Business models for streaming platforms: content acquisition, advertising and users

A streaming platform obtains contents from artists and offers commercial spaces to advertisers. Users value contents’ variety and quality of the service and are heterogeneously bothered by ads. Two solutions can be proposed to users. If they pay a positive price, they subscribe to a commercial-free service with an upgrade of quality (Premium). Otherwise, they have free access to a service of a basic quality. We find that a wider audience gives incentives to the platform to increase both the advertising intensity and the quality upgrade in the Premium. As a consequence, some people move to the Premium. At the limit, the platform opts for a purely subscription-based business model as the audience reaches a certain level. The parsimonious model we propose is able to give a rationale to the emergence of different business models in the streaming market as well as to the (end of the) disputes between artists and the Spotify model.