Competition of Content Acquisition and Distribution Under Consumer Multi-Purchase

Abstract

In many markets, such as video streaming or information services, a consumer may purchase multiple competing products or services. The existing theoretical literature typically assumes that each consumer can buy only one product. This paper explicitly models the consumer’s multi-purchase behavior, and examines an upstream content creator’s content production and selling strategies, as well as competing downstream distributors’ content acquisition and pricing strategies. We find that in contrast to the case of single-product purchase, under multi-product purchase, only one distributor will acquire the creator’s new content in equilibrium. Furthermore, when the content distributors are not highly differentiated (each having a limited amount of unique content), the content creator will reduce new content production, leading to lower profits for both the content creator and the content distributors. By contrast, when the distributors are already highly differentiated with a substantial amount of unique content, the content creator will increase its content production, leading to higher profits for both the content creator and the distributors. We show that our main results and insights are robust to several alternative assumptions.