Interactive Channels and the Challenge of Content Budgeting

Abstract The standard model of content investment and distribution strategy is extended to include online outlets for content that, in the past, has been distributed through traditional media. The model identifies those conditions that do and do not favor online distribution. It shows that, depending on circumstances, it may be optimal for a media product to be available online as long as it is being distributed through traditional media, to make it available online only part of the time it is in traditional channels, or to never release it online. Online distribution is more likely to increase a media product's earnings the higher online revenue is per audience member compared to per audience-member revenue in traditional channels, the larger the contribution of Internet distribution to a media product's total audience, and the larger the contribution online availability makes at any time to subsequent demand for the product. The interactive capabilities of online channels also may be employed to more fully exploit advertisers' demands for access to online audiences, which also increases profits from online distribution. Exploiting the social character of Internet usage to promote content may or may not make online distribution more profitable.