content acquisition by streaming platforms: premium vs...
TRANSCRIPT
Content Acquisition by Streaming Platforms:Premium vs Freemium
Elias Carroni, Dimitri Paolini
Dipartimento di Scienze Economiche, Università di Bologna Dipartimento di Scienze Economiche e Aziendali, Università di Sassari
under reviewPresented at EEA-ESEM 2017
2017.09.19
Yunhyoung Kim
Table of Contents
• Introduction
• Model
– Agents and Their Utilities
– Sequential Game
• Analysis
– Premium
– Freemium
– Premium vs Freemium
• Conclusion
Introduction
Advent of Media Streaming Platforms
Three-sided market : Consumer, Copyright Owner, Advertiser
ConsumersCopyright
Owner
Advertiser
Reach to listen to the music
Seek to sell a product by advertisement
Provide contents
Example : Music Streaming Platform
Platform
Introduction
Premium and Freemium
What are the main drivers in the choice between the “Freemium” and “Premium” models?
Two types of streaming platform
Free-of-ad premium subscriptionwith Free-of-charge Plan
Free-of-ad premium subscriptionwithout Free-of-charge Plan
Freemium Premium
Model
Agents and Their Utilities
ConsumersCopyright
Owner
Advertiser
Reach to listen to the music
Seek to sell a product by advertisement
Provide contentsPlatform
Profit from Subscription - Royalty Payment
Freemium
Premium
Profit from Subscription and Advertisement - Royalty Payment
Model
Agents and Their Utilities
CopyrightOwner
+ royalty (per user)
– Cannibalization effect on other distribution channelsProvides content
Heterogeneous on : density function
Advertiser Sell a product by AD+ sell products to subscribers exposed to the AD
– pay per-user fee
Consumers exposed to the AD always buy
Heterogeneous on
ConsumersReach to platformto listen to music
+ variety of contents
– pay subscription price / nuisance cost of AD
Heterogeneous on
Model
Sequential Game
1. (Monopolistic) Platform attracts contents by offering royalty �
(Monopolistic) Platform sets the subscription price �and advertising charge �
3. Given �and �, consumers and advertisers choose to enter
2.
Analysis
1. Premium Platform
Profit from subscription Royalty payment
Consumers
Stage 3.
Stage 2.
Stage 1.
CopyrightOwner
: Heterogeneous on
Content owner with participate
∴ ( )
Analysis
1. Premium Platform (continued)
Stage 1.
Platform
Price increases as �(potential market size) grows Number of contents increases as � grows, Increased surplus are extracted by higher price
Small royalty is enough to attract all contentsAs � grows, the platform save payment on
content acquisition
Analysis
1. Premium Platform (continued)
Size of Content Owner
Size ofConsumers
Subscription Price of Platform
Size ofConsumers
Size of Content Owner
Fixed
Subscription Price of Platform
Fixed
Royalty Payment of Platform
at some point
Analysis
2. Freemium Platform
Profit from subscription Royalty payment
Consumers
Stage 3.Profit from advertisement
Heterogeneous on
Advertiser
Heterogeneous on
Stage 2.
Analysis
2. Freemium Platform (continued)
Stage 1.
CopyrightOwner
: Heterogeneous on
Analysis
2. Freemium Platform (continued)
MaximalNuisance Cost
Subscription Price of Platform
Heterogeneous on
AD feeof Platform
Size of Advertiser
Size of Content Owner
Size ofConsumers
Royalty Payment of Platform
Analysis
3. Premium vs Freemium
Size ofConsumers
MaximalNuisance Cost
Conclusion
DefinitionContribution
- Try to understand the main driver in the choice of Premium and Freemium
Main Results
- Emergence of different business models by means of AD nuisance and size of potential market
= AD nuisance is strong, platform choose subscription-based model (premium)= Otherwise, platform choose mixed model (free contents + paid access)= Big platform (potential market size is large) prefers premium model= New platform (potential market size is small) prefers freemium model= Content owners prefer premium model when market size is sufficiently broad