Economic analysis of the media representative’s bundling strategy and program quality: The Korean experience

• Published in: Telematics and informatics Vol. 33; no. 2; pp. 422 - 431
• Main Authors: Kim, Weonseek, Lee, Sang-Woo
• Format: Journal Article
• Language: English
• Published: Elsevier Ltd 01.05.2016
• Subjects: Advertising; Broadcaster; Bundling; Media representative; Program quality; Bundling; Program quality; Media representative; Broadcaster; Advertising
• ISSN: 0736-5853; 1879-324X
• DOI: 10.1016/j.tele.2015.09.003

•Pure bundling of advertising times impairs a major broadcaster’s choice of program quality.•Pure bundling can deteriorate the overall quality of TV programs.•This paper provides policy implications for the sales mechanism for television advertising in Korea. In the context of Korea’s unique monopolistic television advertising market, this paper compares separate selling, where a media representative sells each TV broadcaster’s advertising time separately, with pure bundling, where advertising slots are bundled and sold as a package. We analyze the media representative’s choice of separate selling and pure bundling of ad slots, and how that choice affects a broadcaster’s choice of program quality. We show that pure bundling of advertising times by a media representative impairs a major broadcaster’s choice of program quality as compared to separate selling. Furthermore, it can deteriorate the overall quality of TV programs, and thus contravening the government’s interest in diverse public service broadcasting. This paper provides policy implications for the sales mechanism for television advertising in Korea.