This paper investigates competition for advertisers in media markets when
viewers can subscribe to multiple channels. A central feature of the model
is that channels are monopolists in selling advertising opportunities toward
their exclusive viewers, but they can only obtain a competitive price for
advertising opportunities to multi-homing viewers. Strategic incentives of
firms in this setting are different than those in former models of media
markets. If viewers can only watch one channel, then firms compete for
marginal consumers by reducing the amount of advertising on their channels.
In our model, channels have an incentive to increase levels of advertising,
in order to reduce the overlap in viewership. We take an account of the
differences between the predictions of the two types of models and find that
our model is more consistent with recent developments in broadcasting
markets. We also show that if channels can charge subscription fees on
viewers, then symmetric firms can end up in an asymmetric equilibrium in
which one collects all or most of its revenues from advertisers, while the
other channel collects most of its revenues via viewer fees