7

69.6

72.4

74.7

72.0

75.1

76.8

                      National Horizontal Concentration

Figure 13.15 Telecommunications Networking Equipment Industries: HHI Concentration

Table 13.23 Telecommunications Networking Equipment (HHI Concentration)

HHI

1983

1984

1988

1992

1996

2001

2004

2006

Central Office Switches

7,846

4,287

3,079

3,273

3,329

3,308

3,168

2,298

Multiplexers

3,128

3,128

1,778

730

1,031

1,264

1,083

1,083

Internetworking Equipment

2,538

2,538

1,695

1,025

1,979

2,871

3,545

3,545

Fiber Optical Cable

7,260

7,260

2,671

1,855

1,729

2,089

2,156

2,156

Copper Wire and Coax Cable

4,216

4,216

3,491

2,369

2,526

2,320

2,284

2,284

Microwave Equipment

2,158

2,158

2,055

1,751

1,820

2,038

2,026

2,026

Cellular Infrastructure

4,413

4,413

2,498

3,006

2,515

2,395

1,563

1,563

Weighted Average HHI

5,849

3,872

2,727

2,452

2,502

2,614

2,441

2,441

Weighted Average C4

91.6

83.8

83.0

81.9

85.3

86.5

80.4

80.4

(p.330)

                      National Horizontal Concentration

Figure 13.16 Telecom Industry Concentration (Average Services and Equipment)

Table 13.24 Telecom Sector Overall Concentration (Services and Equipment)

HHI

1983

1984

1988

1992

1996

2001

2004

2005

Weighted Average Telecom Services

7,475

3,216

2,475

1,955

1,745

2,027

1,877

2,269

Weighted Average Telecom Equipment

4,327

3,050

2,312

2,250

2,313

2,373

2,130

2,130

Weighted Average Total Telecom

7,247

3,204

2,459

1,989

1,824

2,083

1,912

2,251

Weighted Average C4

93.4

70.0

67.1

64.4

66.2

79.2

76.1

81.3

Information Technology

With digital convergence, traditional media are becoming IT-rich and IT-dependent. At the same time, the IT sector converges in its computer and consumer electronics devices and software and is becoming part of media. Nokia and Microsoft make game consoles. Consumer electronics giant Sony produces film and music. Google andYahoo, basically software companies, are increasingly the gateway into the online content world. Film and music are uploaded from mainframes. Computer-like devices are in every pocket and become media terminals. As the media sector is moving into the direction of the Internet, and as the Internet is spawned, sustained, and guided by IT developments, then the traditional media world cannot be apart from the IT world.

Let us begin with consumer electronics (figure 13.17, table 13.25).

The Television Sets industry zigzags at fairly unconcentrated levels. Home Video Equipment shows a similar trend line at a higher level. TV Reception Equipment (DBS equipment and cableTV set top boxes) are highly concentrated, partly given the absence of a consumer market (the boxes are usually bought by the cable MSOs and DBS providers and rented out as part of regular or digital service).

The concentration trend line for Audio Equipment (CD Players, MP3 Players, and Audio Systems and (p.331) Radios) is N-shaped and shows an increase. Sony holds leading positions in these industries.

                      National Horizontal Concentration

Figure 13.17 Consumer Electronics Sector Industries: HHI Concentration

Table 13.25 Major Segments of Consumer Electronics (HHI Concentration)

HHI

1984

1988

1992

1996

2001

2005

Television Sets

1,108

936

851

1,090

1,180

1,028

Home Video Devices

1,199

860

992

1,267

1,975

1,759

TV Reception Equipment

1,927

2,439

3,382

2,710

2,362

2,475

Audio Equipment

979

1,194

1,130

1,059

1,141

2,088

Weighted Average HHI

1,146

1,120

1,144

1,226

1,396

1,815

Weighted Average C4

55.1

56.7

54.0

57.1

58.9

60.3

Overall, the consumer media electronics sector has been only moderately concentrated, with as light growth after 1996. The sector is competitive. However, several well-known consumer brands exist, such as Sony, Panasonic, and Samsung, and the combined average market shares of the top four firms is above 55%.

