Working Paper: CEPR ID: DP9079
Authors: Helen Weeds
Abstract: This paper examines incentives for exclusive distribution of content in the presence of advertising. A monopoly seller of content - such as televisation rights to popular sports - may contract with one or both of two competing distributors, charging lump-sum fees. When distributors are subscription-funded, exclusive sale to a single buyer is the seller's profit-maximising choice, even when distributors also sell advertising airtime. When distributors are purely advertising-funded, however, non-exclusive contracting may instead be preferred. Advertising revenues accruing directly to the content provider may also generate a preference for non-exclusivity even when selling to subscription-funded distributors. The analysis has implications for the distribution of content to pay TV and free-to-air broadcasters, and for internet distribution of content.
Keywords: advertising; broadcasting; exclusivity; internet
JEL Codes: D43; L14; L82; M37
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| exclusive distribution maximizes profits (D39) | when content is sold to subscription-funded distributors (L82) |
| nonexclusive contracts may be preferred (L14) | when distributors are purely advertising-funded (M38) |
| advertising revenues create a preference for nonexclusive distribution (M37) | when distributors are purely advertising-funded (M38) |
| advertising revenues influence seller's contracting decisions (L14) | favoring nonexclusive arrangements (L49) |
| preference for nonexclusivity can lead to lower consumer surplus (D11) | compared to exclusive arrangements (L14) |