TV wars: content and competition in pay-TV Helen Weeds, University of Essex 5 th Workshop on Media...
-
Upload
claud-french -
Category
Documents
-
view
216 -
download
0
Transcript of TV wars: content and competition in pay-TV Helen Weeds, University of Essex 5 th Workshop on Media...
![Page 1: TV wars: content and competition in pay-TV Helen Weeds, University of Essex 5 th Workshop on Media Economics Bologna, 19-20 October 2007.](https://reader036.fdocuments.in/reader036/viewer/2022062421/56649e605503460f94b5b7b0/html5/thumbnails/1.jpg)
TV wars: content and competition in pay-TV
Helen Weeds, University of Essex
5th Workshop on Media EconomicsBologna, 19-20 October 2007
![Page 2: TV wars: content and competition in pay-TV Helen Weeds, University of Essex 5 th Workshop on Media Economics Bologna, 19-20 October 2007.](https://reader036.fdocuments.in/reader036/viewer/2022062421/56649e605503460f94b5b7b0/html5/thumbnails/2.jpg)
2
Recent developments
Digitisation expands transmission capacity Undermines traditional source of market power
Platform proliferation 1990s (UK): cable and satellite 2000s: DTT and IPTV
Concern has shifted to control over content Sport: “battering ram” of pay-TV Movies
![Page 3: TV wars: content and competition in pay-TV Helen Weeds, University of Essex 5 th Workshop on Media Economics Bologna, 19-20 October 2007.](https://reader036.fdocuments.in/reader036/viewer/2022062421/56649e605503460f94b5b7b0/html5/thumbnails/3.jpg)
3
Cases
UK Wholesale supply of Sky’s premium channels Sky-Virgin Media (VM) dispute over Sky One Ofcom investigations: pay-TV comp’n; Sky on DTT
Europe (Italy, Scandinavia) Exclusive contracts in satellite TV competition
USA Cable overbuild and channel access DirecTV contracts with sports leagues (NFL, MLB)
![Page 4: TV wars: content and competition in pay-TV Helen Weeds, University of Essex 5 th Workshop on Media Economics Bologna, 19-20 October 2007.](https://reader036.fdocuments.in/reader036/viewer/2022062421/56649e605503460f94b5b7b0/html5/thumbnails/4.jpg)
4
This paper
Role of premium content in pay-TV competition
(When) does broadcaster with premium content have an incentive to withhold this from others?
Is exclusivity anti-competitive?
![Page 5: TV wars: content and competition in pay-TV Helen Weeds, University of Essex 5 th Workshop on Media Economics Bologna, 19-20 October 2007.](https://reader036.fdocuments.in/reader036/viewer/2022062421/56649e605503460f94b5b7b0/html5/thumbnails/5.jpg)
5
Related literature
TV content and exclusivity Armstrong (1999) Harbord & Ottaviani (2001) Stennek (2006), Hagiu & Lee (2007)
Licensing of a cost-reducing innovation Kamien & Tauman (1986), Katz & Shapiro (1986),
Jehiel et al (1996), Segal (1999)
TV competition with advertising Anderson & Coate (2005), etc.
