Working Paper: CEPR ID: DP8781
Authors: Helen Weeds
Abstract: The paper examines incentives for exclusive distribution of premium television content such as live sports and Hollywood movies. Static analysis shows that a pay TV operator with premium content always chooses to supply its retail rival, using per-subscriber fees to soften competition. Incorporating platform competition, however, exclusive content gives its holder a market share advantage that is amplified by dynamic effects. Under some conditions this benefit outweighs the opportunity cost of forgone wholesale fees, making exclusivity the equilibrium choice. The analysis explains the observed incidence of content exclusivity in pay TV. Specific dynamic mechanisms are explored, and welfare and policy implications are discussed.
Keywords: exclusivity; foreclosure; pay TV
JEL Codes: D43; L13; L41; L82
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| pay TV operator with premium content (L82) | supply its retail rival (L81) |
| supply its retail rival (L81) | soften competition (L13) |
| soften competition (L13) | extract higher revenues (Y60) |
| exclusive content (Y60) | initial market share advantage (L17) |
| initial market share advantage (L17) | amplify over time (C22) |
| amplify over time (C22) | preference for exclusivity (D10) |
| preference for exclusivity (D10) | benefits outweigh opportunity costs (D61) |
| exclusivity (Y60) | equilibrium choice (D50) |