Content and Advertising in the Media: Pay-Tv Versus Free-to-Air

36 Pages Posted: 15 Feb 2005

See all articles by Martin Peitz

Martin Peitz

University of Mannheim - Department of Economics

Tommaso M. Valletti

Imperial College Business School; Centre for Economic Policy Research (CEPR)

Date Written: December 2004

Abstract

We compare the advertising intensity and content of programming in a market with competing media platforms. With pay-tv, media platforms have two sources of revenues, advertising revenues and revenues from viewers. With free-to-air media, platforms receive all revenues from advertising. We show that if viewers strongly dislike advertising, the advertising intensity is greater under free-to-air television. We also show that free-to-air television tends to provide more similar content whereas pay-tv stations differentiate their content. In addition, we compare the welfare properties of the two different schemes.

Keywords: Advertising, media, product differentiation, two-sided markets

JEL Classification: D43, L13, L82

Suggested Citation

Peitz, Martin and Valletti, Tommaso M., Content and Advertising in the Media: Pay-Tv Versus Free-to-Air (December 2004). CEPR Discussion Paper No. 4771. Available at SSRN: https://ssrn.com/abstract=666825

Martin Peitz

University of Mannheim - Department of Economics ( email )

D-68131 Mannheim
Germany
+49 621 181-1835 (Phone)

HOME PAGE: http://peitz.vwl.uni-mannheim.de/

Tommaso M. Valletti (Contact Author)

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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