LAUSR

In this paper, we investigate the optimal subscription strategy for network video platforms and show how it is affected by social influence. The strategy decision is made among paid strategies, free strategies, and trial strategies, and revenue models are presented in two cases: positive social influence and negative social influence. We show that regardless of which strategy a platform adopts, positive social influence always makes a platform better. Results run counter to the conventional wisdom that positive social influence has an adverse effect on subscription demand without a free trial, which is benefited under negative social influence. A platform can always benefit from offering trial clips in the presence of positive social influence. A paid strategy is optimal if a video generates less social influence and advertising becomes more of a nuisance for consumers. A free strategy, otherwise, is dominant. In the presence of negative social influence, however, a free strategy is always the worst choice for a platform. Moreover, we found that positive social influence expands a consumer’s tolerance of advertising when compared to a video with no social influence.