Strategic Broadcasting of a Championship: Slicing the Matches Between TV Channels

Abstract

Consider a company that owns two sports TV channels: a popular free-to-air channel and a narrow-profile pay one. The company bought the broadcasting rights for a round-robin championship. When developing the broadcasting strategy, the company’s management faces the trade-off between inducing viewers to subscribe to the pay-TV channel and getting revenues from advertisements on the free-to-air channel. Motivated by an anecdotal case of a significant drop in the percentage of broadcasts of best teams among all broadcasts on a free-to-air channel, we propose a theoretical model of broadcasting the championship. We demonstrate that a wide range of strategies can be optimal depending on the market parameters. Whereas the intermediate strategy of broadcasting just weak matches (instead of broadcasting top matches or broadcasting nothing) on the free-to-air channel seems puzzling, we show formally that it can be fully rational for some market configurations. Therefore, we rationalize the puzzling strategy used by the company’s management in the motivational example.