Semiconductors are the heart of IT developments. There are significant differences among the several semiconductor industries, as shown in figure 13.18. Microprocessors (CISC) have a very high concentration, dominated by Intel. The HHI for this industry increased steadily to well above 6,000 after 1996, one of the highest of all industries. Computer memory and microcontrollers have been fairly steady in their market concentration, with Samsung (24%), Micron (16%), and Hynix (12%) dominating the memory market. The weighted average concentration in the semiconductor sector rose significantly to a highly concentrated 3,407 in 1996 and 3,532 in 2005. The aggregate concentration trend for semiconductors is led by computer memory and CISC microprocessors. As the microprocessors grew in revenue, their influence on the overall trend increased even as their market concentration stabilized after 1996.

Most computer industries were highly concentrated in 2005. However, the trend lines follow (p.332) different patterns, as can be seen in figure 13.19 and table 13.27.

                      National Horizontal Concentration

Figure 13.18 Computer Semiconductors: HHI Concentration

Table 13.26 Computer Semiconductors Concentration (HHI)

HHI

1984

1988

1992

1996

2001

2005

Computer Memory

735

1,212

775

885

1,055

1,716

CISC Microprocessors

4,632

4,350

4,881

6,716

6,053

6,778

RISC Microprocessors

3,207

1,299

495

468

Microcontrollers

904

928

893

841

1,168

773

Weighted Average HHI

1,063

1,834

1,760

3,407

3,167

3,532

Weighted Average C4

48.6

66.1

59.0

67.9

69.0

82.2

Microcomputers, far and away the largest IT hardware segment, were initially highly concentrated, but this changed as the industry grew and clones entered. Concentration bottomed out in 1992 with an HHI of 429. Subsequently, Dell, Compaq, and Hewlett-Packard increased significantly in market presence, with the latter two merging in 2002. Dell and Hewlett-Packard accounted for 50% of the market. Market concentration, having followed a U-shaped trend pattern, is in the moderate DOJ range.

A similar U-shaped trend characterizes the mainframe industry, too, though at a much higher level. IBM lost some market share in the late 1980s to “plug-compatibles” and other firms. By 2005, this industry, much diminished in size (table 13.28), became almost totally concentrated, with IBM holding 96% of the market, resulting in an HHI of 9,216.

The weighted average concentration trend line (bold in figure 13.19) is U - shaped. To a good extent this can be attributed to the weight of microcomputers, which represents two-thirds of the total revenue in this subsector. But several other computer industries show a similar pattern, and all but work stations rose in concentration after 1996.

Computer peripherals include, in particular, storage devices, printers, copiers, and modems (figure 13.20, table 13.29). The markets for storage devices and modems show a U-shaped concentration. For printers, concentration rose strongly after 1988, as Hewlett-Packard's market share grew from 5% in 1984 to 55% in 1996. Copiers, which became the largest segment, strongly declined in concentration in the 1980s, as Xerox's dominance ebbed, and stabilized at an intermediate level. The aggregated concentration for the peripheral industries shows an S-shaped trend at the low end of high concentration.

(p.333)

                      National Horizontal Concentration

Figure 13.19 Computers: HHI Concentration

Table 13.27 Computers Industries’ Concentration (HHI)

 

1984

1988

1992

1996

2001

2005

Microcomputers

2,114

667

429

593

1,358

1,561

Workstations

1,567

1,738

2,249

2,373

2,010

2,193

Midrange Computers

1,381

1,195

1,143

1,396

2,044

2,289

Mainframe Computers

5,988

4,194

5,326

6,330

9,216

8,467

Supercomputers

4,762

4,628

5,212

2,368

2,348

2,241

PDAs

3,151

3,070

2,332

Video Game Hardware

3,281

7,367

4,967

3,149

4,494

3,911

Weighted Average HHI

3,436

1,983

1,544

1,688

1,937

1,929

Weighted Average C4

79.9

62.0

54.8

57.5

69.7

70.2

Table 13.28 Computer Industries’ Revenues ($ Million)

 

1984

1988

1992

1996

2001

2005

Microcomputers

11,940

17,147

30,842

38,875

63,237

73,834

Workstations

1,005

2,250

4,525

4,694

3,128

2,724

Midrange Computers

10,400

14,183

8,575

7,800

7,949

8,101

Mainframe Computers

15,105

12,875

7,200

8,250

3,375

2,348

Supercomputers

425

700

800

2,500

3,294

3,700

PDAs

390

1,480

1,846

Video Game Hardware

445

740

1,300

1,464

3,125

3,200

Total

39,320

47,895

53,242

64,972

85,588

95,752

(p.334)

