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Competition between Content Distributors in Two-Sided Markets

Author

Listed:
  • Harald Nygard Bergh
  • Hans Jarle Kind
  • Bjørn-Atle Reme
  • Lars Sørgard

Abstract

We analyze strategic interactions between two competing distributors of an independent TV channel. Consistent with most of the relevant markets, we assume that the distributors set end-user prices while the TV channel sets advertising prices. Within this framework we show that the distributors have incentives to internalize the fact that viewers dislike ads on TV, but no incentives to internalize how the TV-channel’s profits from the advertising market are affected by end-user prices. This leads to some surprising results. First, we show that even undifferentiated distributors might make positive profits. Second, a TV channel might find it optimal to commit to not raising advertising revenue. Third, regulation of the advertising volume might be welfare improving even if the unregulated advertising level is too low from a social point of view.

Suggested Citation

  • Harald Nygard Bergh & Hans Jarle Kind & Bjørn-Atle Reme & Lars Sørgard, 2012. "Competition between Content Distributors in Two-Sided Markets," CESifo Working Paper Series 3885, CESifo.
    • Handle: RePEc:ces:ceswps:_3885
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    References listed on IDEAS

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    10. Hans Jarle Kind & Tore Nilssen & Lars Sørgard, 2009. "Business Models for Media Firms: Does Competition Matter for How They Raise Revenue?," Marketing Science, INFORMS, vol. 28(6), pages 1112-1128, 11-12.
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    Cited by:

    1. Stennek, Johan, 2014. "Exclusive quality – Why exclusive distribution may benefit the TV-viewers," Information Economics and Policy, Elsevier, vol. 26(C), pages 42-57.

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    More about this item

    Keywords

    two-sided market; coordination; regulation; TV industry;
    All these keywords.

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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