Content and advertising in the media: Pay-tv versus free-to-air |
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Authors: | Martin Peitz Tommaso M. Valletti |
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Affiliation: | aDepartment of Economics, University of Mannheim, 68131 Mannheim, Germany;bCEPR, UK;cTanaka Business School, Imperial College London, London SW7 2AZ, UK;dUniversity of Rome “Tor Vergata”, Italy |
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Abstract: | We compare the advertising intensity and content of programming in a market with competing media platforms. With pay-tv, media platforms have two sources of revenues, advertising revenues and revenues from viewers. With free-to-air, media platforms receive all revenues from advertising. We show that if viewers strongly dislike advertising, the advertising intensity is greater under free-to-air television. We also show that free-to-air television tends to provide less differentiated content whereas pay-tv stations always maximally differentiate their content. In addition, we compare the welfare properties of the two different schemes. |
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Keywords: | Advertising Media Product differentiation Two-sided markets |
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