Price Customization and Content Provision in Media Markets

Abstract

Multi-sided media market is a rapidly evolving phenomenon where practice is ahead of research. In this market, a media platform usually manages the interaction between multiple groups of participants, such as consumers, advertisers, and content suppliers. Because of strong cross-side externalities, when making important decisions such as pricing and content provision, it is crucial for a media platform to deeply understand the likely strategic responses of all other sides. In this dissertation, I explicitly model these strategic interactions and examine a media platform's price customization strategy (Essay 1) and content provision strategy (Essay 2). Essay 1 studies whether a competing platform should customize its consumer price by offering an option of paying for not seeing advertisements. I further examine how the possibility of agent multihoming would affect a platform's pricing strategy and profits. This analysis helps one to better appreciate the pricing strategy of media platforms such as Pandora and Spotify, and extends the literature on price discrimination in one-sided markets to two-sided markets. Essay 2 explores media platforms' content provision strategy and source of profits. I propose a model where a media platform interacts with three sides: content suppliers, consumers, and advertisers, and examine how a platform allocates its limited space between content and advertising. This analysis offers insights on how a platform's choice of content provision strategy and sources of profits vary with the the structure of the content market as well as the platform market. Collectively, these two essays address managerial questions on media platforms' pricing strategy and content provision strategy, and will help better understand the strategic interactions in media markets and serve as a useful theoretical framework for empirical research on media firms.