. In addition, the company is the only provider of cable TV in the country, and the license of acquiring the cable TV rights is very costly too. Therefore, the higher charges assist in covering up for the additional costs that the company incurs in content provision. Prior to the price increases in 2007, StarHub has already maximized the profits that it made from the provision of its services. This begins from the sports package, inclusive of the ESPN Star Sports, which increased by $7 to $ 15, the rise of basic packages from $ 20 to $ 24, and a raise in its all-new sports package airing EPL matches by $ 10 to $ 25. 4.From the viewpoint of a content provider like ESPN which receives a per customer royalty from a cable TV operator, explain the moral hazard to which the cable TV operator is subject. The cable TV operator is bound by provision to ensure that he remits subsequent payments to the content provider for each one of its customer as royalty. It is against broadcast rights to air another company’s content without prior permission from the content provider, which in turn leads to the infringement of media broadcast rights.5. From the viewpoint of EPL, explain how a lump-sum bid would resolve asymmetry of information between EPL and cable TV operators.A lump-sum bid would be instrumental in resolving the asymmetry of information between EPL and cable TV operators such as StarHub as this payment enables the live streaming of matches from EPL to these Cable TV providers. This covers the
overhead costs thereby enabling the fans to watch the games one on one.