Exclusive vs Overlapping Viewers in Media Markets

Published: Sept. 1, 2006, 11 a.m.

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