50 Pages Posted: 7 Oct 2013 Last revised: 18 Jun 2017
Date Written: June 17, 2017
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: 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