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Pay-Tv Versus Free-Tv: A Model Of Sports Broadcasting Rights Sales

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  • Helmut Dietl

    ()
    (University of Zurich)

  • Tariq Hasan

    (University of Zurich)

Abstract

In contrast to the U.S., European coverage of top-selling sports tends to move to subscription-TV. The literature provides several explanations for this distinct development in the U.S. and Europe: The TV sports market in the U.S. is characterized by substitution effects due to the existence of other major sports, economies of scale due to the existence of networks covering all of the U.S., and FCC legislation restricting entrance of subscription-TV networks. We present a model which is consistent with the arguments above and points to an additional explanation: If the league sponsors' willingness to pay increases with higher viewer ratings, incentives for a sports league to air its games on free-TV become stronger. Differences in the valuation of such payments might be a factor explaining the different development across the two continents. In order to increase welfare, policymakers should tailor free-TV networks' advertising restrictions to maximize viewer ratings while still ensuring free-TV networks' competitiveness in the market for broadcasting rights. Additionally, increased competition in the sports broadcasting market will increase welfare.

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Bibliographic Info

Article provided by Eastern Economic Association in its journal Eastern Economic Journal.

Volume (Year): 33 (2007)
Issue (Month): 3 (Summer)
Pages: 405-428

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Handle: RePEc:eej:eeconj:v:33:y:2007:i:3:p:405-428

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  1. Spence, A Michael & Owen, Bruce, 1977. "Television Programming, Monopolistic Competition, and Welfare," The Quarterly Journal of Economics, MIT Press, vol. 91(1), pages 103-26, February.
  2. Chae, Suchan & Flores, Daniel, 1998. "Broadcasting versus narrowcasting," Information Economics and Policy, Elsevier, vol. 10(1), pages 41-57, March.
  3. Wladimir Andreff & Paul D. Staudohar, 2000. "The Evolving European Model of Professional Sports Finance," Journal of Sports Economics, , vol. 1(3), pages 257-276, August.
  4. Jeremy Bulow & Ming Huang & Paul Klemperer, 1999. "Toeholds and Takeovers," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 427-454, June.
  5. Cave, Martin & Crandall, Robert W, 2001. "Sports Rights and the Broadcast Industry," Economic Journal, Royal Economic Society, vol. 111(469), pages F4-26, February.
  6. Hansen, Claus Thustrup & Kyhl, Soren, 2001. "Pay-per-view broadcasting of outstanding events: consequences of a ban," International Journal of Industrial Organization, Elsevier, vol. 19(3-4), pages 589-609, March.
  7. Holden, S., 1993. "Network or Pay-Per-View? A Welfare Analysis," Memorandum 08/1993, Oslo University, Department of Economics.
  8. Kruse, Joern & Quitzau, Joern, 2003. "Fussball-Fernsehrechte: Aspekte der Zentralvermarktung," Working Paper 18/2003, Helmut Schmidt University, Hamburg.
  9. Stefan Szymanski, 2003. "The Economic Design of Sporting Contests," Journal of Economic Literature, American Economic Association, vol. 41(4), pages 1137-1187, December.
  10. 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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