Advertising and the Distribution of Content

The paper examines incentives for exclusive distribution of televi-sion content in the presence of advertising. A provider of premium content such as live televisation rights to popular sports may con-tract with one or both of two competing distributors, charging lump-sum fees. With pay TV downstream, exclusive contracting with one distributor is the content providers pro\u85t-maximising choice, while non-exclusivity is the consumer and social preference. When distribu-tors are purely advertising-funded, however, non-exclusive distribution may sometimes be preferred, for example in the presence of a cap on advertising. Product placement and other forms of upstream adver-tising overturn the preferences found for pay TV: the content provider chooses non-exclusivity while consumers prefer the lower advertising intensity under exclusivity. The analysis has implications for the dis-tribution of premium content to pay TV and free-to-air distributors, and for content distribution via the internet