Study of price competition in OTT market when OTT platforms and content producers engage in an exclusive contract

Abstract

THIS PAPER ANALYZES THE EFFECTS OF exclusive contract on content provision between an OTT platform and Content producer on market competition when consumers single-home. In particular, the model in this paper embodies the real world example in which a certain OTT platform differentiates itself by offering exclusive contents while other platform does not. Three primary findings of the paper follows: 1) Whether or not buyers and platforms benefit from exclusive contents is uncertain. Multi-homing sellers’ profit is not affected. Single-Homing sellers’ profit may increase by the amount of lump sum payment. 2) Streaming fee to sellers that is contingent on a number of subscribers’ view is twice higher on a platform without exclusive contents than one with exclusive contents. This is to attract sellers to feature their contents despite a smaller user base. 3) If network externality that buyers obtain from exclusive contents and the total number of buyers are large enough, it is advantageous for a platform to engage in as many exclusive contracts with content producers as possible.