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Business models for media firms : does competition matter for how they raise revenue?

Kind, Hans Jarle; Nilssen, Tore; Sørgard, Lars
Working paper
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URI
http://hdl.handle.net/11250/163176
Date
2009-07
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  • Discussion papers (SAM) [578]
Abstract
The purpose of this article is to analyze how competitive forces

may influence the way media firms like TV channels raise revenue. A media firm

can either be financed by advertising revenue, by direct payment from the viewers

(or the readers, if we consider newspapers), or by both. We show that the scope

for raising revenues from consumer payment is constrained by other media firms

offering close substitutes. This implies that the less differentiated the media firms content, the larger is the fraction of their revenue coming from advertising. A media

firm's scope for raising revenues from ads, on the other hand, is constrained by

how many competitors it faces. We should thus expect that direct payment from

the media consumers becomes more important the larger the number of competing

media products.
Publisher
Norwegian School of Economics and Business Administration. Department of Economics
Series
Discussion paper
2009:8

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