Exclusivity and Control and Howard Stern

Here’s a really interesting summary of a (tough to read) working paper from Harvard Business School that studies a key question: When is it better to provide something exclusively, and when is it better to provide that something on multiple distribution channels (i.e., “multihome”)?

Here’s the key section:

High-quality content will [be] multihome, because foreclosing a portion of the market by being exclusive will be too costly. Mid-quality content will be exclusive and can soften price competition at the platform level enough to offset the losses from excluding a portion of the market. Low-quality content will multihome, since it would not yield any comparative advantage if it were exclusive.

If we assume “quality” is reflected in the price of content acquisition and/or the popularity of that content, then, for example, major league sports play-by-play is “high-quality” content and thus is available across numerous distribution windows.

But, Mr. Karmazin, isn’t Howard Stern also “high-quality” content? And if this Harvard model is correct (and on this point I definitely think it is) aren’t you foreclosing a large portion of the market by forcing Stern to be exclusive? Aren’t you leaving both revenue and listeners “on the table”?

Let me answer: Yes, yes, and yes.

It seems to me that distinguishing between “high,” “medium,” and “low-quality” content is an exercise everyone in satellite radio should engage in.

It’s not Howard Stern’s fault that his audience is smaller than it used to be. It’s the fault of a distribution policy which isn’t matched to the quality of the content.

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