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split it to make it somewhat possible for both creators to meet the threshold. Regarding
the production cost, the idea is roughly the same. When the cost is quite high, allocating
anything to the low-type creator has a tiny effect on increasing the effort level. When
the cost is quite low, allocating everything to the high-type creator is good enough. The
splitting strategy is optimal if and only if the cost is neither too high nor too low.

Optimal Advertorial Allocation and Contract Design of a Multichannel Networks Company on Video Sharing
Platforms
Figure 6: Impact of the advertorial fee and production cost on advertorial allocation

type creator has a tiny effect on increasing the effort level. When the cost is quite low,
5. Comparison among the Three Structures
allocating everything to the high-type creator is good enough. The splitting strategy is
optimal if and only if the cost is neither too high nor too low.
5.1 The Independent-MCN Structure (I) versus the No-MCN One (N)
5. Comparison among the Three Structures
It is shown that under structure N, the advertorial would always wholly be
To figure out how the existence of the MCN (the intermediary) would affect the
allocated to the high-type creator, and the low-type creator would never get the
5.1 The Independent-MCN Structure (I) versus the No-MCN One (N)
business environment, we compare structure I and structure N regarding the advertorial
advertorial. However, under structure I, the low-type creator may get partial advertorial
To figure out how the existence of the MCN (the intermediary) would affect the
allocation decision.
business environment, we compare structure I and structure N regarding the advertorial
under certain circumstances. It is because the MCN cares about maximizing the profit
allocation decision.
Proposition 3. The optimal advertorial allocation decision under structure N is
it gets from the advertorial revenue sharing, whereas the business owner cares only
Proposition 3: The optimal advertorial allocation decision under structure N is

=1≥ . hreshold. Since the revenue sharing
about maximizing the probability of reaching the t (3) (3)
�
�
It is shown that under structure N, the advertorial would always wholly be allocated
percentage that the MCN gets from the low-type creator is usually larger than the one

to the high-type creator, and the low-type creator would never get the advertorial.
However, under structure I, the low-type creator may get partial advertorial under certain
from the high type, the MCN may want to allocate partial advertorial fees to the low-
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circumstances. It is because the MCN cares about maximizing the profit it gets from the

type creator under certain circumstances. As for the business owner in structure N,
advertorial revenue sharing, whereas the business owner cares only about maximizing
the probability of reaching the threshold. Since the revenue sharing percentage that the
allocating all the advertorial to the more capable creator is the only way to maximize
MCN gets from the low-type creator is usually larger than the one from the high type, the
the probability of reaching the threshold. The comparison between structures I and N
MCN may want to allocate partial advertorial fees to the low-type creator under certain
circumstances. As for the business owner in structure N, allocating all the advertorial
indicates that the existence of the MCN creates more opportunities for weaker creators
to the more capable creator is the only way to maximize the probability of reaching the
and thus boosts the diversification of sharing platforms.
threshold. The comparison between structures I and N indicates that the existence of the
MCN creates more opportunities for weaker creators and thus boosts the diversification of
One may wonder whether the above finding still holds if the independent MCN
sharing platforms.
does not (or cannot) adopt revenue sharing. In this case, the independent MCN’s
One may wonder whether the above finding still holds if the independent MCN does
not (or cannot) adopt revenue sharing. In this case, the independent MCN’s expected profit
expected profit function becomes
function becomes
(1 − )(1 − ) (1 − )
�
�
�
�
� �
� �
� �
� �
and straightforward numerical studies show that the optimal x may still be less than
and straightforward numerical studies show that the optimal may still be less than 1.
1. In other words, the existence of an independent MCN still benefits weaker creators
regardless of the adoption of revenue sharing.
In other words, the existence of an independent MCN still benefits weaker creators
regardless of the adoption of revenue sharing.
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5.2 The Independent-MCN Structure (I) versus the Leagued-MCN
One (L)

To see how the ownership of MCN affects the industry, we further compare the

independent-MCN structure (I) and the leagued-MCN structure (L) regarding the
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