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Strategic Differentiation by Business Models: Free-To-Air and Pay-TV

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  • Emilio Calvano
  • Michele Polo

Abstract

Broadcasting markets are marked by the coexistence of outlets with radically different business models, some offering content free of charge and relying on advertising, others charging for access and airing few ads. We develop a model with competing broadcasters that leads to endogenous differentiation in business models. Differentiation is not driven by the heterogeneity of agents as in classic works. Rather it relates to the 'two-sided' nature of these markets. A key driver is a strong form of strategic substitutability induced by natural properties of technology that allows advertisers to reach viewers.

Suggested Citation

  • Emilio Calvano & Michele Polo, 2020. "Strategic Differentiation by Business Models: Free-To-Air and Pay-TV," The Economic Journal, Royal Economic Society, vol. 130(625), pages 50-64.
    • Handle: RePEc:oup:econjl:v:130:y:2020:i:625:p:50-64.
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    File URL: http://hdl.handle.net/10.1093/ej/uez037
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    Cited by:

    1. Simon P. Anderson & Bruno Jullien, 2015. "The advertising-financed business model in two-sided media markets," Post-Print hal-02866192, HAL.
    2. Bruno Jullien & Alessandro Pavan & Marc Rysman, 2021. "Two-sided markets, pricing, and network effects," Post-Print hal-03828345, HAL.
    3. Hemant K. Bhargava, 2022. "The Creator Economy: Managing Ecosystem Supply, Revenue Sharing, and Platform Design," Management Science, INFORMS, vol. 68(7), pages 5233-5251, July.
    4. Christian Bach & Robert Edwards & Christian Jaag, 2023. "Postal Platform Pricing with Limited Consumer Attention," Working Papers 202318, University of Liverpool, Department of Economics.
    5. Jullien, Bruno & Sand-Zantman, Wilfried, 2021. "The Economics of Platforms: A Theory Guide for Competition Policy," Information Economics and Policy, Elsevier, vol. 54(C).
    6. Gregor Langus & Vilen Lipatov, 2022. "Value Creation by Ad-Funded Platforms," CESifo Working Paper Series 9525, CESifo.
    7. Federico Boffa & Lapo Filistrucchi, 2014. "Optimal Cartel Prices in Two-Sided Markets Access," Working Papers 14-19, NET Institute.
    8. Zennyo, Yusuke, 2024. "A model of mobile app and ad platform markets," International Journal of Industrial Organization, Elsevier, vol. 97(C).
    9. Shekhar, Shiva, 2020. "Zero Pricing Platform Competition," MPRA Paper 99364, University Library of Munich, Germany.
    10. Calvano, Emilio & Polo, Michele, 2021. "Market power, competition and innovation in digital markets: A survey," Information Economics and Policy, Elsevier, vol. 54(C).

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