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The business model of a streaming platform

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  • E. Carroni
  • D. Paolini

Abstract

A streaming platform obtains contents from artists and offers commercial spaces to advertisers. Users value contents' variety and quality of the service and are heterogeneously bothered by ads. Two solutions can be proposed to users. If they pay a positive price, they subscribe to a commercial-free service with an upgrade of quality (Premium). Otherwise, they have free access to service of a basic quality. We find that a wider audience gives incentives to the platform to increase both the advertising intensity and the quality upgrade in the Premium. As a consequence, some people move to the Premium. At the limit, the platform opts for a purely subscription-based business model as the audience reaches a certain level. The parsimonious model we propose is able to give a rationale to the emergence of different business models in the streaming market as well as to the (end of the) disputes between artists and the Spotify model

Suggested Citation

  • E. Carroni & D. Paolini, 2019. "The business model of a streaming platform," Working Paper CRENoS 201902, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    • Handle: RePEc:cns:cnscwp:201902
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    2. Zennyo, Yusuke, 2020. "Freemium competition among ad-sponsored platforms," Information Economics and Policy, Elsevier, vol. 50(C).

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    Keywords

    Second-degree price discrimination; Platform; Multi-Sided Markets; Media; Advertising;
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