![Page 6: TV wars: content and competition in pay-TV Helen Weeds, University of Essex 5 th Workshop on Media Economics Bologna, 19-20 October 2007.](https://reader036.fdocuments.in/reader036/viewer/2022062421/56649e605503460f94b5b7b0/html5/thumbnails/6.jpg)
6
Outline of talk
Modelling TV competition
Incentives for exclusivity Static model Dynamic platform competition
Implications
![Page 7: TV wars: content and competition in pay-TV Helen Weeds, University of Essex 5 th Workshop on Media Economics Bologna, 19-20 October 2007.](https://reader036.fdocuments.in/reader036/viewer/2022062421/56649e605503460f94b5b7b0/html5/thumbnails/7.jpg)
7
Industry structure
Programme production
Channel packaging
Transmission (“platforms”)
Retailing & revenue generation
![Page 8: TV wars: content and competition in pay-TV Helen Weeds, University of Essex 5 th Workshop on Media Economics Bologna, 19-20 October 2007.](https://reader036.fdocuments.in/reader036/viewer/2022062421/56649e605503460f94b5b7b0/html5/thumbnails/8.jpg)
8
Industry features
Differentiation Horizontal: platform; basic channels; other services Premium content
Platform competition Single-homing and switching costs Economies of scale
Transmission networks Programme production
Building market share yields future as well as current benefits
![Page 9: TV wars: content and competition in pay-TV Helen Weeds, University of Essex 5 th Workshop on Media Economics Bologna, 19-20 October 2007.](https://reader036.fdocuments.in/reader036/viewer/2022062421/56649e605503460f94b5b7b0/html5/thumbnails/9.jpg)
9
Model of TV competition
Broadcasters i = A, B Supply channels to viewers Compete in prices Advertising
Horizontal differentiation Consumers uniformly distributed on [0,1] Broadcasters exogenously located at {0, 1} Transport cost t > 0
![Page 10: TV wars: content and competition in pay-TV Helen Weeds, University of Essex 5 th Workshop on Media Economics Bologna, 19-20 October 2007.](https://reader036.fdocuments.in/reader036/viewer/2022062421/56649e605503460f94b5b7b0/html5/thumbnails/10.jpg)
10
Model (2)
Viewer utility: ui = vi – ni – pi
vi = quality
ni = advertising intensity, = ad disutility
pi = price
Basic channels: v0 0 (symmetric)
Premium channel, held by A Highly attractive: value to viewers = v No substitutes, difficult to replicate
![Page 11: TV wars: content and competition in pay-TV Helen Weeds, University of Essex 5 th Workshop on Media Economics Bologna, 19-20 October 2007.](https://reader036.fdocuments.in/reader036/viewer/2022062421/56649e605503460f94b5b7b0/html5/thumbnails/11.jpg)
11
Contracting
A’s choice Exclusivity Non-exclusivity: contract with B
A makes take-it-or-leave-it offer
Two-part tariff: F + csB
Eqm c = v F > 0 extracts remaining surplus Ad revenue r (per sub.) accrues to A
![Page 12: TV wars: content and competition in pay-TV Helen Weeds, University of Essex 5 th Workshop on Media Economics Bologna, 19-20 October 2007.](https://reader036.fdocuments.in/reader036/viewer/2022062421/56649e605503460f94b5b7b0/html5/thumbnails/12.jpg)
12
Static outcome
Non-exclusivity Gain from excl. G0 < 0 Viewer surplus lower (eqm price = t + v) Welfare higher
Comparative statics dG0/dt < 0 (harder to attract rival subs)
dG0/dv < 0 (greater opp. cost of forgone fees)
dG0/dr < 0 (greater opp. cost of forgone viewers)
![Page 13: TV wars: content and competition in pay-TV Helen Weeds, University of Essex 5 th Workshop on Media Economics Bologna, 19-20 October 2007.](https://reader036.fdocuments.in/reader036/viewer/2022062421/56649e605503460f94b5b7b0/html5/thumbnails/13.jpg)
13
Discussion
Per-sub fee Softens retail competition Internalises seller’s ad revenue r
Regulate to reduce fee? Content creation & investment
Efficient contracting All viewers receive content (efficient allocation) C.f. licensing a cost-reducing innovation
![Page 14: TV wars: content and competition in pay-TV Helen Weeds, University of Essex 5 th Workshop on Media Economics Bologna, 19-20 October 2007.](https://reader036.fdocuments.in/reader036/viewer/2022062421/56649e605503460f94b5b7b0/html5/thumbnails/14.jpg)
14
Platform competition
