85 Pages Posted: 24 Nov 2015 Last revised: 16 Mar 2017
Date Written: February 22, 2017
We estimate the welfare consequences of local news broadcasting decisions in advertiser-funded television, a question that has played a central role in US regulation of media markets. We treat station broadcasting decisions as the outcome of a discrete game in which stations choose programming to maximize advertising revenue, which depends upon viewership. Using program-level data on television viewing and advertising prices during the 5-8 p.m. evening news hours, we find that local news is under-provided relative to the viewer optimum. Counterfactual simulations suggest that welfare loss arises in part from the higher value advertisers place on entertainment viewers in a two-sided market framework. However in many markets additional local news broadcasting would increase joint station revenues as well as viewing, indicating that classic business stealing also plays a role in welfare outcomes.
Keywords: Television, media, welfare, news
JEL Classification: L82, L1
Suggested Citation: Suggested Citation
Baker, Matthew and George, Lisa Megargle, The News Hour: Welfare Estimation in the Market for Local TV News (February 22, 2017). Available at SSRN: https://ssrn.com/abstract=2694687 or http://dx.doi.org/10.2139/ssrn.2694687