The Role of Bargaining Power for Media Bias, Redlining in the IPTV Market, and Long Tail Economy in Online News

Abstract

The three articles in this issue of the journal analyze factors affecting the decisions of media firms. The first article studies how advertisers’ bargaining power and joint operating agreements influence media bias. The second article investigates factors affecting entry decisions into an Internet Protocol TV (IPTV) service market. The third article explores the role of long tail economy forces on revenue generating capability and the profitability of online news provision. The first article, “Media Bias When Advertisers Have Bargaining Power” by Wen-Chung Guo and Fu-Chuan Lai, constructs a theoretical model using a two-sided markets framework to analyze the degree of media bias under different model specifications. The first model specification assumes that there are two media firms and two advertisers that place their advertisements only in one of the firms (single-homing). Readers are assumed to have heterogeneous biased beliefs. The second model specification assumes that advertisers can place advertisements with both firms (multihoming). The third model specification assumes that media firms enter into joint operating agreements. The article finds that when advertisers have greater bargaining power, media bias and subscription prices increase. The main intuition for this result is that lower bargaining power on the media firms’ side reduces firms’ advertising revenue. To counteract this shortfall in revenue, firms try to increase their subscription revenue by selecting more biased positions that reflect readers’ beliefs, which reduces competition between the firms by increasing differentiation between the two media products. The authors also find that media bias increases under multihoming. On the other hand, the authors find that joint operating agreements reduce media bias. This is an interesting finding for joint-operating agreements because the number of agreements has been declining in the United States. “Diffusion of the New Video Delivery Technology: Is There Redlining in the Internet Protocol TV Service Market?,” by Sung Wook Ji, is an empirical study of AT&T U-verse’s recent decisions to offer IPTV services in different areas of the state of Indiana. Because Indiana does not have “built-out requirements” for new entrants, the entrant is not required to offer IPTV services throughout the entire state (franchise area). The author performs logistic