Compensating Online Content Producers: A Theoretical Analysis

Abstract

The digital content industry is rapidly growing, and many platforms host a vast amount of content that is produced by independent producers. A major source of revenue for these platforms is advertising. However, advertising revenue depends on the number of active customers who visit the platform and enjoy content created by content producers. Therefore, major platforms provide incentives for content producers to encourage high-quality content creation. A commonly used incentive is ad revenue sharing. In this paper, we study how such sharing incentives are affected by the nature of competition among various producers, the size of customer base, and the type of customers. We also examine the implications for profits and welfare and extend the analysis to consider the case when the platform allows consumers to directly donate to the producers. Our results show that increased producer competition can lead to higher compensation for the producers, higher content quality, and higher producers’ profits. We also show that allowing consumers to donate to producers can lead to a higher commission rate and better-quality content. However, increased consumer generosity may lead to lower profits for content producers. In addition, we find that asymmetry among producers can sometimes benefit the platform. This paper was accepted by Matthew Shum, marketing.

Video‐sharing platform's optimal monetary incentive decisions considering motivation crowding‐out effect

“…Contributors can exert effort to increase the quality of their videos. Similar assumption was also employed by Berman and Katona (2020) and Jain and Qian (2021).…”

“…Moreover, few researches have explored the impact of introducing monetary incentives on both UGC quality and platform profits. Our paper is closely related to the work of Ren et al (2012), Jain and Qian (2021), Liu and Feng (2021). Ren et al (2012), Jain and Qian (2021) analytically study the design of platforms' incentive schemes.…”

“…Our paper is closely related to the work of Ren et al (2012), Jain and Qian (2021), Liu and Feng (2021). Ren et al (2012), Jain and Qian (2021) analytically study the design of platforms' incentive schemes. However, they both ignore the motivation crowdingout effect.…”

“…Unlike the aforementioned researches, Ren et al (2012) and Jain and Qian (2021) consider a different setting where monetary incentives are offered by online content platforms to stimulate content contributors. Ren et al (2012) study the design of the optimal payment scheme of a UGC platform ignoring the motivation crowding‐out effect.…”

The Tip of the Iceberg: A Roadmap for Management Research on Tipping

“…Recently we have seen a surge in tipping in contexts with traditionally weaker or non-existent tipping norms, which include industries like limited-service restaurants, coffee chains, and some retail establishments (e.g., Karabas et al, 2020; Wilson & Setter, 2020), and countries like Sweden (Mulinari, 2019) and the United Kingdom (Jones, 2020). Tipping has also spread to new industries with wholly different compensation structures like gig work platforms and live-streaming services (Jain & Qian, 2021; Wilson & Setter, 2020). Curiously, in tandem with the rise of tipping in newer contexts, we are seeing concerted efforts by some actors to abandon long-standing tipping practices, like some full-service restaurants and cruise ships (Azar, 2020; Ren, 2021).…”