Is the Internet Bad News? The Online News Era and the Market for High-Quality News

Frijters, Paul and Velamuri, Malathi (2009): Is the Internet Bad News? The Online News Era and the Market for High-Quality News.

Abstract

We review and model the impact of the internet on the production and uptake of high- quality news. Our review of trends in the market for news suggests 3 stylized facts: i) particular quality news markets are dominated by merely a few providers, ii) demand for quality news appears stable, but provision of news has become specialized; mainstream news is decoupled from quality news, and iii) the dominant business model of internet news mirrors that of radio, television, and newspapers in that costs of news production are recouped via advertising. We build a stylized model that rationalizes these facts. Our model captures three conflicting effects: (1) economies of scale in the production of news lead to monopolies on particular markets, (2) easy access to information on the internet makes it cheaper to provide high-quality news and to disseminate it via the web, which increases the production of such news; and (3) the existence of bloggers and news aggregators who recycle the stories of news-providers reduces the effective property rights of high-quality news producers, thus forcing the business model of the internet to be advertising-based. For the most likely cases, our model would imply that the internet does not constitute bad news for the provision and uptake of quality news.

• Item Type: MPRA Paper
• Language: English
• Keywords: News quality; Internet; Monopolies; Search Costs; Advertising
• Subjects: L - Industrial Organization > L8 - Industry Studies: Services > L82 - Entertainment ; Media; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure ; Size Distribution of Firms; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L15 - Information and Product Quality ; Standardization and Compatibility

References

Baron, D. (2006): "Persistent media bias," Journal of Public Economics, 90, 1-36.

Berry, S., and J. Waldfogel (2001): "Do Mergers Increase Product Variety? Evidence From Radio Broadcasting," Quarterly Journal of Economics, 116(3), 1009-1025.

Carroll, J. (2007): "Foreign News Coverage: The U.S. Media's Undervalued Asset," Joan Shorenstein Center on the Press, Politics and Public Policy Working Paper Series Number 2007- 1.

Cooper, M., G. Kimmelman, and C. Leanza (2001): "Comments of Consumers Union, Consumer Federation of America, Civil Rights Forum, Center for Digi- tal Democracy, Leadership Conference on Civil Rights and Media Access Project," http://www.consumersunion.org/telecom/fccdc1201.htm.

Dertouzos, J., and W. Trautman (1990): "Economic Effects of Media Concentration: Esti- mates from a Model of the Newspaper Firm," Journal of Industrial Economics, 39(1), 1{14.

Drum, K. (2007): "A Blogger Says: Save The MSM!," http://www.motherjones.com/politics/2007/03/blogger-says-save-msm.

Filistrucchi, L. (2005): "The Impact of Internet on the Market for Daily Newspapers i Italy," European University Institute Working Paper No. ECO2005/12.

Gentzkow, M. (2007): "Valuing New Goods in a Model with Complementarity: Online Newspa- pers," American Economic Review, 97(3), 713-744.

Gentzkow, M., and J. Shapiro (2006): "Media Bias and Reputation," Journal of Political Economy, 114(2), 280-316.

-----(2007): "What Drives Media Slant? Evidence from U.S. Daily Newspapers," NBER Working Paper No.12707.

George, L. (2007): "What's t to print: The effect of ownership concentration on product variety in daily newspaper markets," Information Economics and Policy, 19, 285-303.

-----(2008): "The Internet and the Market for Daily Newspapers," B.E. Journal of Economic Analysis & Policy, 8(1).

Groseclose, T., and J. Milyo (2005): "A Measure of Media Bias," Quarterly Journal of Eco- nomics, CXX(4), 1191-1237.

Horrigan, J. (2006): "Online News: For Many Home Broadband Users, the Internet is a Primary News Source," Pew Internet and American Life Project.

Hume, E. (1996): "The New Paradigm for News," Annals of the American Academy of Political and Social Science, 546, 141-153.

Kaiser, U., and J. Wright (2006): "Price structure in two-sided markets: Evidence from the magazine industry," International Journal of Industrial Organization, 24, 1-28.

Knight, B., and C.F. Chiang (2008): "Media Bias and In uence: Evidence from Newspaper Endorsements," NBER Working Paper No. 14445.

Lawton, B. (2007): "Newspapers' Online Operations: Performance Report 2006," Newspaper Association of America Report.

Lenhart, A., and S. Fox (2006): "Bloggers: A portrait of the Internet's New Storytellers," Pew Internet and American Life Project.

McEwen, M. (2007): "Media Ownership; Rules Regulations and Practices in Selected Coun- tries and Their Potential Relevance to Canada," Report for the Canadian Radio-television and Telecommunications Commission.

Mullainathan, S., and A. Shleifer (2005): "The Market for News," American Economic Review, 95(4), 1031{1053.

NAA (2006): "The Source: Newspapers by the Numbers," Newspaper Association of America Report.

Neiva, E. (1995): "Chain Building: The Consolidation of the American Newspaper Industry, 1955-1980," Business and Economic History, 24(1), 22-26.

Nilsson, A., U. Nulden, and D. Olsson (2001): "Mobile Media: The Convergence of Media and Mobile Communications," Journal of Research into New Media Technologies, 7(1), 34-38.

Owen, B., and M. Spence (1977): "Television Programming, Monopolistic Competition, And Welfare," Quarterly Journal of Economics, 91(1), 103-126.

Patterson, T. (2000): "Doing Well and Doing Good: How Soft News and Critical Journalism Are Shrinking the News Audience and Weakening Democracy-And What News Outlets Can Do About It," John F. Kennedy School of Government Research Working Paper, RWP01-001.

PEJ (2006,2007,2008): "The State of the News Media," Annual Report on American Journalism.

Peterson, P. E. (2003): "Finding Americas Voice: A Strategy for Reinvigorating U.S. Public Diplomacy," Report for the U.S. Council on Foreign Relations.

Pew (2006a): "Maturing Internet News Audience - Broader Than Deep," Pew Research Center for the People and the Press Report.

-----(2006b): "Online News: For Many Home Broadband Users, the Internet is a Primary News Source," Pew Internet and American Life Project.

-----(2007): "Views of Press Values and Performance," Pew Research Center for the People and the Press Report.

-----(2008): "Home Broadband," Pew Internet and American Life Project.

Reddaway, W. (1963): "The Economics of Newspapers," Economic Journal, 73(290), 201-218.

Robinson, M. (2007): "The News Interest Index, 1986-2007: Two Decades of American News Preferences, Parts I and II," Pew Research Center for the People and the Press Report.

Rosse, J. (1967): "Daily Newspapers, Monopolistic Competition, and Economies of Scale," Amer- ican Economic Review, Papers and Proceedings of the Seventy-ninth Annual Meeting of the American Economic Association, 57(2), 522-533.

-----(1970): "Estimating Cost Function Parameters Without Using Cost Data: Illustrated Methodology," Econometrica, 28(2), 256-275.

Satloff, R. (2003): "How to Win Friends and In uence Arabs: Rethinking Public Diplomacy in the Middle East," Weekly Standard.

Stromberg, D. (2004): "Mass Media Competition, Political Competition, and Public Policy," Review of Economic Studies, 71(1), 265-284.