A STUDY OF DIGITAL MUSIC PRICING MODELS

The development of Internet brought in revolutions in pricing models in the music industry. Currently, there are two common schemes to sell digital music. The first one is referred to as the ownership model, under which the consumers purchase and download the singles they prefer. The second one is referred to as the subscription model, under which consumers subscribe to the streaming services by paying a subscription fee. Out paper reveals that the advertisement revenue rate impacts music service providers’ choice of pricing models. The music provider should choose the subscription model, when the advertisement revenue rate is low; the ownership model when the advertisement revenue rate is moderate; and offer the music for free and exploit profit from advertisements when the advertisement revenue rate is high

Price Discrimination and Audience Composition in Advertising-Based Broadcasting

Traditionally, media like TV and radio, but also the Internet, have been characterized by free access (by consumers having the necessary hardware), with services supported through advertising revenues. Profitability in these markets depends on the capability of attracting audience. Strategic choices, however, also depend on the relationship with the dual market for advertising services. In this paper, a model is introduced, which has two distinguishing features. First, the multidimensional nature of competition in media markets is acknowledged, through explicit modeling of vertical and horizontal differentiation. Second, the price of advertising depends on the expected audience composition, not simply on its magnitude. It also depends on the broadcasters' capability of effectively price-discriminate among advertising customers. It is found that market equilibria depend on a number of critical factors: the amount and type of price discrimination in advertising, the correlation between formats and audience composition, the relative profitability of the different market segments, and diseconomies of scale in program quality.Advertising, Media Industries, Broadcasting, Price Discrimination, Television, Radio, Differentiation.

The Making of Cultural Policy: A European Perspective

No good comparable data on sizes of cultural sectors of the countries of Europe exist. Still, local and national governments of Europe spend substantial resources on culture and cultural sectors contribute significantly to employment and national income. After briefly describing special features of cultural goods and clarifying some misconceptions about the value of culture, valid and invalid arguments for subsidising culture are discussed. Although it is easy to justify government support for preservation of heritage, this is more difficult for the performing arts. Due to changing technologies and advent of E-culture classic public-good arguments for government intervention in broadcasting and other cultural activities become less relevant. Different institutions varying from selection by arts councils, bureaucrats or politicians to less directed tax incentives lead to different cultural landscapes. Theories of delegation suggest delegating the judgement on artistic qualities and execution of cultural policy to an independent Arts Fund. The Minister of Culture should concentrate on formulating a mission for cultural policy and make sure it is implemented properly. The insights of the theories of local public goods and federalism are applied to the making of cultural policy in Europe. Different approaches to international cultural policy in Europe are discussed. The overview concludes with lessons for the making of cultural policy in Europe.cultural policy, heritage, performing arts, museums, quality, participation, vouchers, tax incentives, quality, politicians, bureaucrats, delegation

Public and Private Activity in Commercial TV Broadcasting

We consider a model of commercial television market, where private broadcasters coexist with a public television broadcaster. Assuming that the public TV station follows a policy of Ramsey pricing whereas the private stations are profit maximizers, we consider the equilibria in this market and compare with a situation where the public station is privatized and acts as another private TV broadcaster. A closer scrutiny of the market for commercial television leads to a distinction between target rating points, which are the prime unit of account in TV advertising, and net coverage, which is the final goal of advertisers. Working with net coverage as the fundamental concept, we exploit the models of competition between public and private price and quantity in order to show that privatization of the public TV station entails a welfare loss and results in TV advertising becoming more expensive. Keywords: TV broadcasting, imperfect competition, Ramsey pricing, welfare comparison. JEL classification: L11, L82, L3

Strategies to Fight Ad-sponsored Rivals

We analyze the optimal strategy of a high-quality incumbent that faces a low-quality ad-sponsored competitor. In addition to competing through adjustments of tactical variables such as price or advertising intensity, we allow the incumbent to consider changes in its business model. We consider four alternative business models, two pure models (subscription-based and ad-sponsored) and two mixed models that are hybrids of the two pure models. We show that the optimal response to an ad-sponsored rival often entails business model reconfigurations, a phenomenon that we dub 'competing through business models.' We also find that when there is an ad-sponsored entrant, the incumbent is more likely to prefer to compete through a pure, rather than a mixed, business model because of cannibalization and endogenous vertical differentiation concerns. We discuss how our study helps improve our understanding of notions of strategy, business model, and tactics in the field of strategy

The advertising-financed business model in two-sided media markets

This chapter focuses on the economic mechanisms at work in recent models of advertising finance in media markets developed around the concept of two-sided markets. The objective is to highlight new and original insights from this approach, and to clarify the conceptual aspects. The chapter first develops a canonical model of two-sided markets for advertising, where platforms deliver content to consumers and resell their "attention" to advertisers. A key distinction is drawn between free media and pay media, where the former result from the combination of valuable consumer attention and low ad nuisance cost. The first part discusses various conceptual issues such as equilibrium concepts and the nature of inefficiencies in advertising markets, and concrete issues such as congestion and second-degree discrimination. The second part is devoted to recent contributions on issues arising when consumers patronize multiple platforms. In this case, platforms can only charge incremental values to advertisers which reduces their market power and affects their price strategies and advertising levels. The last part discusses the implications of the two-sided nature of the media markets for the choice of content and diversity

Mimicking vs. counter-programming strategies for television programs

International audienc

Essays in Media Economics

This thesis contributes to the understanding of media markets by studying the determinants of media outlets’ content choice, by developing novel techniques to assess media bias, and by analyzing the welfare effects of potential regulations. Chapter 2 demonstrates that advertising has a causal positive effect on content differentiation on YouTube, in particular, an exogenous increase in the technically feasible advertising quantity reduces the YouTubers’ probability to duplicate mainstream content. Chapters 3, 4, and 5 develop novel techniques and applications to measure political media bias. Finally, Chapter 6 shows that commercial media bias can be mitigated by a cap on advertising quantity. The results contribute to the literature on content differentiation in (digital) media markets, political media bias, commercial media bias, two-sided (media) markets, media content as a public good, and user-generated content