Competition between Pay TV and Ad-supported broadcasts

This study examines the influence of the presence or absence of advertising on viewer behavior within the television market. Broadcasters offer programming free of charge, relying on revenue generated from selling advertising airtime. However, excessive advertising can decrease viewer interest, necessitating a careful balance between ad ratios, program genres, and viewer ratings. Using a model based on Hotelling’s, this paper explores how variations in viewers’ susceptibility to advertising affect their broadcaster preferences. Specifically, it clarifies the behavioral motivations of viewers who opt for pay TV despite the associated costs.