Pricing and content development for online media platforms regarding consumer homing choices

Abstract

With the rise of online media platforms, intensified competition has forced platforms to develop their content and even to cooperate with rival platforms. It is worth exploring the effects of multihoming, a key feature in platform businesses, on platform strategies and decision-making. In this paper, we establish a game-theoretic model in which two competing platforms generate profits from consumer subscriptions, and consumers decide to subscribe to one (singlehoming) or both (multihoming) platforms. In addition, we examine whether multihoming leads to negative synergy because of the content overlap between the platforms but mitigates price competition, where a platform that can create new content itself decides whether to distribute the content exclusively or to cooperate with the rival by licensing the newly developed content. We derive the equilibrium price and content decisions of the platforms and further elaborate their optimal strategic choices regarding content development and distribution. We find that in the absence of multihoming, developing exclusive content is an efficient competitive strategy for platforms but may cause worse social welfare than would be the case without the development of new content. However, in the presence of multihoming, developing exclusive content is a dominant strategy that benefits platforms, consumers, and society. Managerial insights are provided for platform managers in terms of the rival reactions and changes in content-and market-related factors.