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Video Economics

Video Economics. The notion of a “public good”. Public vs. Private Goods. Private good Cost depends on # of consumers Once consumed, product is gone Public good Costs independent of # of consumers Consumption unrelated to availability. Markets for Public Goods. No uniform pricing

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Video Economics

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  1. Video Economics The notion of a “public good”

  2. Public vs. Private Goods • Private good • Cost depends on # of consumers • Once consumed, product is gone • Public good • Costs independent of # of consumers • Consumption unrelated to availability

  3. Markets for Public Goods • No uniform pricing • Charge each what s/he can pay

  4. International TV Prices

  5. No uniform pricing Charge each what s/he can pay All media are public goods Public good distribution only in TV High fixed costs, low marginal costs Maximum exploitation of every product Multiple dist. “windows” Markets for Public Goods

  6. What is Windowing? Why and How it Works

  7. Main Points Understand • What “windowing” is • How and why it works • Main distribution windows, order • How to determine windows • Challenges of new media and new markets

  8. Definitions • “Windows” — distribution channels • Cinema, pay cable, national network • “Windowing” — releasing programming into windows in a specified order • License agreement • Producer/syndicator and distribution outlet • Covers specified area for license period

  9. Why it Works • “Public good” nature of TV and film • Takes advantage of already-produced programs • Elastic pricing in different windows • Requires ability to separate buyers • Temporally • Geographically

  10. Typical Windowing Order(Film) • Cinema • PPV • Video • Pay cable • Basic cable • National TV network • Local station (syndication)

  11. Typical Windowing Order(TV) • National TV network • International • Basic cable (syndication) • Local station (syndication)

  12. Windowing Considerations • Per-viewer price in various channels • Amt. viewer will pay in each window • Interest rate • Increase in viewership with each additional window • Vulnerability to unauthorized copying • Decline in viewer interest after initial release

  13. Impact of Windowing on Program Supply • More windows = larger production budget • Deficit financing • Programming sold below costs in early windows • Fewer new programs • All windows compete • New windows are disruptive • Change programming • Affect profits in others

  14. Recent Changesin Distribution Windows • VCR/Cable windows have moved forward • Increased penetration rate • International is now vital • 50-70 percent • Same-week cable window • Often co-financed • Cable syndication for cable shows • Satellites confuse international sales

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