Content vs. Advertising: The Impact of Competition on Media Firm Strategy

Godes, David; Ofek, Elie; Sarvary, Miklos
January 2009
Marketing Science;Jan/Feb2009, Vol. 28 Issue 1, p20
Academic Journal
Media firms compete in two connected markets. They face rivalry for the sale of content to consumers, and at the same time, they compete for advertisers seeking access to the attention of these consumers. We explore the implications of such two-sided competition on the actions and source of profits of media firms. One main conclusion we reach is that media firms may charge higher content prices in a duopoly than in a monopoly. This happens because competition for advertisers can reduce the return per customer impression from the ad market, making each firm less willing to underprice content to increase demand. Greater competitive intensity may thus increase content profits and decrease ad profits. These findings are in sharp contrast to those in a regular one-sided product market, in which competition typically lowers product prices and profits. We extend the framework to examine competition across different media (e.g., between magazines and cable TV) and show that firms in a duopolistic medium may benefit from more intense competition from a monopolist in another medium. We characterize the conditions for each firm in the duopoly medium to bundle more ads and earn greater total profits than the rival firm in the monopoly medium.


Related Articles

  • MULTI-CRITERIA COMPLEX FOR PROFITABILITY ANALYSIS OF CONSTRUCTION PROJECTS. Tamošaitienė, Jolanta; Zavadskas, Edmundas Kazimieras; Turskis, Zenonas; Vainiūnas, Povilas // Economics & Management;2011, Vol. 16, p969 

    In the last decades significant changes in technology, economy, society and politics have seriously modified the environment in which construction enterprises operate. Market globalisation and deregulation encourage appearing of new players. International construction projects do not necessarily...

  • The Existence of Low-End Firms May Help High-End Firms. Ishibashi, Ikuo; Matsushima, Noriaki // Marketing Science;Jan/Feb2009, Vol. 28 Issue 1, p136 

    Two models of competition between high-end and low-end products benefiting the high-end firms are presented. One is a quantity competition model, and the other is a price competition model with product differentiation. The key factor is the existence of two heterogeneous consumer groups: those...

  • Quantity Discounts in Differentiated Consumer Product Markets. Subramaniam, Ramanathan; Gal-Or, Esther // Marketing Science;Jan/Feb2009, Vol. 28 Issue 1, p180 

    In this paper, we extend the standard Hotelling model of product differentiation to incorporate a second dimension of consumer heterogeneity that relates to the quantity of the product consumers wish to buy. This extension allows us to derive optimal nonlinear pricing rules chosen by competing...

  • THE THEORY OF DUOPOLY. Henderson, Alexander // Quarterly Journal of Economics;Nov54, Vol. 68 Issue 4, p565 

    The article discusses various aspects of the theory of duopoly in economics. The theory of duopoly is concerned with what rational men would do and, under all plausible conditions, what they would do is to form a monopoly. This can be proved, and the conditions displayed. Yet the duopoly problem...

  • The Timing of Capacity Investment by Start-ups and Established Firms in New Markets. Swinney, Robert; Cachon, G�rard P.; Netessine, Serguei // INSEAD Working Papers Collection;2010, Issue 60, p1 

    We analyze the competitive capacity investment timing decisions of both established firms and start-ups entering new markets which are characterized by a high degree of demand uncertainty. Firms may invest in capacity early (when the market is highly uncertain) or late (when market uncertainty...

  • Nonlinear Pricing with Random Participation. Rochet, Jean-Charles; Stole, Lars A. // Review of Economic Studies;Jan2002, Vol. 69 Issue 238, p277 

    The canonical selection contracting programme takes the agent's participation decision as deterministic and finds the optimal contract, typically satisfying this constraint for the worst type. Upon weakening this assumption of known reservation values by introducing independent randomness into...

  • Metal-sealed components are not just for UHV anymore. Comello, Vic // R&D Magazine;Oct97, Vol. 39 Issue 11, p24 

    Focuses on the use of metal-sealed vacuum components in the ultrahigh vacuum (UHV) regime, with reference to the high price for this sealing technology. Details on the application of metal-sealed components in the semiconductor industry; Reference to some of the elastomeric sealing materials...

  • IMPERFECT MONOPOLY: SOME THEORETICAL CONSIDERATION. Forchheimer, Karl // Nebraska Journal of Economics & Business;Spring83, Vol. 22 Issue 2, p65 

    Examines the analytical properties of the model of partial monopoly. Concept of monopoly; Analysis of the context of monopoly prices; Illustration of the scheme which determine the market of a monopolist.

  • Duopoly with Differentiated Products and Entry Barriers. Nti, Kofi O.; Shubik, Martin // Southern Economic Journal;Jul81, Vol. 48 Issue 1, p179 

    In this paper, we use a game theoretic framework for studying the strategic entry problem. We examine two models of product differentiated duopoly with a potential entrant facing a single period fixed entry cost. In the first model, the firms compete with quantity and entry decisions as...


Read the Article


Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics