Newspapers in Times of Low Advertising Revenues

50 Pages Posted: 7 Oct 2013 Last revised: 18 Jun 2017

Charles Angelucci

Columbia University

Julia Cage

Sciences Po Paris Department of Economics; Centre for Economic Policy Research (CEPR)

Date Written: June 17, 2017

Abstract

Newspapers’ advertising revenues have declined sharply in recent decades. We build a model to investigate the consequences on newspapers’ content and prices of a reduction in advertisers’ willingness to pay. Newspapers choose the size of their newsroom, and readers are heterogeneous in the relative amount of journalistic-intensive content they prefer. We show that a reduction in advertising revenues lowers newspapers’ incentives to pro- duce journalistic-intensive content, which affects the composition of their readership. We then build a unique dataset on French newspapers between 1960 and 1974 and perform a difference-in-differences analysis using a “quasi-natural experiment”: the introduction of advertising on television, which affected national newspapers more severely than local ones. We find robust evidence of a decrease in both the amount of journalistic-intensive content produced and the subscription price, which may help rationalize current industry trends. We also provide evidence that national newspapers’ readership became less educated and affluent following the change in prices and content.

Keywords: Newspaper industry, Two-sided markets, Price discrimination, Advertising, Newspaper quality

JEL Classification: L11, L15, M37

Suggested Citation

Angelucci, Charles and Cage, Julia, Newspapers in Times of Low Advertising Revenues (June 17, 2017). NET Institute Working Paper No. 13-13. Available at SSRN: https://ssrn.com/abstract=2335743 or http://dx.doi.org/10.2139/ssrn.2335743

Charles Angelucci (Contact Author)

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States

Julia Cage

Sciences Po Paris Department of Economics ( email )

28 Rue des Saints-Pères
Paris, 75007
France

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

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