When TV Becomes a Stream: Content Decisions of a Video On Demand Service

49 Pages Posted: 5 Jun 2020 Last revised: 11 Mar 2021

See all articles by Nikhil George

Nikhil George

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management

Siddhartha Sharma

Kelley School of Business, Indiana University

Rahul Telang

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management

Date Written: May 29, 2020

Abstract

Entertainment television today is being increasingly consumed via online video on demand (VOD) services. A VOD service is less constrained compared to the traditional (linear) TV in terms of the number of programs it can simultaneously offer, allowing its viewers to watch a program at a time of their choice. On the one hand, offering more programs can dilute the quality of the offered programs; while on the other, the service benefits from the time flexibility that viewers now have on their side. In this paper, we theoretically study how the ‘on-demand’ feature affects the number of programs and the investment in their qualities (by a monopolist) when viewers are heterogeneous in their keenness to watch television programs, their preferred genre (taste preference) and, importantly, their preferred time to watch the programs (time preference). We first show that, when offering the same number of programs, while the linear TV service offers them at the same quality, the VOD service can offer them at different qualities. When the VOD service offers more programs---utilizing its capacity advantage to better cater to viewer tastes---the offering can comprise both higher and lower quality programs compared to the linear TV. While a shift to VOD increases consumer welfare, it is not always Pareto-improving when the VOD service make asymmetric investments in programs. Results on quality are driven by the heterogeneity in viewer time preferences, and are in line with real world observations about the content of popular VOD platforms.

Keywords: VOD, Entertainment Industry, Quality, Netflix, Streaming platforms

Suggested Citation

George, Nikhil and Sharma, Siddhartha and Telang, Rahul, When TV Becomes a Stream: Content Decisions of a Video On Demand Service (May 29, 2020). Available at SSRN: https://ssrn.com/abstract=3605989 or http://dx.doi.org/10.2139/ssrn.3605989

Nikhil George (Contact Author)

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management ( email )

Pittsburgh, PA 15213-3890
United States
4127262186 (Phone)

Siddhartha Sharma

Kelley School of Business, Indiana University ( email )

1275 E 10th St
Bloomington, IN 47405
United States

Rahul Telang

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management ( email )

4800 Forbes Ave
Pittsburgh, PA 15213-3890
United States
412-268-1155 (Phone)

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