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Competition between Content Distributors in Two-Sided Markets

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Author Info

  • Harald Nygard Bergh
  • Hans Jarle Kind
  • Bjørn-Atle Reme
  • Lars Sørgard

Abstract

We analyze strategic interactions between two competing distributors of an independent TV channel. Consistent with most of the relevant markets, we assume that the distributors set end-user prices while the TV channel sets advertising prices. Within this framework we show that the distributors have incentives to internalize the fact that viewers dislike ads on TV, but no incentives to internalize how the TV-channel’s profits from the advertising market are affected by end-user prices. This leads to some surprising results. First, we show that even undifferentiated distributors might make positive profits. Second, a TV channel might find it optimal to commit to not raising advertising revenue. Third, regulation of the advertising volume might be welfare improving even if the unregulated advertising level is too low from a social point of view.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2012/wp-cesifo-2012-07/cesifo1_wp3885.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3885.

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Date of creation: 2012
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Handle: RePEc:ces:ceswps:_3885

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Related research

Keywords: two-sided market; coordination; regulation; TV industry;

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References

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  1. Hans Jarle Kind & Tore Nilssen & Lars Sørgard, 2009. "Business Models for Media Firms: Does Competition Matter for how they Raise Revenue?," CESifo Working Paper Series 2713, CESifo Group Munich.
  2. Peitz, Martin & Valletti, Tommaso M., 2008. "Content and advertising in the media: Pay-tv versus free-to-air," International Journal of Industrial Organization, Elsevier, vol. 26(4), pages 949-965, July.
  3. Gregory Crawford, 2008. "The discriminatory incentives to bundle in the cable television industry," Quantitative Marketing and Economics, Springer, vol. 6(1), pages 41-78, March.
  4. Lal, Rajiv & Matutes, Carmen, 1994. "Retail Pricing and Advertising Strategies," The Journal of Business, University of Chicago Press, vol. 67(3), pages 345-70, July.
  5. Crawford, Gregory S & Yurukoglu, Ali, 2011. "The Welfare Effects of Bundling in Multichannel Television Markets," CEPR Discussion Papers 8370, C.E.P.R. Discussion Papers.
  6. Weeds, Helen, 2012. "TV Wars: Exclusive Content and Platform Competition in Pay TV," CEPR Discussion Papers 8781, C.E.P.R. Discussion Papers.
  7. 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).
  8. Hans Jarle Kind & Tore Nilssen & Lars Sørgard, 2010. "Price Coordination in Two-Sided Markets: Competition in the TV Industry," CESifo Working Paper Series 3004, CESifo Group Munich.
  9. Kenneth C. Wilbur, 2008. "A Two-Sided, Empirical Model of Television Advertising and Viewing Markets," Marketing Science, INFORMS, vol. 27(3), pages 356-378, 05-06.
  10. Hans Jarle Kind & Tore Nilssen & Lars S�rgard, 2007. "Competition for Viewers and Advertisers in a TV Oligopoly," Journal of Media Economics, Taylor & Francis Journals, vol. 20(3), pages 211-233.
  11. Armstrong, Mark, 1999. "Competition in the Pay-TV Market," Journal of the Japanese and International Economies, Elsevier, vol. 13(4), pages 257-280, December.
  12. Andrei Hagiu & Robin S. Lee, 2011. "Exclusivity and Control," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 20(3), pages 679-708, 09.
  13. Germa Bel & Joan Calzada, 2007. "Access Pricing to a Digital Broadcasting Platform," Journal of Media Economics, Taylor & Francis Journals, vol. 20(1), pages 29-53.
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Cited by:
  1. Stennek, Johan, 2014. "Exclusive quality – Why exclusive distribution may benefit the TV-viewers," Information Economics and Policy, Elsevier, vol. 26(C), pages 42-57.

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