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

  • Peitz, Martin
  • Valletti, Tommaso M.

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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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
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505551

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  1. Simon P. Anderson & Stephen Coate, 2003. "Market Provision of Broadcasting: A Welfare Analysis," Virginia Economics Online Papers 358, University of Virginia, Department of Economics.
  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. 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.
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