Strategic Differentiation by Business Models: Free-to-Air and Pay-TV
Free-to-air and Pay-TV business models usually cohabit in broadcasting (and more generally in media) markets. We analyze a model in which two identical broadcasting stations compete for viewers and for advertisers. Differentiation by business model arises endogenously in equilibrium. A merger to monopoly maintains differentiation and comes with strings attached. Monopoly power leads to excessive subscription prices, changes the overall provision of advertising and induces an allocative inefficiency of advertising messages across stations. We therefore argue that the prevailing antitrust and regulatory practice of classifying FTA and Pay-TV operators in different relevant markets is misguided.
|Date of creation:||16 Apr 2016|
|Date of revision:||21 May 2016|
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