                      National Horizontal Concentration

Figure 13.20 Peripheral Computer Equipment: HHI Concentration

Table 13.29 Computer Peripheral Equipment (HHI Concentration)

HHI

1984

1988

1992

1996

2001

2005

Storage Devices

1,831

2,118

1,830

1,780

1,355

2,333

Printers

1,676

1,166

1,725

3,280

3,112

3,623

Modems

2,629

1,319

973

734

989

1,056

Copiers

3,732

2,535

1,530

1,574

1,294

1,494

Weighted Average HHI

1,933

1,860

1,697

2,064

1,563

1,869

Weighted Average C4

66.6

65.1

63.9

72.4

63.4

66.9

We can now take stock of the hardware subsector. The overall IT Hardware industry—comprising consumer media electronics, computers, peripherals, and semiconductors—shows a distinct U-shaped graph. After a sharp decline from 1984 to 1992, average concentration increased again to a high HHI of 2,200 in 2005 (figure 13.21, table 13.30).

We now move to computer software. Of the various segments of the software subsector, the software for computer operating systems, network operation, and mainframes are highly concentrated (figure 13.22, table 13.31). Other software segments are much less concentrated, though specialized niches exist that are dominated by specialist firms.

The concentration of the microcomputer operating system software industry is well known. Microsoft dominated this industry with 92% market share. In the 1990s, Linux emerged, an operating system developed by a community of users and programmers. Its 2005 share was still small, however, in contrast with its growing share in network operating system software.

(p.335)

                      National Horizontal Concentration

Figure 13.21 Major IT Hardware Sectors: Concentration Trends

Table 13.30 IT Hardware Industries (HHI Concentration)

 

1984

1988

1992

1996

2001

2005

Semiconductors

1,063

1,834

1,760

3,407

3,094

4,092

Computers

3,436

1,983

1,544

1,688

1,937

1,929

Peripherals

1,933

1,860

1,697

2,064

1,563

1,869

Consumer Electronics

1,146

1,120

1,144

1,226

1,396

1,815

Weighted Average HHI

2,536

1,746

1,503

1,937

1,920

2,200

                      National Horizontal Concentration

Figure 13.22 Computer Software: Concentration Trend

(p.336)

Table 13.31 IT Hardware Sectors’ Revenues

IT Hardware

1984

1988

1992

1996

2001

2005

Semiconductors

4,015

7,526

12,679

23,395

22,798

26,719

Computers

39,320

47,895

53,242

64,972

85,588

95,752

Peripherals

7,005

13,109

20,136

29,566

31,440

33,589

Consumer Electronics

18,167

21,571

26,053

30,756

32,284

35,089

Total

77,255

108,298

139,634

216,147

258,096

272,695

Table 13.32 Computer Software Concentration (HHI)

 

1984

1988

1992

1996

2001

2005

Operating Systems

3,056

6,973

6,851

7,379

8,309

9,304

Network Operating Systems

2,477

3,484

3,454

2,275

2,485

Enterprise Application Software

900

998

996

1,069

939

1,117

Mainframe Software

6,286

5,864

5,121

3,454

4,233

4,594

Software Services

2,254

2,423

1,933

1,484

1,194

1,487

PC Entertainment Software

346

323

487

877

1,298

1,592

Games Software

2,031

352

1,100

1,275

678

930

Consumer Application Software

1,443

1,367

981

1,082

1,796

2,220

Weighted Average HHI

3,951

4,313

3,443

2,494

2,415

2,612

Weighted Average C4

77.4

75.8

74.7

73.0

68.3

72.1

Table 13.33 Computer Software Revenues ($ Million)

 

1984

1988

1992

1996

2001

2005

Operating Systems

1,068

1,562

1,810

2,670

6,500

6,698

Network Operating Systems

480

552

1,660

2,170

2,192

Enterprise Application Software

233

522

1,171

3,183

11,144

13,000

Mainframe Software

3,150

7,678

7,117

7,983

8,033

6,852

Software Services

931

2,008

3,827

9,014

18,960

22,361

PC Entertainment Software

137

179

507

748

1,282

1,082

Games Software

1,362

1,631

2,101

2,734

3,672

5,242

Consumer Application Software

400

844

1,245

2,923

8,400

9,332

Total

7,280

14,904

18,330

30,915

60,161

66,759

Because of the specialized nature of mainframe software and the concentrated hardware market, this industry has historically known few competitors. Computer Associates and Compuware held a smaller position in the face of dominance by IBM (63% in 2005). This brought concentration down significantly, but it remains high.

