Exclusive vs Overlapping Viewers in Media Markets

Episode von Volkswirtschaft - Open Access LMU - Teil 02/03 von Ludwig-Maximilians-Universität München · 1. September 2006

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.

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