ZEW - Centre for European Economic Research

08/22/2023 | Press release | Distributed by Public on 08/22/2023 01:27

Streaming Platforms: Cheap Content Is More Likely to Be Recommended // Streaming Providers Incentivised to Promote Content with Low License Fees

Streaming Providers Incentivised to Promote Content with Low License Fees

Algorithms possess the capacity to steer competition within streaming platforms and, consequently, influence consumers' choice of content.

Streaming services are shaping consumers' content choices through their algorithms. The recommendation systems of streaming platforms can steer users towards content that is cheaper to stream, since platforms have the incentive to favour content with the lowest licensing fees. This enhances the visibility of cost-effective content, as shown by a theoretical study carried out by ZEW Mannheim.

"Streaming platforms curate a mix of content offerings to capitalise on consumer interests. They pay producers fees for the use of the licensing rights. To maximise profit, it makes strategic sense for streaming services to spotlight content with particularly low licensing fees in their recommendation lists," elaborates Jacopo Gambato, a researcher in ZEW's "Economics of Innovation and Industrial Dynamics". "Conversely, algorithms might curtail recommendations for pricier productions, as these usually come with higher licensing costs. This, in turn, would dampen their visibility," adds Luca Sandrini, a postdoctoral researcher at the Budapest University of Technology and Economics.