Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • January – February 2009
  • Article
  • Marketing Science

Content vs. Advertising: The Impact of Competition on Media Firm Strategy

By: David Godes, Elie Ofek and Miklos Sarvary
  • Format:Print
  • | Pages:16
ShareBar

Abstract

Media firms compete in two connected markets. They face rivalry for the sale of content to consumers, and at the same time, they compete for advertisers seeking access to the attention of these consumers. We explore the implications of such two-sided competition on the actions and source of profits of media firms. One main conclusion we reach is that media firms may charge higher content prices in a duopoly than in a monopoly. This happens because competition for advertisers can reduce the return per customer impression from the ad market, making each firm less willing to underprice content to increase demand. Greater competitive intensity may thus increase content profits and decrease ad profits. These findings are in sharp contrast to those in a regular one-sided product market, in which competition typically lowers product prices and profits. We extend the framework to examine competition across different media (e.g., between magazines and cable TV) and show that firms in a duopolistic medium may benefit from more intense competition from a monopolist in another medium. We characterize the conditions for each firm in the duopoly medium to bundle more ads and earn greater total profits than the rival firm in the monopoly medium.

Keywords

Monopoly; Duopoly and Oligopoly; Business Model; Price; Media; Competitive Strategy; Competitive Advantage; Advertising; Profit; Media and Broadcasting Industry

Citation

Godes, David, Elie Ofek, and Miklos Sarvary. "Content vs. Advertising: The Impact of Competition on Media Firm Strategy." Marketing Science 28, no. 1 (January–February 2009): 20–35.
  • Find it at Harvard

About The Author

Elie Ofek

Marketing
→More Publications

More from the Authors

    • March 2023
    • Faculty Research

    How Should Netflix Add an Ad-Supported Tier?

    By: Elie Ofek and Olivier Toubia
    • March 2023
    • Faculty Research

    Companion to: Demand Simulator Spreadsheet Supplement

    By: Elie Ofek and Olivier Toubia
    • March 2023
    • Faculty Research

    Gross Profits

    By: Elie Ofek
More from the Authors
  • How Should Netflix Add an Ad-Supported Tier? By: Elie Ofek and Olivier Toubia
  • Companion to: Demand Simulator Spreadsheet Supplement By: Elie Ofek and Olivier Toubia
  • Gross Profits By: Elie Ofek
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Accessibility
  • Digital Accessibility
Copyright © President & Fellows of Harvard College