Media Platforms and Technology Disruption: Pricing in the Digital Age

Abstract

This research analyzes competition between streaming media platforms (Content Providers, CPs) employing different revenue models: ad-supported versus personalized, ad-free subscriptions. We uniquely model consumer heterogeneity across two dimensions: content preference and ad tolerance, departing from prior literature's uniform ad disutility. Our game-theoretical analysis determines optimal pricing strategies under varying market conditions, showing how CPs capture distinct market segments. Key findings reveal that high ad revenue per user (ARPU) drives CPs to prioritize ad-supported services, potentially marginalizing premium offerings. Conversely, strong consumer loyalty to content preferences enables CPs to raise prices for ad-free services. The study offers theoretical insights and actionable advice for navigating the evolving SVOD landscape.