“Narrowcasting” and “Broadcasting” on Nonbroadcast Media

Abstract

This article revises and extends economic models of program choice to explain why nonbroadcast video technologies such as cable and videocassettes not only segment audiences more finely with “narrow appeal” programs but also offer relatively expensive, apparently “broad appeal” programs that are typically repeated on different media over time. Specifically, it shows plausible conditions under which the availability of direct pricing mechanisms and expanded channel capacity (or the introduction of new video delivery systems) may induce a program producer or distributor with monopoly power to broaden rather than more narrowly focus program appeal, in conjunction with increasing production expenditures on those programs. Contrary to previous models, these programs may have increasingly “lowest common denominator” content. Evidence of successful intertemporal price discrimination by theatrical movie distributors and of production cost inflation are offered in empirical support. Nonbroadcast media appear to increase social welfare in economic terms, although these benefits are apparently mitigated by higher rents paid to factors of production.