Getting beer during commercials: adverse effects of Ad-Avoidance

This paper studies the impact of ad-avoidance behavior in media markets. We consider a situation where viewers can avoid advertisement messages. As the media market is a two-sided market, increased ad-avoidance reduces advertisers' value of placing an ad. We contrast two financing regimes, free-to-air and pay-TV. We find that increased avoidance opportunities decrease profits and entry in the free-to-air regime. In contrast, in the pay-TV regime, lower income from advertisements are compensated by higher subscription income leaving profits and the number of channels unaflected. Bypassing advertising messages affects welfare ambiguously. --Media Markets,Two-Sided Markets,Ad-avoidance