TV on Mobility as a Two-Sided TV on Mobility as a Two-Sided PlatformPlatform

Marc IvaldiUniversity of Toulouse (IDEI), EHESS and

CEPR

Estelle Malavolti-GrimalENAC and University of Toulouse

(GREMAQ)

Conference on Competition Policy in Two-Sided Markets

Toulouse - June 29/30th - July 1st, 2006

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A new marketA new market

● Demand 1.7 billion mobile subscribers

Korean market, US market, European markets Short duration Mobility Monthly fee = $ 20 ; price per program = 50 cents

Higher willingness-to-pay

● Supply Type of content

Classical TV Dedicated content (“mobizode”)

High cost for the tuner ($ 600) Technological issues

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Features of the mobile TV marketFeatures of the mobile TV market

● Enlarged market

● Two-sided market

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Enlarged MarketEnlarged Market

● Episodes of mobility Larger potential usage wrt to classical TV

● Conclusions Better and larger audience of advertising

Potential profits for the mobile operator

Higher willingness-to-pay for TV Potential profits for the mobile operator

– Customers / consumers accept more advertising

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Telcom Operators

Consumers Advertising & TV

Two-sidedMarket 

Purchase of broadcasting

time / advertising

(Quantity : price)

Operators provide a platform that makes contact between …

Purc

hase

/ sa

le

TV d

urat

ion

(qua

ntity

/ pr

ice)

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Two-sided MarketTwo-sided Market

● Existence of externalities Consumers want to consume TV broadcasts

Positive externality Consumers don’t want to consume advertising

Negative externality

● Conclusion The more advertising, the less TV broadcast Arbitrage

Higher price of ads, higher demand of advertising duration

– Increase of profits on the side of TV broadcasters/channels BUT– Decrease of profits on the side of consumers

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LiteratureLiterature

●Two-sided markets Rochet-Tirole 04, 03 Armstrong 02 Crampes-Haritchabalet-Jullien 04

Emerging market = the operator is a monopoly Impact of mobility

Anderson-Coate 05 Welfare analysis Two part tariffs

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Market structureMarket structure

● Agents Telecom operator

Monopoly Two-part tariffs

TV broascasters / Advertisers Consommateurs

● A regulator

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ObjectiveObjective

●Instruments: price

●Two questions

Normative aspects

What are the optimal level of advertising and

broadcasting?

Positive aspects

How to implement them?

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Telecom Operator

Consumers Advertisers

C = Fixed cost (tuner)

c = Variable costs of broadcasting

r = price of one m

inute

of broadcasting

A = Access fee

p = p

rice

of o

ne m

inut

e

of T

V on

mob

ile

T = S

ubsc

ritio

n fe

e

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Normative aspects: Three different Normative aspects: Three different viewsviews

● Regulator Maximizes welfare

● Wise monopoly Maximises profit taking into account the two

sides of the market

● Myopic monopoly Maximises profit on each side separately

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The consumerThe consumer

●n usage of mobile TV en mobilité (minutes)

●m gain per minute from mobility●p purchase price of one minute of mobile TV

●T subscription●a quantity of ads (received)●social cost of advertising U u n I mn pn T a

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The consumerThe consumer

'u n

p n m

●Inverse demand function

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The myopic monopolyThe myopic monopoly

● Choice of the price of advertising / broadcasting

● Choice of the price of the minute of mobile TV

Max sc and ,ara A A a a r n

Max sc andpn T cn C U u n n p

( )r r n

such that u n

p c m

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The wise monopolyThe wise monopoly

● Choice of prices of broadcasting and mobile TV

● Price lower than marginal cost!

Max

sc et

et ,a

pn ra T A cn C

U u n n p

A a a r n

u n u n r nap m m

n r a

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Results on positive aspectsResults on positive aspects

●Analysis Wise monopoly / Myopic monopoly Two dimensions

Externality of advertising Sensitivity of advertising demand to audience

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Results on normative aspectsResults on normative aspects

● The wise monopoly achieves a higher social welfare than the myopic monopoly

● Analysis Regulator / Wise monopoly / Myopic monopoly Two dimensions

Externality of advertising Sensitivity of advertising demand to audience

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21

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Concluding remarksConcluding remarks

● An integrated structure provides higher profits and welfare than a separated structure

Role of telecom operators ● Competition policy

Prices lower than marginal costs