Preliminary and Incomplete Comments Welcome

Technology occasionally changes media consumers ’ control over the amount of advertising to which they are exposed. Advertisers and media firms will benefit from an empirical methodology to forecast the degree to which such technologies will affect their business. This paper introduces such a methodology. I develop a game-theoretic model of advertiser-supported media markets: media platforms (e.g., television networks) compete both for media consumers (viewers) and for advertisers. The profit-maximizing network sets its ad level to trade off marginal advertising revenue with the value of its last ad’s marginal audience loss. I estimate the model’s structural parameters, using television advertisement and audience data from four sources. I then re-specify the model to account for the effects of advertisement-avoidance technology, and solve the re-specified model to make predictions about new equilibrium advertisement prices, ad quantities, and audience sizes. Preliminary results indicate that viewers are averse to advertisements, and that cost per thousand viewers decreases with the number of ads sold, and increases with the size of the audience