Did Time Warner blink? Most accounts of the Time Warner / CBS agreement indicate that CBS got most of what they wanted.
Earlier, I had suggested that alternative ways to access CBS content may have increased Time Warner's disagreement value. Maybe I was wrong or maybe this just wasn't enough. CBS's strategy was to hold out until football season. At that point, Time Warner's disagreement value would fall because rabid football fans are more likely to switch to other providers such as Dish or Direct TV.
Another aspect is using collective bargaining to mitigate the impact of crisis response in countries like South Africa that has been devasted by apartheid. It is hard to balance the improvement brought on by its role in protecting wages as well as better treatment for contract workers as opposed to its ability to actually save jobs but it definately positively affected the ability to secure those items because of the social implications.
ReplyDeleteJena Hodges
What seemingly started out like a game of chicken, by Time Warner Cable locking out CBS from its programming content on the cable system, ended when Time Warner Cable flinched and CBS was able to bargain harder using the lucrative NFL content to sway Time Warner Cable’s ability to negotiate the terms of the contract. As illustrated by Froeb, “bargaining begins with the observation that real negotiations rarely have rules like the ones that characterize formal games.” (Froeb, 2014. P. 205).
ReplyDeleteBy using the NFL content as leverage knowing that fans would be more likely to switch to another provider, CBS was able to alter the outcome of the negotiations. Time Warner Cable was trying it’s best to change the outcome as well by assuming that the FCC would intervene and provide some form of government intervention. This approach was in part thwarted by a law passed by Congress in 1992 that gave a station the right to seek retransmission compensation.
This nonstrategic view of bargaining ended when a financial settlement was reached between the two companies with the company who had the content wanted by the other’s customers coming out ahead. The potential lost opportunity cost to Time Warner Cable would have been to great not to agree to the demands placed by CBS. As a result, CBS was in a much stronger bargaining position.
While the terms of the agreement was not made public as agreed to by both parties, CBS was able to double approximately double its subscriber fees and was able to retain ownership of the digital rights.
Reference:
Froeb, L. M., McCann, B. T., Shor M., Ward, M. R. (2014). Managerial Economics: A Problem Solving Approach. Boston, MA: Cengage Learning