DP4771 Content and Advertising in the Media: Pay-TV versus Free-To-Air

Author(s): Martin Peitz, Tommaso Valletti
Publication Date: December 2004
Keyword(s): advertising, media, product differentiation, two-sided markets
JEL(s): D43, L13, L82
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=4771

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.