Competition for Advertisers and for Viewers in Media Markets

Authors


  • Thanks to Justin Contat and Charlie Murry for insightful discussion; to Stephen Bruestle and Markus Reisinger for very detailed comments; to Fabrizio Germano, Lisa George, Jacques Crémer, Laurent Linnemer, Mark Armstrong, Martin Peitz and Nicolas Schutz for comments and discussion, as well as the Editor and three referees and participants of the Hunter College Media conference, CEPR Bologna, CRESSE Corfu and ICT Mannheim. The authors are grateful for financial support from NSF (Simon Anderson) and from NRK, Telenor and TV 2 (Øystein Foros and Hans Jarle Kind).

Abstract

Standard models of advertising-financed media assume consumers patronise a single-media platform, precluding effective competition for advertisers. Such competition ensues if consumers multi-home. The principle of incremental pricing implies that multi-homing consumers are less valuable to platforms. Then entry of new platforms decreases advertisement prices, while a merger increases them, and advertisement-financed platforms may suffer if a public broadcaster carries advertisements. Platforms may bias content against multi-homing consumers, especially if consumers highly value overlapping content and/or second impressions have low value.

Ancillary