Optimal Advertorial Allocation and Contract Design of a Multichannel Networks Company on Video Sharing Platforms

Abstract

Multichannel Networks (MCN) companies arise due to booming video-sharing platforms like YouTube. MCN companies sign creators who produce and publish videos on video-sharing platforms. In addition to the advertising revenue from the platforms, the companies and creators can earn revenue by completing advertorial tasks delegated by business owners. In this study, we study how an MCN company allocates an advertorial task and designs revenue-sharing contracts for creators with different abilities to attract online viewers. We find that the MCN company may not always allocate an advertorial task only to the most outstanding creator. When the creators’ abilities are not too distinct, and the advertorial fee and the cost for creating a video are moderate, a splitting strategy (i.e., allocating the task to multiple creators) could be optimal. By comparing different industry structures, we also show that the splitting strategy cannot be optimal without independent MCN companies. In other words, independent MCN companies may make video-sharing platforms more diversified.