An Empirical Model of Television Advertising and Viewing Markets
نویسنده
چکیده
Television networks compete for both viewers and advertisers. Recent theoretical work has modeled the impact of viewers’ and advertisers’ network usage on the other group. Empirical work has not kept pace. I estimate viewer demand for television programs as a function of program characteristics, audience flow, day and time effects, and time given to advertising. I find audiences are highly responsive to advertising quantities. When a highly-rated network increases its advertising level 10%, the model predicts it loses about 30% of its audience; a low-rated network loses 70-90% of its viewers. I separately estimate advertiser demand for program audiences as a function of audience size, quantity of advertising sold, and program characteristics. I find the price elasticity of advertising demand is -2.9, and the audience elasticity of advertising demand is 0.83. The results indicate that advertiser preferences are at least as important as viewer preferences when networks choose programs. Viewers’ two most preferred program genres, Action/Drama and News, account for just 16% of network program-hours. Advertisers’ two most preferred genres, Reality and Scripted Comedy, account for 47% of network program-hours. I use viewer and advertiser demand estimates in conjunction with a game-theoretic model of television network competition to speculate how advertisement-avoidance technology will impact market equilibria. The model suggests that ad-avoidance tends to increase equilibrium advertising levels and decrease network revenues.
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