Abstract: This paper studies the operation of self-produced content of an online video platform, who engages in a three-stage game with an embedded ads sponsor, involving decisions of embedded ads price, embedded ads quantity, consumer subscription fee, and pre-roll ads quantity. The game is analyzed and compared under two different pricing modes of the embedded ads, i.e., CPT (cost per time) and CPM (cost per mille). The results show that when the revenue rate of the embedded ads sponsor is below certain thresholds, the platform under both CPT and CPM only places pre-roll ads; otherwise, the platform will place both embedded ads and pre-roll ads under CPT, while only places embedded ads under CPM. Comparisons show that CPT and CPM are equivalent when the revenue rate of the embedded ads sponsor is low; otherwise, the CPM mode leads to higher price and quantity of embedded ads, lower subscription fee and pre-roll ads quantity, and higher platform profit and consumer utilities. The embedded ads sponsor prefers CPM when its revenue rate is moderate and prefers CPT when its revenue rate is high.

Key words: online videos, self-produced content, embedded ads, pre-roll ads, video pricing