DP6072 Exclusive Quality - Why Exclusive Distribution May Benefit the TV Viewers

Author(s): Johan Stennek
Publication Date: January 2007
Keyword(s): advertising, bargaining, exclusive contracts, investment, quality, two-sided market
JEL(s): C78, D43, K21, L42
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=6072

Sports organizations, Hollywood studios and TV channels grant satellite and cable networks exclusive rights to televise their matches, movies and media contents. Exclusive distribution prevents viewers from watching attractive programs, and reduces the TV-distributors incentives to compete in prices. This paper demonstrates that exclusive distribution may also give providers of contents incentives to invest in higher quality and, as a result, force competitors to reduce their prices. Exclusive distribution may benefit all viewers, including those who are excluded.