Organizing distribution channels for information goods on the Internet

Rajiv Dewan, Marshall Freimer, Abraham Seidmann

Research output: Contribution to journalArticlepeer-review

42 Scopus citations

Abstract

Rapid technological developments and deregulation of the telecommunications industry changed the way in which content providers distribute and price their goods and services. Instead of selling a bundle of content and access through proprietary networks, these firms are shifting their distribution channels to the Internet. In this new setting, the content and Internet service providers find themselves in a relationship that is simultaneously cooperative and competitive. We find that proprietary content providers prefer the Internet channels to direct channels only if the access market is sufficiently competitive. Furthermore, maintaining a direct channel in addition to the Internet channels changes the equilibrium enough that the proprietary content providers prefer having the Internet channels, regardless of the level of competition in the access market. Telecommunications technology developments uniformly increase content providers' profit. On the other hand, the technology impact on Internet service provider profits is nonmonotonic: Their profits may increase or decrease as a result of lower telecommunication costs. While initially the ISP profit increases as more customers are drawn to the Internet, it eventually decreases as the spatial competition becomes more intense. We also show that proprietary content providers should benefit from having some free content available at the Internet service providers' sites to induce more customers to join the Internet.

Original languageEnglish (US)
Pages (from-to)483-495
Number of pages13
JournalManagement Science
Volume46
Issue number4
DOIs
StatePublished - Apr 2000
Externally publishedYes

ASJC Scopus subject areas

  • Strategy and Management
  • Management Science and Operations Research

Fingerprint

Dive into the research topics of 'Organizing distribution channels for information goods on the Internet'. Together they form a unique fingerprint.

Cite this