First Brown Bag of the Semester – September 5, 2014

Ryland Sherman, PhD student, and David Waterman, Professor Emeritus, Indiana University, Department of Telecommunications

The Future of Online Video: An Economic and Policy Perspective

Abstract: We explore the economics of the online video entertainment industry to provide a foundation for understanding its economic future and how regulation may affect it. We first document recent development of online video, including market structure, prevailing programming windows, and content aggregation patterns. In spite of its remarkable efficiencies, we identify three potential obstacles to online video’s future growth: competition from increasingly efficient cable, DBS, and other multi-channel programming distributions, including advantages they have in large scale aggregation of online content via “TV Everywhere” type services; limited availability of high quality content, especially windowed programming; and ISP pricing strategies that may raise effective consumer prices of video consumption. In conclusion, we discuss the role that FCC regulation or other government policies can play to ensure future competition and open entry in the online video industry.

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