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Price Discrimination and Audience Composition in Advertising-Based Broadcasting

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  • Roberto Roson

    () (Department of Economics, University Of Venice C� 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.

Suggested Citation

  • Roberto Roson, 2007. "Price Discrimination and Audience Composition in Advertising-Based Broadcasting," Working Papers 2007_07, Department of Economics, University of Venice "Ca' Foscari".
  • Handle: RePEc:ven:wpaper:2007_07
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    References listed on IDEAS

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    Cited by:

    1. Armando J. Garcia Pires, 2013. "Media Plurality and the Intensity of Readers' Political Preferences," Journal of Media Economics, Taylor & Francis Journals, vol. 26(1), pages 41-55, March.
    2. Anna D'Annunzio, 2013. "Vertical Integration in Two-Sided Markets: Exclusive Provision and Program Quality," DIAG Technical Reports 2013-16, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
    3. repec:eee:indorg:v:53:y:2017:i:c:p:114-144 is not listed on IDEAS

    More about this item

    Keywords

    Advertising; Media Industries; Broadcasting; Price Discrimination; Television; Radio; Differentiation.;

    JEL classification:

    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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