Newspapers in Times of Low Advertising Revenues

60 Pages Posted: 7 Oct 2013 Last revised: 22 Jul 2016

Charles Angelucci

Columbia University

Julia Cage

Sciences Po Paris Department of Economics

Date Written: July 21, 2016

Abstract

Newspapers’ advertising revenues have declined sharply in recent decades. We build a model to investigate the consequences on newspapers’ pricing and quality choices of a reduction in advertisers’ willingness to pay for readers' attention. In our model, selling subscriptions in addition to newsstand issues allows to price discriminate between readers. We show that lower advertising revenues decrease newspapers’ incentives to provide quality, which increases newspapers’ incentive to price discriminate whenever readers’ sensitivity to quality is sufficiently high. We 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 in 1968, which affects national newspapers more severely than local ones. We find robust evidence of increased price discrimination and decreased quality as a result of the drop in advertising revenues, which may help rationalize current industry trends.

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 (July 21, 2016). 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

Paper statistics

Downloads
159
Rank
149,587
Abstract Views
929