Optimal Revenue Model And Service Design Decisions For Content Platforms

For typical content platforms offering online music,videos,and e-books,participants include users,platforms,and third-party copyright owners.For the platform,the complexity of the participants has led to multiple factors challenges of decisionmaking.However,mastering the interaction between these complex factors has important guiding significance for the management and decision-making of the platform.This article abstracts the core issues faced by content platforms in industrial practice,and studies the optimal pricing and content control decisions of monopoly platforms through management models.It turns out that the optimal decision of the platform’s revenue model depends on two factors: advertising rates and network effects.When the strength of network effects is low,high advertising rate makes the platform motivated to choose the pure ad revenue model.If the advertising rate is low,the platform would adopt pure subscription model.Only when the advertising rate is moderate,ad revenue and subscription revenue account for a considerable proportion,the platform will choose a hybrid model.When the network effect is large,the decision of the platform is similar,except that when the advertising rate is low,the platform will provide hybrid services,but its free service is a kind of "real" free,that is,there is no advertisement for this layer of service.The platform’s content control strategy is highly related to its revenue model.This article found that when the strength of the network effects and the advertising rates are both small,the platform has the motivation to provide a trial period.Because only in this area,the negative effect of free riding is acceptable.In other areas,the platform will comprehensively judge the value of the adsponsored free service based on the strength of the network effects and the value of advertising rate,so as to choose whether to benefit from subscription,advertising or hybrid services.Finally,for platforms that adopt a mixed revenue model,the research on the quality control of the ad-sponsored free service has found that only when the number of advertisements and the advertising rates are both small,the platform will have the incentive to benefit from pure subscriptions,and the optimal quality of free services will continue to increase with the increase in the number of advertisements.