In the very large industry of software services, concentration shifted from high to moderate levels as Oracle and SAP successfully entered the market. IBM lost about half of its share to 20%. The market concentration in this industry is moderate.

In video game software, Atari initially held a 75% market share but lost it when the industry crashed in 1984. Nintendo became market leader in the video game hardware industry and lost it to Sega and Electronic Arts. The market reached unconcentrated levels.

The consumer application software industry experienced several mergers that caused it to become concentrated. IBM acquired Lotus, but Microsoft was the only company that succeeded significantly—its market share expanded from 24% to 47%, raising concentration to 2,220 and resulting in a U-shaped trend (tables 13.32,13.33).

(p.337) The overall aggregation for the software industry is shown in the bolded trend line in figure 13.21. Concentration declined significantly after 1988 and stabilized after 1996 at a fairly high level around an HHI of 2,100.

We can now aggregate both the hardware and the software parts of the IT sector (figure 13.23).

The overall information technology sector shows a U-shaped trend line, too. After an initial decline, concentration increased again after 1992 to a level that is in the low end of the high range but still below that of 1984 (tables 13.34,13.35).

The decline of IBM in many of the IT segments outside of mainframe computers reduced overall concentration initially. After 1992, the growth of Dell, the failure of many small entrants, the mergers of HP, Compaq, and DEC, and other stock market–fueled deals drove concentration up again. Overall, the IT sector is highly concentrated by DOJ standards.

                      National Horizontal Concentration

Figure 13.23 Overall IT Sector Concentration (Including Consumer Electronics)

Table 13.34 Concentration of the Major IT Sector

 

1984

1988

1992

1996

2001

2005

IT Hardware

3,038

1,943

1,611

2,123

2,042

2,287

Consumer Electronics

1,146

1,120

1,144

1,226

1,396

1,815

Software

3,951

4,313

3,443

2,494

2,415

2,612

Weighted Average HHI

2,672

2,110

1,775

1,881

2,053

2,047

Table 13.35 Revenues of Major IT Sectors (Including Consumer Electronics)

 

1984

1988

1992

1996

2001

2005

Aggregate IT Hardware

50,340

68,530

86,057

117,933

139,826

156,060

Consumer Electronics

18,167

21,571

26,053

30,756

32,284

33,063

Computer Software Aggregate

7,280

14,904

18,330

30,915

60,161

66,759

Total IT Sector

75,787

105,005

130,440

179,604

232,271

255,882

(p.338) The Internet Sector

Industries associated with the Internet have grown considerably in size. These industries can either be considered part of the traditional sectors—mass media, telecom, and IT—or treated separately. We have chosen to do the latter.

The core Internet sector comprises eight industries that provide the basic instrumentalities for online users. Their concentration trends are shown in figure 13.24 (see also tables 13.36,13.37).

                      National Horizontal Concentration

Figure 13.24 Cybermedia Industries Concentration (HHI)

Table 13.36 Internet Industries Concentration (HHI)

 

1984

1988

1992

1996

2001

2005

Backbones

1,454

1,259

970

896

1,565

1,610

ISPs

6,102

4,155

3,078

1,683

1,251

1,356

Broadband Providers

502

828

1,163

Browser Software

9,025

8,330

7,325

Internet Search Engines

1,515

619

2,967

Portals

6,126

4,680

3,078

1,386

1,839

2,272

IP Telephony Providers

1,000

500

1,466

Media Player Software

8,131

3,462

3,538

Weighted Average HHI

2,959

2,114

1,685

1,287

1,357

1,494

Weighted Average C4

77.4

72.4

67.5

57.9

56.8

66.2

(p.339)

Table 13.37 Internet Industries Revenues ($ Million)

 

1984

1988

1992

1996

2001

2005

Backbones

300

1,300

1,700

2,400

10,500

13,762

ISPs

47

359

672

3,072

23,064

16,896

Broadband Providers

1,162

4,762

15,930

Browser Software

92

300

275

Internet Search Engines

193

1,000

2,047

Portals

96

148

200

336

2,791

6,200

IP Telephony Providers

17

263

1,240

Media Player Software

11

153

108

Tot al

443

1,807

2,572

7,283

42,833

56,459

ISPs, Portals, search engines, and backbones show U-shaped concentration trends. ISPs, although initially highly concentrated, drop to moderate levels in 1996 and then rise again, with AOL becoming the market leader. In 2005, AOL held a declining share of 33% of the ISP market. For portals, three companies, Time Warner (AOL), Yahoo, and MSN (Microsoft), had a combined share of almost 82% in 2005.

