Sponsored Data: New Alignments Between Content Provider and Content Buyer in Digital Content Market

Posted: 7 Jan 2019

See all articles by Soohyun Cho

Soohyun Cho

Rutgers, The State University of New Jersey

Liangfei Qiu

University of Florida - Warrington College of Business Administration

Subhajyoti Bandyopadhyay

University of Florida

Date Written: December 23, 2018

Abstract

AT&T and Time Warner have recently sealed a historic merger agreement, but debate continues to swirl around the purported benefits arising from the vertical integration of a content provider (CP) with an Internet service provider (ISP). In this paper, we discuss sponsored data (also called zero-rating) – one of the primary considerations of vertical integration – by developing a game-theoretic model involving an ISP, CPs, and consumers. The results of our model analysis show that an ISP that has merged with a less competitive CP will allow its own CP to offer zero-rating contents if consumers have a weak preference for specific content. However, if consumers have a strong preference in this regard, the ISP generates higher revenue by allowing only the rival CP to offer zero-rating content. Our analysis extends to consumer surplus and social welfare considerations, and carries implications for policymakers as well as ISPs, CPs, and consumers.

Keywords: Vertical Integration, Sponsored Data, Internet Service Provider, Content Provider

Suggested Citation

Cho, Soohyun and Qiu, Liangfei and Bandyopadhyay, Subhajyoti, Sponsored Data: New Alignments Between Content Provider and Content Buyer in Digital Content Market (December 23, 2018). Available at SSRN: https://ssrn.com/abstract=3305922

Soohyun Cho

Rutgers, The State University of New Jersey ( email )

One Washington Place, 906
Newark, NJ 07102
United States

Liangfei Qiu (Contact Author)

University of Florida - Warrington College of Business Administration ( email )

Gainesville, FL 32611
United States

HOME PAGE: http://sites.google.com/site/qiuliangfei/

Subhajyoti Bandyopadhyay

University of Florida ( email )

PO Box 117165, 201 Stuzin Hall
Gainesville, FL 32610-0496
United States

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