314 / 2024-04-24 12:57:53

Content Exclusivity on Advertising Revenue-Sharing Platforms

exclusive contract; multihoming; platform competition; ad revenue sharing

In recent years, many digital content platforms (e.g., YouTube, TikTok, Twitch, and Instagram) serve consumers with content posted by third-party content providers. These platforms display advertising on the content and share ad revenues with providers to incentivize content contribution. As digital technology makes it easy for content providers to use multiple platforms, providers’ multihoming is a major factor that shapes platform competition. To maintain a competitive edge, some content platforms have signed exclusive contracts with content providers to regulate providers’ multihoming behaviors. In this paper, we develop an analytical model to investigate the impacts of platforms’ adoption of exclusive contracts on market participants. Our analysis finds that, under uniform revenue sharing, exclusive contracts can make platforms worse off when the consumer’s marginal valuation for content is high, suggesting that platforms may prefer not mandating exclusive collaboration contracts. Moreover, we show that the implementation of exclusive contracts can increase content providers’ total surplus when the consumer’s marginal valuation for content is relatively moderate. Finally, we extend the analysis to consider differentiated ad revenue sharing and provide insights into the impacts of different multihoming regulation strategies. Our results have important implications for digital content platform managers, content providers, and policymakers.