Optimizing a Menu of Multiformat Subscription Plans for Ad-Supported Media Platforms

Abstract

Media content distribution has changed extensively in the past decade. Content that was once distributed through traditional formats such as television, radio, and print is now available through contemporary digital formats such as smartphone and tablet apps, with many possible versions (e.g., presence or absence of ads). Consequently, many media firms that face heterogeneous markets of consumers with varying content consumption preferences are now offering “menus” of multiformat and multiversion subscription bundles for their customers to choose from. Yet, little systematic model-based guidance exists for configuring and pricing menu options. Moreover, most media firms are audience-building platforms that serve at least two distinct customer groups (content consumers and advertisers) with interrelated demands. Therefore, constructing a menu of content subscription bundles that maximizes total profit from both consumers and advertisers is a formidable challenge. This research proposes a theory-driven implementable model-based approach that can aid media platforms in addressing this challenge. The proposed approach is then demonstrated for a U.S. newspaper, and insights into profit-maximizing menus under various business model and format strategies are provided.