DP9079 Advertising and the Distribution of Content

Author(s): Helen Weeds
Publication Date: August 2012
Keyword(s): Advertising, Broadcasting, Exclusivity, Internet
JEL(s): D43, L14, L82, M37
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=9079

This paper examines incentives for exclusive distribution of content in the presence of advertising. A monopoly seller of content - such as televisation rights to popular sports - may contract with one or both of two competing distributors, charging lump-sum fees. When distributors are subscription-funded, exclusive sale to a single buyer is the seller's profit-maximising choice, even when distributors also sell advertising airtime. When distributors are purely advertising-funded, however, non-exclusive contracting may instead be preferred. Advertising revenues accruing directly to the content provider may also generate a preference for non-exclusivity even when selling to subscription-funded distributors. The analysis has implications for the distribution of content to pay TV and free-to-air broadcasters, and for internet distribution of content.