Welcome to Scribd, the world's digital library. Read, publish, and share books and documents. See more
Download
Standard view
Full view
of .
Look up keyword or section
Like this
1Activity
0 of .
Results for:
No results containing your search query
P. 1
Platform Siphoning

Platform Siphoning

Ratings: (0)|Views: 13|Likes:
Published by Core Research
The business model of commercial-financing relies on advertisers to pay for content. Advertisers will not pay if consumers unbundle the advertisements from the content (advertising bypass). TiVo, remote controls, and pop-up ad blockers are examples of adavoidance
technologies. Purchasing such devices causes content providers to increase
advertising levels (as has happened recently) because the remaining audience is less adverse to ads, and leads to a downward spiral. The bypass option may cause total welfare to fall. Higher avoidance reduces content quality and can lead to more massmarket content. We cast doubt on the profitability of using subscriptions to counter the impact of ad-avoidance
The business model of commercial-financing relies on advertisers to pay for content. Advertisers will not pay if consumers unbundle the advertisements from the content (advertising bypass). TiVo, remote controls, and pop-up ad blockers are examples of adavoidance
technologies. Purchasing such devices causes content providers to increase
advertising levels (as has happened recently) because the remaining audience is less adverse to ads, and leads to a downward spiral. The bypass option may cause total welfare to fall. Higher avoidance reduces content quality and can lead to more massmarket content. We cast doubt on the profitability of using subscriptions to counter the impact of ad-avoidance

More info:

Published by: Core Research on Oct 02, 2009
Copyright:Attribution Non-commercial

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as PDF, TXT or read online from Scribd
See more
See less

10/20/2011

pdf

text

original

 
 
Platform Siphoning
by
Simon P. Anderson
and 
Joshua S. Gans
*
 First Draft: 7
th
April, 2006This Version: 9
th
August, 2009
The business model of commercial-financing relies on advertisers to pay for content.Advertisers will not pay if consumers unbundle the advertisements from the content(advertising bypass). TiVo, remote controls, and pop-up ad blockers are examples of ad-avoidance technologies. Purchasing such devices causes content providers to increaseadvertising levels (as has happened recently) because the remaining audience is lessadverse to ads, and leads to a downward spiral. The bypass option may cause totalwelfare to fall. Higher avoidance reduces content quality and can lead to more mass-market content. We cast doubt on the profitability of using subscriptions to counter theimpact of ad-avoidance.
 JEL Classification Numbers
. L82, L86, M37
 Keywords
. Two-sided markets, advertising-finance, media economics, siphoning, bypass,death spiral.
*
University of Virginia (Anderson) and University of Melbourne (Gans). This paper builds, expands upon andreplaces a previously distributed paper, “Tivoed: The Effect of Ad Avoidance Technologies on Content provider Behavior.” We thank Sunit Shah, Ken Wilbur, Helen Weeds, and participants at the 4
th
Workshop on MediaEconomics (Washington, 2006) and seminars at New York University and Cornell University for comments. Wethank the Australian Research Council and IPRIA for financial assistance. The first author thanks the NSF for support under grants SES 0452864 (“Marketing Characteristics”) and GA10704-129937 (“Advertising Themes”).All correspondence to joshua.gans@gmail.com. The latest version of this paper will be available atwww.mbs.edu/jgans.
 
1
“Because of the ad skips.... It’s theft. Your contract with the network when you get the show is you’re going to watch the spots. Otherwise you couldn’t get the showon an ad-supported basis. Any time you skip a commercial or watch the button you’re actually stealing the programming.” (James Kellner, CEO Turner  Broadcasting, 2002)“The future of the TV business is dependent on enabling advertisers to reach people who don't want to watch ads and who have the ability to avoid them. Youcan see this issue coming a mile away and marketers and networks should be prepared.” (Tom Rogers, CEO TiVo, 2009)“It’s obvious how rampant ad blocking hurts the Web: If every passenger siphonsoff a bit of fuel from the tank before the plane takes off, it’s going to crash.”(Farhad Manjoo, Slate, 2009)
1.
 
Introduction
Many industries where content (informational or otherwise) is provided to consumers can be characterized as a two-sided market or platform. For example, in commercial (or free-to-air)television, the content provider broadcasts programming which bundles entertainment contentwith advertising messages. The programming simultaneously serves two groups of consumers;the viewers who want to enjoy the content, and the advertisers who want to reach prospectivecustomers with their messages. The same pattern drives traditional business models in radio,newspapers, magazines and many commercially-driven websites (including search engines). Thismodel has evolved because, without a lure, consumers would not choose to consume ads.However, when presented with valued content, they receive advertising clutter as part of the mix.It is, as the quotes above suggest, the ‘price’ they pay for content provision.In recent years, new technologies allow consumers of content to ‘have their cake and eatit too’ by avoiding ads. These new ad-avoidance technologies (AATs) allow consumers toreceive their desired content and to siphon out the advertising clutter. In television, this isexemplified by the Digital Video Recorder (the most famous of which is TiVo) which allows
 
2consumers to easily skip or ‘zap’ ads. To be sure, video cassette recorders also enabled this butwith far less ease.
1
At the other extreme, there are downloaded programs over the Internet(unpaid for by using, for example, BitTorrent) that do not include ads. If they did, concerns about pirated content might be diminished.Ad avoidance is not simply an issue for television broadcasting. Many newspapers andrelated sites trying to build an on-line option have chosen to offer content for free with ad-support to provide the revenue. In response to user annoyance about the form of such ads – including pop-ups, distracting videos and bandwidth hungry multi-media (Manjoo, 2009) – opensource programmers have developed ‘ad blocking’ plug-ins for web browsers. These literally block any advertising content from most sites, providing the consumer with clutter-free contentand denying those sites advertising revenue. Not surprisingly, these technologies have raised concerns that the entire model of ad-supported content provision may be unviable as a business model. To be sure, in extremis, if allads are avoided, no revenue will be earned and content cannot be funded that way. However,there are several reasons to think that the penetration and incentives to adopt AATs may notnecessarily drive this ‘doomsday scenario.’First, the very fact that ads are a ‘price’ imposed on consumers has long been seen as anissue for ad effectiveness. Traditional ad-avoidance involves consumers reducing the negativeimpact of ads. For television, this is exemplified by ‘going to the bathroom’ or otherwise usingad breaks to undertake other tasks or simply ‘tune out’ (Moriarty & Everett, 1994; Speck &Elliot, 1997). The long-standing response to traditional ad avoidance has been to reduce theamount of ‘clutter’ to consumers (e.g., shorter ad breaks to reduce incentives to leave the room).
1
A TiVo for example allows for a 30 second skip, which can skip ads at a few button presses. Time sensitive eventscan also be adjusted. Consumers can watch ‘live’ sports without ads by delaying their start viewing and skipping adsso as to finish at the same time as those watching it without avoiding ads.

You're Reading a Free Preview

Download
scribd
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->