For broadband providers, the market is split between cable and DSL, and concentration is moderate nationally (though essentially duopolistic locally). Internet backbones show a different trend. After a decrease of the HHI to an unconcentrated level in 1996, the subsector rose to 1,610 in 2004, the result of a string of acquisitions by WorldCom in the late 1990s.

The aggregate trend line for the Internet industries is U-shaped, too. After declining to a low of 1,287 in 1996, the trend line rises, reaching a moderately concentrated HHI of 1,494 in 2004.

High- and Low-Concentration Industries

We can identify which industries have been particularly pronounced in their growth and decline of concentration in the two-decade period of 1984 to 2005. This is provided in the next two tables. Table 13.38 shows the concentrating industries in descending order of their 20-year C4 concentration gain. We use the gain in C4 concentration to calculate the extent of change, since using the HHI with its exponent nature would distort comparisons of growth percentages. At the top of concentration are video rental (a 64.8% gain in share for the top four companies, as the industry changed from mom-and-pop to a national chain structure) and cable TV operators (whose national C4 gain was large, 47.4%, and which is also locally highly concentrated). Other high-gain industries are mobile telephony (46.4%), PC entertainment software (45%), pay-TV (35.1%), radio stations (29.6%), and local phone service (22.8%). Additional important mass media industries with high concentration gain are prime-time TV production (25.4%), educational books (23.1%), movie theater chains (14.3%), TV stations (13.2% but low in absolute terms), magazines (9.7%), academic journals (8.4%), and trade and paperback books (8.4%).

And what are the industries with low or negative growth of concentration? Table 13.39 shows that of 85 industries analyzed that existed both in 1984 and 2005, 23 industries have deconcentrated over the 20-year-period, and 22 in the period 1996–2005. The largest meaningful decreases were for Fiber Optical Cables, (–47%) in the technology field (though rising after 1996)and ISPs (mostly in the 1990s due to the emergence of commercial entrants). Of mass media industries, reductions in concentration over the 20-year period were in TV networks (–11%) and cable TV channels (–4.3%, and before 1996). This is not a long list.

(p.340)

Table 13.38 Industries with Growing Concentration (C4)

Industry

1984

1996

2005

Gain of Top 4 Firms (1984–2005)

Gain of Top 4 Firms (1996–2005)

Video Rental

0.2

32.0

64.8

64.6

32.8

Cable TV Operators

20.7

43.5

68.1

47.4

24.6

Mobile Telephony

27.9

41.0

74.3

46.4

33.3

PC Entertainment Software

31.0

53.5

76.0

45.0

22.5

Pay TV Channels

36.9

53.0

72.0

35.1

19.0

Camcorders

60.4

83.4

93.9

33.5

10.5

Computer Memory

44.1

49.6

76.2

32.1

26.6

Radio Stations

8.3

13.6

38.0

29.6

24.4

Syndication

33.3

61.1

61.2

27.9

0.1

TV PrimeTime Production

37.0

55.0

62.4

25.4

7.4

Music Retailing

15.4

26.7

38.8

23.4

12.1

Educational Books

57.8

69.6

80.9

23.1

11.3

Midrange Computers

61.9

67.1

84.9

23.0

17.8

Local Service

55.0

52.9

77.8

22.8

24.9

Paging

16.1

43.8

36.6

20.5

–7.2

Printers

70.0

78.8

90.3

20.3

11.5

Video Game Hardware

81.0

98.6

99.9

18.9

1.3

DBS Equipment

65.0

80.8

83.6

18.6

2.8

Copper Wire & Coax Cable

82.1

100.0

100.0

17.9

0.0

Enterprise Application Software

41.8

52.0

59.2

17.4

7.2

Retailing Books

18.5

44.1

35.2

16.7

–8.9

Home Video

52.8

69.0

69.0

16.2

0.0

Supercomputers

70.0

80.0

86.0

16.0

6.0

</