|New NBC Universal Poised for Big Gains in Entertainment Profits|
|Subject||Increased Market Concentration Allows for Bigger Profits|
|Topic||Oligopoly; Profit Maximization and the Firm|
Demand, Health Care, Profit, Hospitals
NBC is finalizing its purchase of Universal Studios, and the new company,
NBC Universal, will be one of the five largest entertainment companies
in the world. The new company will be 80% owned by NBC's parent company,
General Electric Company, with the other 20% owned by France's Vivendi
Universal SA, although Vivendi will have the right to sell its share to
GE in several years.
NBC Universal also can potentially reap significant benefits from the merger. When NBC broadcasts the 2004 Summer Olympics on its network stations, it can show some of the sports on Universal's USA Network. Doing this can help USA remain among the cable lineup of rival companies. Further, NBC Universal can use its network and cable channels to heavily advertise (at reduced prices, of course) the movies and DVD's coming from Universal Studios. It also now has access to Universal Studios' library of old TV shows, such as "Magnum, P.I.," which it can advertise as well. Finally, NBC Universal will own television shows such as "Law and Order," which it currently airs. This will help NBC significantly when the time comes to renegotiate timing of shows and determining advertising costs, as its bargaining power will increase.
Overall, the move is expected to help NBC Universal become much more
competitive in the entertainment industry.
(Updated July, 2004)
|Source||Joe Flint and Brooks Barnes. "The Peacock's New Strut." The Wall Street Journal. 11 May 2004.|
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