Good Thing Bad Thing

[Liam Hall]

3ALITY DIGITAL ACQUIRES ELEMENT TECHNICA

http://www.inbroadcast.com/newsroom....cle&a=00001946

I always viewed these two innovative companies in a similar light. Is it a good thing they now sing from the same song sheet or a bad thing?

[Stephen Pruitt]

Unless there are substantial economies of scale involved with this merger (which seems unlikely), it's probably not good news for either innovation or pricing. Indeed, this is what we call in economics a "market power" or "horizontal" merger. Just imagine the loss in innovation that would come if UPS bought FedEx. Same story here. On the other hand, if the economics of innovation in this area are so high that neither company was likely to be able to adequately invest resources sufficient to survive in the long term without the merger, then, in the end, it will prove to be beneficial for innovation (but not pricing).

Stephen