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Compensating Online Content Producers: A Theoretical Analysis

Author

Listed:
  • Sanjay Jain

    (Naveen Jindal School of Management, University of Texas at Dallas, Richardson, Texas 75080)

  • Kun Qian

    (Naveen Jindal School of Management, University of Texas at Dallas, Richardson, Texas 75080)

Abstract
The digital content industry is rapidly growing, and many platforms host a vast amount of content that is produced by independent producers. A major source of revenue for these platforms is advertising. However, advertising revenue depends on the number of active customers who visit the platform and enjoy content created by content producers. Therefore, major platforms provide incentives for content producers to encourage high-quality content creation. A commonly used incentive is ad revenue sharing. In this paper, we study how such sharing incentives are affected by the nature of competition among various producers, the size of customer base, and the type of customers. We also examine the implications for profits and welfare and extend the analysis to consider the case when the platform allows consumers to directly donate to the producers. Our results show that increased producer competition can lead to higher compensation for the producers, higher content quality, and higher producers’ profits. We also show that allowing consumers to donate to producers can lead to a higher commission rate and better-quality content. However, increased consumer generosity may lead to lower profits for content producers. In addition, we find that asymmetry among producers can sometimes benefit the platform.

Suggested Citation

  • Sanjay Jain & Kun Qian, 2021. "Compensating Online Content Producers: A Theoretical Analysis," Management Science, INFORMS, vol. 67(11), pages 7075-7090, November.
    • Handle: RePEc:inm:ormnsc:v:67:y:2021:i:11:p:7075-7090
    DOI: 10.1287/mnsc.2020.3862
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    1. Cai, Yajun & Wu, Yibin & Xue, Weili, 2024. "Social media retailing in the creator economy," Omega, Elsevier, vol. 124(C).
    2. Wilfred Amaldoss & Jinzhao Du & Woochoel Shin, 2024. "Pricing Strategy of Competing Media Platforms," Marketing Science, INFORMS, vol. 43(3), pages 488-505, May.
    3. Hemant K. Bhargava, 2022. "The Creator Economy: Managing Ecosystem Supply, Revenue Sharing, and Platform Design," Management Science, INFORMS, vol. 68(7), pages 5233-5251, July.
    4. Song, Haiqing & Wang, Rui & Tang, Yanli, 2024. "Competition or cooperation: Strategy analysis for a social commerce platform," European Journal of Operational Research, Elsevier, vol. 318(2), pages 560-574.
    5. Gustavo Berganti~nos & Juan D. Moreno-Ternero, 2023. "Revenue sharing at music streaming platforms," Papers 2310.11861, arXiv.org.
    6. Foerster, Manuel & Hellmann, Tim & Vega-Redondo, Fernando, 2024. "Strategic use of social media influencer marketing," UC3M Working papers. Economics 43985, Universidad Carlos III de Madrid. Departamento de Economía.
    7. He, Bo & Mirchandani, Prakash & Yang, Guang, 2023. "Offering custom products using a C2M model: Collaborating with an E-commerce platform," International Journal of Production Economics, Elsevier, vol. 262(C).

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