Optimizing a Menu of Multi Format Subscription Plans for Advertising Supported Media Platforms: A Model and Application in the Daily Newspaper Industry

Abstract

Distribution of content by media companies has greatly transformed in the past decade. Content, which was once distributed through e.g., television, radio and print formats, is now available through contemporary digital formats with many possible versions, such as smartphone and tablet apps with and without ads etc. Consequently, many media firms facing markets comprised of heterogeneous consumers with varying content consumption preferences are offering ‘menus’ of multi format-version subscription bundles for their consumers to choose from. So far, however, there is little systematic model-based guidance on configuring and pricing menu options available to such content marketers. Moreover, most media firms are ‘audience-building platforms’ that serve at least two distinct customer groups (content consumers and advertisers) with inter-related demands. Therefore, constructing a menu of content subscription bundles that maximizes total profit from both consumers and advertisers becomes an even more complex problem, not yet addressed in the marketing literature. Therefore, this article proposes a theory-driven implementable model-based approach that can aid media platforms in optimally designing their subscription menus. The proposed framework is demonstrated for a U.S. newspaper and profit maximizing menus for various strategies are determined.