The annual revenues (in billion dollars) in financial year 2001 for the top five players in the global media and entertainment industry are given in the following table. The top five corporations in this industry include three U.S.-based corporations (AOL Time Warner, Walt Disney, and Viacom), one French corporation (Vivendi Universal), and one Australian corporation (News Corporation). The revenue indicated for Vivendi Universal does not include the revenue from its environmental business. Assume that the total worldwide revenue of all firms in this industry was $250 billion.
Company Revenue
AOL Time Warner.........................38
Walt Disney................................. 25
Vivendi Universal.......................... 25
Viacom...................................... 23
News Corporation......................... 13
a. Compute the three-firm and five-firm concentration ratios.
b. Compute the three-firm and five-firm Herfindahl indexes.
c. Make a simplistic assumption that in addition to the five corporations mentioned in the table, there are 40 other companies in this industry with an equal share of the remaining market. Compute the Herfindahl index for the overall industry.
d. Suppose there were not 40, but only 10 other companies in the industry with an equal share of the remaining market. Compute the Herfindahl index for the overall industry.
e. Interpret your answers to parts (c) and (d) in terms of the competition structure of the industry.