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

design problem of an MCN company on a video-sharing platform with the consideration
of advertorial allocation. Our work thus contributes to the literature.

3. Model

To answer our research questions, we construct stylized models to describe the
interaction among an independent MCN company and multiple creators. To better
understand the impact of the existence of the MCN company, we consider three types of
industry structures: (1) the independent-MCN structure (structure I), (2) the leagued-MCN
structure (structure L), and (3) the no-MCN structure (structure N). These three types of
models are based on different kinds of cooperative relationships among creators and MCN

companies in the real business world. Structure I reflects the most common format adopted
by famous MCN companies, including Fullscreen (based in America) and CAPSULE
(based in Taiwan), and many other creators; structure L is built up based on studios
established by a group of creators who are close friends or siblings (such as This Group
Of People and Huang Brothers in Taiwan); structure N depicts the scenario which most of
the beginning YouTubers face at their initial stage. By characterizing the players’ optimal
decisions and equilibrium outcomes, we draw managerial implications.

3.1 The Independent-MCN Structure (I)

3.1.1 The Basic Setting
Under the independent-MCN structure, we have three players: an MCN company (it),
a high-type creator (she), and a low-type creator (he), where the high-type creator is more
capable of attracting audiences than the low-type one (e.g., by having a larger number of
subscribers or more views per video). Each of the two creators may make a video. The
industry structure with an independent MCN is depicted in Figure 1.

Figure 1 The Independent-MCN Structure

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ϕ ϕ
H L