Content proliferation and narrowcasting in the age of streaming media

Abstract

Streaming media companies have changed how contents are consumed, produced, and delivered. This research develops a theoretical model on optimal content policies for streaming media companies in order to maximize customer engagement. We have the following interesting findings. First, in contrast to the results in prior literature that firms produce just enough programs and coverage intervals of the programs do not overlap, we show that placing programs closer can be a better policy for engagement‐based firms. Second, more contents are produced under engagement‐based model when the customer value of the content is high. Third, on learning the distribution of the customers, the media firm will always place programs closer when the distribution density is higher such that neighboring programs always have overlapped target audience. Additionally, in facing the tradeoffs of content quality and quantity, the firm should use a high‐quality and low‐variety policy for crowded clusters but a low‐quality and high‐variety policy for niche clusters. Furthermore, when customers consume multiple shows in a period, a good policy is to produce TV shows or series with multiple episodes, whereas individual movies are more suitable for an infrequent watcher market. Our research contributes to the literature on digital media, and the results provide interesting and insightful implications for streaming companies.