Media Platforms’ Content Provision Strategies and Sources of Profits

Wilfred Amaldoss (), Jinzhao Du () and Woochoel Shin ()
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Wilfred Amaldoss: Fuqua School of Business, Duke University, Durham, North Carolina 27708
Jinzhao Du: Faculty of Business and Economics, University of Hong Kong, Hong Kong
Woochoel Shin: Warrington College of Business, University of Florida, Gainesville, Florida 32611

Marketing Science, 2021, vol. 40, issue 3, 527-547

Abstract: Some media platforms earn their profits from both consumers and advertisers (e.g., Spotify, Hulu), whereas others earn their profits from either advertisers only (e.g., Jango, Tubi) or consumers only (e.g., Tidal, Netflix). Thus, media platforms adopt divergent strategies depending on how they allocate the limited space or bandwidth between content and advertising. In this paper, we examine media platforms’ content provision strategies and their implications for the profits of media platforms as well as content suppliers, taking into account the cross-side effects of a multisided media market and the nature of competition in the content supplier market. To facilitate the analysis, we propose a model where media platforms interact with three sides: content suppliers, consumers, and advertisers. First, our analysis of a perfectly competitive content market shows that though consumers’ desire for content raises the willingness to pay, it can hurt platforms’ profits. Second, counter to our intuition, platforms’ profits can increase with the cost of procuring content. Third, advertisers’ desire for consumers reduces a monopoly content supplier’s profits under a paid-content-with-ads strategy. Fourth, a monopoly content supplier cannot extract all the profits from competing platforms. Furthermore, competing content suppliers may even charge higher prices than a monopoly content supplier. Finally, we highlight how the nature of competition in the content market shapes platforms’ choice of a no-ad strategy.

Keywords: multisided platform; media markets; content provision strategy; game theory (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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