Roberto Roson () (Department of Economics, University Of Venice Cà Foscari)
Abstract
Traditionally, media like TV and radio, but also the Internet, have been characterized by free access (by consumers having the necessary hardware), with services supported through advertising revenues. Profitability in these markets depends on the capability of attracting audience. Strategic choices, however, also depend on the relationship with the dual market for advertising services. In this paper, a model is introduced, which has two distinguishing features. First, the multidimensional nature of competition in media markets is acknowledged, through explicit modeling of vertical and horizontal differentiation. Second, the price of advertising depends on the expected audience composition, not simply on its magnitude. It also depends on the broadcasters' capability of effectively price-discriminate among advertising customers. It is found that market equilibria depend on a number of critical factors: the amount and type of price discrimination in advertising, the correlation between formats and audience composition, the relative profitability of the different market segments, and diseconomies of scale in program quality.
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Publisher Info
Paper provided by University of Venice "Ca' Foscari", Department of Economics in its series Working Papers with number
2007_07.
Find related papers by JEL classification: L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media M37 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - Advertising
This paper has been announced in the following NEP Reports: