Handbook on the Economics of the Internet
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Handbook on the Economics of the Internet

Edited by Johannes M. Bauer and Michael Latzer

As the single most important general purpose technology of recent times, the Internet is transforming the organization, competitive structure and business models of the private, the public and non-profit sectors. In 27 original chapters, leading authors discuss theoretical and applied frameworks for the study of the economics of the Internet and its unique economics as a global information and communications infrastructure. They also examine the effects of the Internet on economic transactions (including social production, advertising, innovation, and intellectual property rights), the economics and management of Internet-based industries (including search, news, entertainment, culture, and virtual worlds), and the effects of the Internet on the economy at large.
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Chapter 22: The economics of online video entertainment

Ryland Sherman and David Waterman


Although online video entertainment dates back to the mid-1990s, its revenue models, market structure, and programming content continue to evolve. Driving these changes have been dramatic technological advances, accompanied by rapid broadband Internet adoption, from about 3 percent of households in 2000, to about two-thirds of households only a decade later, and by a growing migration of consumers from offline to online media delivery systems. In this chapter we address some broad questions about this industry to provide a framework for thinking about its economic future. Has Internet distribution of video entertainment created real economic value for consumers, relative to established ‘offline’ media? How are its market structure and revenue models evolving? How does Internet entertainment programming differ from offline media? While our answers are necessarily incomplete, patterns of market organization, income sources, programming content, and other characteristics of this industry have now emerged. For our purposes, we consider online video entertainment to be the streaming or downloading of videos to a personal computer or other Internet-connected media device. Our main focus is on professionally produced content, but user-generated video is a remarkable part of the online video entertainment landscape, and is also part of this study. We thus focus on television, movies, and similar forms of video entertainment, or what has been widely regarded as the ‘over-the-top’ (OTT) video industry.

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