The Effects of popcorn time on Netflix in a two–sided market

Abstract

My thesis discusses the effects on legal streaming agents of entry of free, but illegal, substitutes, in a two–sided video streaming market. Legal streaming agents rely on support from two very different, but inevitably linked, groups: studios and consumers, while their free counterparts rely on support only from consumers. As a result, the pricing decisions for legal streaming agents are far more complex than those of firms operating in regular single–sided markets and of firms operating in other two–sided markets. I have used one model, with two setups, in order to examine how the payment–scheme between a paid streaming agent and the Studios affect key metrics as user distribution and platform utility. In the first setup, with a lump–sum transfer, I find that the effectiveness of anti–piracy investments increase utility for both the paid and the free platforms, and shift consumers towards the legal alternative. In the second setup, with a per–user transfer, I find that the free agent will capture the whole market, and no efforts taken by either the Studios or the paid streaming agent will change the user distribution. From this, I find that studios and paid streaming agents are much better off with lump–sum transfer.