Upstream competition and exclusive content provision in media markets

TL;DR

This paper models media markets using a multilateral vertical contracting framework, analyzing how upstream competition and exclusive content contracts are affected by market parameters and bargaining power.

Contribution

It introduces a comprehensive model combining Nash bargaining and Hotelling competition to analyze equilibrium outcomes and contractual arrangements in media markets.

Findings

Exclusive contracts are more likely when premium content value is high.

Decreased downstream differentiation increases the likelihood of exclusivity.

Lower advertising revenue importance and upstream bargaining power favor exclusive arrangements.

Abstract

With a multilateral vertical contracting model of media markets, we examine upstream competition and contractual arrangements in content provision. We analyze the trade of content by the Nash bargaining solution and the downstream competition by the Hotelling location model. We characterize the equilibrium outcomes and the contractual arrangements for various vertical structures. We show that the possibility of exclusive contracts rises when the value of the premium content increases, the degree of horizontal differentiation in the downstream market decreases, the importance of advertising revenue decreases, and the relative bargaining power of upstream firm decreases.