Thought Exercise: Media Platform Incentives

I've been thinking some lately about the incentives for media platforms in this current age of "free" content that's paid for by advertising, and what the effects on incentives that revenue model has, particularly when compared with other revenue models. If we assume that these companies are trying to maximize profits, then their goal will be to get as much money from their revenue source(s) as possible while minimizing expenses, with bandwidth being a major expense (notably, delivering high quality video uses a lot of bandwidth).

In an advertisement-based revenue model, media platforms are incentivized to maximize user retention—the longer any given user stays on the platform, the more ads that platform can show them, thus generating more ad-based revenue. However, people generally don't like advertisements (a separate problem that I think needs solving, but that's a thought experiment for another time). In general, people are not coming to your media platform for advertisements, so you need to figure out how to show them the maximum number of ads that they'll tolerate while giving them content they want to see enough to increase that tolerance threshold.

In general, this ad-based model does not care what the content is, who makes it, or who the users are. It does not care about advertisement companies either; or rather, it only cares so far as is necessary to retain their advertisement campaigns that the media platform charges them to deliver. If the platform cared about the companies running the ads, they wouldn't spam users with the same one too frequently—doing so is likely wasted ad-money from the advertisers' point-of-view, as you'd rather increase general awareness; that is, if you're showing a static number of ads, you'd rather show it to more people a little than to fewer people a lot. Also, I know as a user that I'm typically fine with the same ad at a low frequency, but come to dislike it as the frequency increases. That can be bad for advertisers.

Users are only cared about under the ad-based model so far as they are able to be retained. The media platform does not care if it would be better for the user to consume less media through the platform—indeed, it wants you addicted to it so it can serve you more ads. This is arguably bad because business decisions are not being made that would take a user's wellbeing into account.

Creators are also only cared about so far as at least enough people are making sufficiently compelling content that the media platform can use to retain users' attention. Indeed, the media platform has no need to benefit any particular creator at all in this process, and the only concern it has here is how a creator may negatively affect user and advertiser perceptions of the platform, which could drive away either half of the revenue model.

This model is the primary one used on most of the larger media platforms, such as YouTube, Facebook, and Twitter, and I think by looking at where incentives lie, we can all agree that it's actually kind of terrible. It's bad for users, awful for creators, and even dubious for advertisers (though as the direct source of money, they have the most sway over the platform). There are, however, two other models I've been thinking about: User-subscription and Creator-subscription. Both of these models theoretically remove the need for advertiser-based funding, though "need" has little application to profit-seeking; therefore, companies often seek to add in advertisement revenue wherever they can (*cough*Twitch*cough*). Regardless, I'm going to examine both models under the assumption that ad-revenue isn't part of them (keeping in mind that if it is added in, it brings its own incentives to bear).

We've actually seen quite a few user-subscription models in practice. Many streaming services use it, such as Netflix. This model has a tricky set of incentives, because they want people to find their service desirable enough that they keep subscribing, but the media platform actually wants them to use their platform as little as possible (to reduce bandwidth costs). This paradox—the platform wanting you to pay for a service you never use—must practically speaking be resolved somewhere in the middle, where the service is just good enough that you want to keep it around and use it sometimes, but never so much that you start to cost the service too much money.

This model doesn't particularly care directly about creators or users; rather, it cares about exclusivity and hype/popularity. If they can get exclusive access to the most popular or hyped-up media, then it will draw people to their platform. If they can stretch that out such that users have one main show they really want to watch that's only available via the media platform, then that's ideal, since it draws people in, keeps them paying the subscription, but also means they aren't consuming bandwidth beyond that.

It should be noted that one positive is it's hard to predict if a new show will be popular—this model is very good for creators who are currently making a must-watch show or are planning on adapting something that's already popular. However, because an original, must-watch show is hard to predict, these media platforms do want to experiment with unknown media that they think has potential to become a big thing. If it's made by more obscure creators that work for less, that's a bonus (since that also reduces expenses). As such, this model has some incentive to seek out smaller creators and fund their work.

This brings us to the Creator-subscription model. This is where creators, in some way, pay the platform to host and promote their content. The immediate benefit to creators is that the media platform has an incentive to make any creator on the platform happy, because losing a creator from the platform decreases their revenue.

However, keep in mind the expenses angle—creators that are popular cost the media platform more money due to the increased bandwidth demands of the content they have. This means either more popular creators have to pay more, the platform needs a lot of smaller creators to balance out the costs (assuming everyone pays the same—this means they want as many creators as possible, with most of them reaching very few people), or bandwidth costs end up getting passed along to creators. Incidentally, this sort of model can be found with webhosting services.

Additionally, creators having to pay money to have their media hosted by the platform means there is a notable barrier of entry. While this can be argued to have benefits for users (it means creators on the platform are at least being serious to some degree), it does restrict opportunities for creators who are unable to pay.

This article has primarily been a thought exercise, but I think it's an interesting one. Analyzing incentive systems and the behavior they encourage is an important part of being a game designer, and those skills are something I enjoy applying to the real world. I'll add that I think the ideal system for a media platform is one that aligns with the goals of creators and is free from non-creator advertising. The reason for this is simple: the goal of every creator is to find their audience and make them happy. When this happens, users are in turn connected with media they enjoy. However, I don't think any such platform has yet to achieve major success and visibility. Perhaps one day one will!

Thank you for reading.

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