Advertising Competition in the Free-To-Air TV Broadcasting Industry ∗
Advertising Competition in the Free-to-Air TV Broadcasting Industry ∗ Marc Ivaldiy Jiekai Zhangz This version: April, 2018 Abstract This paper empirically investigates the advertising competition in the free-broadcast TV industry within a two-sided market framework. A structural model of oligopoly competition is fitted to a unique dataset on the French broadcast television market, allowing us to exhibit the significance and the magnitude of the network externalities between TV viewers and advertisers and to confirm the two-sidedness nature of this industry. After having validated the conjecture that the competition in the TV adver- tising market is of the Cournot type, we provide empirical evidence that the price-cost margin, which does not account for the feedback loops between the two sides of a market, is not a proper indicator of market power of firms operating in two-sided mar- kets. Finally, we conduct counterfactual simulations of a merger in French TV market approved by the competition authority under the behavioral remedy which consists in maintaining independent the advertising sales house of the merged TV channels. We show that the behavioral remedy was unnecessary, due to the two-sidedness nature of the market. JEL Classiffication: D22, D43, K21, L11, L13, L22, L41, M37 Keywords: Advertising, competition, media, TV, two-sided market, market conduct, behavioral remedies ∗The authors are grateful to the Conseil supérieur de l’audiovisuel (CSA) and the Centre national du cinéma et de l’image animée (CNC) for making available the data used in this study. In particular, we thank Nicolas Bouy (CSA) for his expert explanations and insights on the French TV broadcasting industry.
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