Dynamic aspect (reduced form) Future profit increases with current market share
b(si) s.t. b' > 0, b'' > 0
Motivation si
t+1 and pit+1 both increasing in si
t
E.g. models of switching costs, network effects, quality investment
(ignore advertising)
![Page 15: TV wars: content and competition in pay-TV Helen Weeds, University of Essex 5 th Workshop on Media Economics Bologna, 19-20 October 2007.](https://reader036.fdocuments.in/reader036/viewer/2022062421/56649e605503460f94b5b7b0/html5/thumbnails/15.jpg)
15
Solving the model
Quadratic form: b(si) = ½si2
Parameter restrictions (concavity of π fn) 0 < < 4t (competitive mkt) t > 3v
Gain from exclusivity
2
2 344 34
ttvt
vG
![Page 16: TV wars: content and competition in pay-TV Helen Weeds, University of Essex 5 th Workshop on Media Economics Bologna, 19-20 October 2007.](https://reader036.fdocuments.in/reader036/viewer/2022062421/56649e605503460f94b5b7b0/html5/thumbnails/16.jpg)
16
Properties of G
1. critical value of such that below this, G < 0 above this, G > 0
2. critical value of v such that below this, G < 0 above this, G > 0
3. G is decreasing in t
![Page 17: TV wars: content and competition in pay-TV Helen Weeds, University of Essex 5 th Workshop on Media Economics Bologna, 19-20 October 2007.](https://reader036.fdocuments.in/reader036/viewer/2022062421/56649e605503460f94b5b7b0/html5/thumbnails/17.jpg)
17
Interpretation
Exclusivity more likely when
1. Strong platform competition
Dynamic benefit > opp. cost of distn fees
Examples War of attrition: Italy, Scandinavia Growth of new platforms, multi-channel TV:
build installed base
![Page 18: TV wars: content and competition in pay-TV Helen Weeds, University of Essex 5 th Workshop on Media Economics Bologna, 19-20 October 2007.](https://reader036.fdocuments.in/reader036/viewer/2022062421/56649e605503460f94b5b7b0/html5/thumbnails/18.jpg)
18
Interpretation (2)
2. More valuable (“premium”) content
Trade-off between Forgone distn fees: increasing in v Dynamic benefit: asymmetry in si widens in v
As v increases, 1st then 2nd effect dominates
Importance of premium content, especially popular sports
![Page 19: TV wars: content and competition in pay-TV Helen Weeds, University of Essex 5 th Workshop on Media Economics Bologna, 19-20 October 2007.](https://reader036.fdocuments.in/reader036/viewer/2022062421/56649e605503460f94b5b7b0/html5/thumbnails/19.jpg)
19
Interpretation (3)
3. Less differentiated distributors
Easier to attract rival’s subs Lower opp. cost of forgone distn fees Easier to build market share: strengthens b effect
Intra-platform compn (satellite-satellite) low t exclusivity
Inter-platform compn (satellite-cable) higher t non-exclusivity
![Page 20: TV wars: content and competition in pay-TV Helen Weeds, University of Essex 5 th Workshop on Media Economics Bologna, 19-20 October 2007.](https://reader036.fdocuments.in/reader036/viewer/2022062421/56649e605503460f94b5b7b0/html5/thumbnails/20.jpg)
20
Discussion
Role of exclusive content v creates initial asymmetry: sA > sB
Prices are decreasing in b′ Convexity: b′(sA) > b′(sB)
A cuts price more than B, building share further initial asymmetry is enhanced
NB Cannot be achieved through prices alone No scope for cost reduction: mc = 0
![Page 21: TV wars: content and competition in pay-TV Helen Weeds, University of Essex 5 th Workshop on Media Economics Bologna, 19-20 October 2007.](https://reader036.fdocuments.in/reader036/viewer/2022062421/56649e605503460f94b5b7b0/html5/thumbnails/21.jpg)
21
Welfare and antitrust implications
Depends on nature of dynamic effect
Exclude rivals
Switching costs: build installed base Future prices higher for larger base Distortion of platform choice: additional inefficiency
Programme investment Enhance own & weaken rival’s incentives to invest
Market entry strategy
![Page 22: TV wars: content and competition in pay-TV Helen Weeds, University of Essex 5 th Workshop on Media Economics Bologna, 19-20 October 2007.](https://reader036.fdocuments.in/reader036/viewer/2022062421/56649e605503460f94b5b7b0/html5/thumbnails/22.jpg)
22
Future developments
Digital switchover
Development of IPTV
Internet