The Advertising-Financed Business Model in Two-Sided Media Markets

Simon P. Anderson, Bruno Jullien
Handbook of Media Economics

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excerpt Given the complexities of modeling the effects in the previous paragraph in terms of the mapping from subscription fees and ad levels to ultimate purchases, it is not too surprising that the literature has taken some drastic simplifications. on 6/3/2019, 2:19:56 PM

excerpt Advertisers are assumed to derive some benefit from reaching consumers. This should realistically depend on the number and types of other advertisers reaching them, and also the types and numbers of consumers reached. Both of these heterogeneities are typically set aside. on 6/3/2019, 2:21:13 PM

excerpt We start out with the analysis of pure advertising finance. For technological reasons in the difficulty of excluding and pricing access to a pure public good (the TV or radio signal, say), the early days of broadcasting involved such a business model. Only fairly recently, with the advent of signal scramblers and descramblers, did it become economically viable to have viewers pay for platform access. on 6/3/2019, 2:22:12 PM

excerpt Steiner (1952) enunciated the duplication principle whereby media offerings tend to concentrate (and double up) in genres with large consumer interest. Put succinctly by example, if 70% of media consumers will only listen to country music, and 30% will only listen to rock, and if there is only room for two radio stations (due to spectrum constraints), then the market equilibrium will have two country stations. A two-channel monopolist will provide one channel catering to each type and so cover the full diversity of tastes. on 6/3/2019, 2:25:48 PM

cites Institutional Structure and Program Choices in Television Markets on 6/3/2019, 2:32:37 PM