Response to Entry in Streaming Markets: A Game-Theoretic Model

The rise of new entrants in content-streaming markets has intensified competition for incumbents such as Netflix, prompting a reassessment of pricing and content strategies. This study analyzes an incumbent platform offering both exclusive and nonexclusive content facing an entrant that provides only nonexclusive content under subscription or usage-based pricing. We develop an analytical framework incorporating consumer heterogeneity, consumption intensity, content acquisition costs, and entrant pricing. Our findings show that incumbents do not always differentiate their pricing and may match the entrant’s pricing strategy under certain conditions. Entry depends on a cost threshold shaped by consumer valuation and incumbent response, and higher valuation does not always increase entry incentives, as incumbents can strategically deter entry. We also find that entrants may invest more in content when acquisition costs and exclusivity appreciation are low, and incumbents do not always enjoy a positional advantage, as profitability depends on market conditions. Overall, the study provides actionable insights, highlighting the need for platforms to align pricing and content strategies with consumer behavior, competitive dynamics, and content characteristics in evolving streaming markets.