Is Having More Channels Really Better? A Model of Competition Among Commercial Television Broadcasters

Abstract

Competitive behavior in commercial television broadcasting is modeled to examine program choice and the effects of more channels being available on firm strategy. Specifically, broadcasters compete by selecting both the "type" and quality level of a program to offer, but do not compete on price. We obtain five major results. First, a comparison of monopoly and duopoly markets indicates that broadcasters in an industry with a larger number of competitors may provide programs of lower quality compared to broadcasters in an industry with a smaller number. Second, in terms of viewer welfare, having more channels available is not necessarily "better." Third, broadcasters tend to choose an intermediate level of differentiation in terms of the types of programs they provide, resulting in a "counterprogramming" strategy. In other words, avoidance of price competition is not required for competitors to differentiate themselves from each other. Fourth, if one broadcaster starts the evening with a higher-quality (higher-rated) program than its competitor, its second program should also be of higher quality. Finally, a broadcaster's first program should be of equal or higher quality than its second program. Put another way, it always behooves a broadcaster to "lead with its best."