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Content and advertising in the media: Pay-tv versus free-to-air

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  • Peitz, Martin
  • Valletti, Tommaso M.

Abstract

We compare the advertising intensity and content of programming in a market with competing media platforms. With pay-tv, media platforms have two sources of revenues, advertising revenues and revenues from viewers. With free-to-air, media platforms receive all revenues from advertising. We show that if viewers strongly dislike advertising, the advertising intensity is greater under free-to-air television. We also show that free-to-air television tends to provide less differentiated content whereas pay-tv stations always maximally differentiate their content. In addition, we compare the welfare properties of the two different schemes.

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Bibliographic Info

Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 26 (2008)
Issue (Month): 4 (July)
Pages: 949-965

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Handle: RePEc:eee:indorg:v:26:y:2008:i:4:p:949-965

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Web page: http://www.elsevier.com/locate/inca/505551

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  1. Gabszewicz, Jean J & Laussel, Didier & Sonnac, Nathalie, 2002. " Press Advertising and the Political Differentiation of Newspapers," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 4(3), pages 317-34.
  2. Anderson, Simon P & Gabszewicz, Jean Jaskold, 2005. "The Media and Advertising: A Tale of Two-Sided Markets," CEPR Discussion Papers 5223, C.E.P.R. Discussion Papers.
  3. Bagwell, Kyle, 2007. "The Economic Analysis of Advertising," Handbook of Industrial Organization, Elsevier, Elsevier.
  4. Steffen Hoernig & Tommaso Valletti, 2006. "Mixing Goods with Two-Part Tariffs," CEIS Research Paper 72, Tor Vergata University, CEIS.
  5. Peitz, Martin & Valletti, Tommaso, 2004. "Content and Advertising in the Media: Pay-TV versus Free-To-Air," CEPR Discussion Papers 4771, C.E.P.R. Discussion Papers.
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  7. Esther Gal-Or & Anthony Dukes, 2006. "On the Profitability of Media Mergers," The Journal of Business, University of Chicago Press, vol. 79(2), pages 489-526, March.
  8. GABSZEWICZ, Jean J. & LAUSSEL, Didier & SONNAC, Nathalie, . "Programming and advertising competition in the broadcasting industry," CORE Discussion Papers RP -1873, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  10. Prasad, A. & Mahajan, V. & Bronnenberg, B.J.J.A.M., 2003. "Advertising versus pay-per-view in electronic media," Open Access publications from Tilburg University urn:nbn:nl:ui:12-332538, Tilburg University.
  11. Simon P. Anderson & Stephen Coate, 2005. "Market Provision of Broadcasting: A Welfare Analysis," Review of Economic Studies, Oxford University Press, vol. 72(4), pages 947-972.
  12. d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979. "On Hotelling's "Stability in Competition"," Econometrica, Econometric Society, Econometric Society, vol. 47(5), pages 1145-50, September.
  13. Kaiser, Ulrich & Wright, Julian, 2004. "Price Structure in Two-sided Markets: Evidence from the Magazine Industry?," ZEW Discussion Papers 04-80, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  14. Spence, A Michael & Owen, Bruce, 1977. "Television Programming, Monopolistic Competition, and Welfare," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 91(1), pages 103-26, February.
  15. Reisinger, Markus, 2004. "Two-Sided Markets with Negative Externalities," Discussion Papers in Economics 478, University of Munich, Department of Economics.
  16. repec:rje:randje:v:37:y:2006:3:p:645-667 is not listed on IDEAS
  17. Choi, Jay Pil, 2006. "Broadcast competition and advertising with free entry: Subscription vs. free-to-air," Information Economics and Policy, Elsevier, vol. 18(2), pages 181-196, June.
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