Topic: Media Platforms’ Content Provision Strategy and Source of Profits
Speaker: Jinzhao Du, Department of Marketing, Duke University’s Fuqua School of Business
Time: Wednesday, 25 October, 13:30-15:00
Location: Room K01, Guanghua Building 2
We see media platforms earning their profits from both consumers and advertisers (e.g., the New York Times), advertisers only (e.g., the Huffington Post), or consumers only (e.g., Netflix). This paper theoretically investigates two important strategic issues confronting a media platform: what proportion of its limited bandwidth or space should a platform allocate for content (instead of advertising)? and what should be the source of a platform’s profits? To facilitate this analysis, we propose a model where a media platform interacts with three sides: content suppliers, consumers, and advertisers. When consumers’ desire for content is high, one might expect a platform to offer paid content rather than free content. Our analysis, however, shows that competing platforms will adopt a free-content strategy even in circumstances where a monopoly platform adopts a paid-content-with-ads strategy if consumers’ desire for content is sufficiently high. We observe a reversal in the pattern of results when consumers’ desire for content is sufficiently low. Counter to conventional wisdom, inter-platform competition helps a platform to earn more profits when they adopt a free-content strategy. Next, in the presence of a monopoly content supplier, competing platforms never shun advertisers whenever they can earn non-negative profits from serving advertisers. When content suppliers compete, however, competing platforms may avoid advertising and earn their entire profits from consumers even when serving advertisers allows competing platforms to earn positive profits. Finally, compared to a monopoly content supplier, a duopoly content supplier can raise the price for content and yet not decrease the total channel profits.
Jinzhao Du, Ph.D. Candidate in Marketing, Fuqua School of Business, Duke University. He is interested in Platform-based marketing, Multi-sided media market, Network marketing, and Applied game theory.
Your participation is warmly welcomed!