Is Having More Channels Really Better? A Model of Competition Among Commercial Television Broadcasters

The television broadcasting industry has experienced both significant technological and regulatory changes over the past two decades. As a result of these changes, the scope of competition in terms of the number of viewing options available to the public has greatly increased. In order to examine the effects of these changes on competition and viewer welfare, we present a model of competitive behavior that is tailored to the institutional setting of commercial television. Specifically, broadcasters compete by selecting the “type” of program to offer and the quality level (production values) of their program offering, but do not compete on price. We obtain five major results. First, broadcasters tend to choose an intermediate level of differentiation in terms of the types of programs they provide. In other words, they “counter program,” but not to the full extent. Second, if one broadcaster starts the evening with a higher quality (higher rated) program than its competitor, its second program should also be of higher relative quality. Third, a broadcaster’s first program should be of equal or higher quality than its second program. In other words, it always behooves a broadcaster to “lead with their best.” Fourth, a comparison of monopoly and duopoly markets indicates that broadcasters in an industry with a larger number of competitors may provide programs of lower quality compared to broadcasters in an industry with a smaller number. Finally, in terms of viewer welfare, having more channels available is not necessarily “better.” While the institutional setting of our analysis is that of commercial television, the model and its findings are applicable to other advertising-supported media industries.