Collaboration or Encroachment? The Content Provider’s Strategic Content Provision Strategy

Abstract

With the rapid growth of the streaming industry, an increasing number of Super Content Providers (SCPs), such as Disney, Warner Bros., and NBC Universal, have launched their own streaming platforms, entering the downstream streaming market. However, some content providers, like Sony, still collaborate with Netflix. Therefore, this paper employs game theory to investigate the optimal content provision strategy for SCPs: collaboration or encroachment. We derive some interesting findings. First, contrary to intuition, we find that whether under the collaboration or encroachment strategy, improving the quality of a player’s own film library (the SCP or the incumbent platform) does not always result in higher profit for that player (first hurts then benefits the player). Second, for both the platform and the SCP, an increase in the scale of their film libraries does not automatically lead to higher profits. Third, when the revenue share is positively correlated with the scale of the film library, a small-scale library strengthens the motivation to encroach; conversely, when the library scale does not influence the revenue share, a large-scale library increases the motivation to encroach. Lastly, while the encroachment strategy can be a win–win situation for the incumbent platform and the SCP, it hurts consumer surplus. In contrast, the collaboration strategy can achieve a win–win–win situation under some conditions. Our study helps to explain the market practices and provides valuable guidelines for SCPs’ content provision strategies.