Exclusive vs Overlapping Viewers in Media Markets

Ambrus, Attila and Reisinger, Markus (September 2006): Exclusive vs Overlapping Viewers in Media Markets. Discussion Papers in Economics 2006-25

Abstract

This paper investigates competition for advertisers in media markets when viewers can subscribe to multiple channels. A central feature of the model is that channels are monopolists in selling advertising opportunities toward their exclusive viewers, but they can only obtain a competitive price for advertising opportunities to multi-homing viewers. Strategic incentives of firms in this setting are different than those in former models of media markets. If viewers can only watch one channel, then firms compete for marginal consumers by reducing the amount of advertising on their channels. In our model, channels have an incentive to increase levels of advertising, in order to reduce the overlap in viewership. We take an account of the differences between the predictions of the two types of models and find that our model is more consistent with recent developments in broadcasting markets. We also show that if channels can charge subscription fees on viewers, then symmetric firms can end up in an asymmetric equilibrium in which one collects all or most of its revenues from advertisers, while the other channel collects most of its revenues via viewer fees.

• Item Type: Paper (Discussion Paper)
• Keywords: Media, Multihoming, Platform Competition, Two-Sided Markets
• Subjects: Economics; Economics > Discussion Papers in Economics; Economics > Discussion Papers in Economics > Industrial Organization
• Dewey Classification: 300 Social sciences; 300 Social sciences > 330 Wirtschaft
• Journal of Economic Literature classification: D43, L13
• Language: English