Superstar Exclusivity in Two-Sided Markets

Abstract

In most platform environments, the exclusive provision of premium content from leading creators (superstars) is used as a strategy to boost user participation and secure a competitive edge vis-à-vis rivals. In this article, we study the impact of superstar exclusive content provision on platform competition and complementors’ homing decisions. Two competing platforms facilitate interactions between consumers and suppliers, of which the latter are identified by the superstar and a fringe of complementors (e.g., independent developers, amateurs). When platform competition is intense, more consumers become affiliated with the platform favored by superstar exclusivity. This mechanism is self-reinforcing as it generates an entry cascade of complementors, and some complementors single home on the favored platform. We find that cross-group externalities are key in shaping market outcomes. First, exclusivity benefits complementors and might make consumers better off when cross-group externalities are large enough. Second, contrary to conventional wisdom, vertical integration (platform-superstar) may make exclusivity less likely than vertical separation under reasonable conditions. Finally, we discuss implications for the strategies of platform owners, managers of superstars and complementors, and antitrust enforcers. This paper was accepted by Joshua Gans, business strategy. Funding: L. Madio gratefully acknowledges financial support from the Economic and Social Research Council [Grant ES/J500215/1], the UCLouvain “Move-in” Fellowship Programme, the European Research Council under the European Union’s Horizon 2020 Research and Innovation Programme [Grant 670494], and the Unicredit & Universities Foscolo Europe Fellowship. Supplemental Material: The online appendix is available at https://doi.org/10.1287/mnsc.2023.4720 .