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Challenging content exclusivity in network industries: the case of digital broadcasting

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  • Evens, Tom
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    Abstract

    Interacting with network externalities and switching costs, exclusive dealings for premium contents in digital broadcasting markets allow incumbents to deny rivals critical mass and profitable market entry. A downstream company that acquires the exclusive rights to high-quality programming in the upstream market may obtain a competitive advantage over its rivals which suffer from negative externalities. Instead of fostering competition and innovation, exclusive licensing serves as an effective entry-deterrent strategy in order to preserve market power and to leverage monopolies. Although exclusivity for premium content has long been considered the only way for guaranteeing the remuneration of the vast investments in content production and platform infrastructure, this paper challenges the profitability of this exclusivity strategy in network industries. The paper questions the traditional economic assumptions underlying exclusivity of content and argues that the increasing emergence of multi-sided platforms in the broadcasting industry creates incentives for right holders to multi-home rather than single-home their contents. --

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    Bibliographic Info

    Paper provided by International Telecommunications Society (ITS) in its series 21st European Regional ITS Conference, Copenhagen 2010: Telecommunications at new crossroads - Changing value configurations, user roles, and regulation with number 12.

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    Date of creation: 2010
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    Handle: RePEc:zbw:itse10:12

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    Web page: http://www.itseurope.org/

    Related research

    Keywords: Business model; digital broadcasting; exclusivity; bundling; shared access; innovation;

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    1. Armstrong, Mark, 1999. "Competition in the Pay-TV Market," Journal of the Japanese and International Economies, Elsevier, vol. 13(4), pages 257-280, December.
    2. Jean-Charles Rochet & Jean Tirole, 2003. "Platform Competition in Two-Sided Markets," Journal of the European Economic Association, MIT Press, vol. 1(4), pages 990-1029, 06.
    3. Geoffrey G. Parker & Marshall W. Van Alstyne, 2005. "Two-Sided Network Effects: A Theory of Information Product Design," Management Science, INFORMS, vol. 51(10), pages 1494-1504, October.
    4. Antonio NICITA & Maria Alessandra ROSSI, 2008. "Access to Audio-visual Contents, Exclusivity and Anticommons in New Media Markets," Communications & Strategies, IDATE, Com&Strat dept., vol. 1(71), pages 79-102, 3rd quart.
    5. Author One David Harbord & Author Two Marco Ottaviani, 2002. "Contracts and Competition in the Pay-TV Market," Industrial Organization 0203005, EconWPA.
    6. Doganoglu, Toker & Wright, Julian, 2010. "Exclusive dealing with network effects," International Journal of Industrial Organization, Elsevier, vol. 28(2), pages 145-154, March.
    7. Whinston, Michael D, 1990. "Tying, Foreclosure, and Exclusion," American Economic Review, American Economic Association, vol. 80(4), pages 837-59, September.
    8. Antonio Nicita & Giovanni Ramello, 2005. "Exclusivity and Antitrust in Media Markets: The Case of Pay-TV in Europe," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 12(3), pages 371-387.
    9. Illing, Gerhard (Ed.), . "Industrial Organization and the Digital Economy," Monographs in Economics, University of Munich, Department of Economics, number 19506, April.
    10. Dennis W. Carlton & Michael Waldman, 1998. "The Strategic Use Of Tying To Preserve And Create Market Power In Evolving Industries," University of Chicago - George G. Stigler Center for Study of Economy and State 145, Chicago - Center for Study of Economy and State.
    11. Christiaan Hogendorn & Ka Yat Yuen, 2004. "Platform Competition with “Must-Have” Components," Wesleyan Economics Working Papers 2004-003, Wesleyan University, Department of Economics.
    12. Hagiu Andrei, 2007. "Merchant or Two-Sided Platform?," Review of Network Economics, De Gruyter, vol. 6(2), pages 1-19, June.
    13. Weeds, Helen, 2012. "TV Wars: Exclusive Content and Platform Competition in Pay TV," CEPR Discussion Papers 8781, C.E.P.R. Discussion Papers.
    14. Anthony Boardman & Shaun Hargreaves-Heap, 1999. "Network Externalities and Government Restrictions on Satellite Broadcasting of Key Sporting Events," Journal of Cultural Economics, Springer, vol. 23(3), pages 165-179, August.
    15. Aghion, Philippe & Bolton, Patrick, 1987. "Contracts as a Barrier to Entry," American Economic Review, American Economic Association, vol. 77(3), pages 388-401, June.
    16. Barry Nalebuff, 2004. "Bundling as an Entry Barrier," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 159-187, February.
    17. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June.
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