Content Proliferation and Narrowcasting in the Age of Streaming Media

Abstract

Streaming media companies have changed how contents are consumed, produced, and delivered. This research develops a theoretical model on optimal content policies for streaming media companies in order to maximize customer engagement. We have the following interesting findings. First, in contrast to the results in prior literature that firms produce just enough products without overlapping product coverage intervals, we show that overlapping coverage intervals and placing products closer can be a better policy for engagement-based firms. Second, engagement-based model produces more contents when the value of the contents is large to the customers or the profit margin in selling content is less than a certain threshold. Third, on learning a general customers’ distribution, the media firm will always overlap product coverage intervals and place programs closer when the distribution density is larger. Additionally, in facing the tradeoffs of content quality and quantity, the firm should use a higher-quality and low-variety policy for high density clusters but a lower-quality and high-variety policy for low density clusters. Furthermore, when customers consume multiple shows in a period, a better policy is to film TV shows or series with multiple episodes rather than individual movies. Our research contributes to the literature on digital media, and the results provide interesting and insightful implications for streaming companies.