The News Hour: Welfare Estimation in the Market for Local TV News
65 Pages Posted: 24 Nov 2015 Last revised: 2 Feb 2019
Date Written: January 31, 2019
We estimate the welfare consequences of local news broadcasting decisions in advertiser-funded television, a central question in media regulation. We model programming decisions as the outcome of a discrete game played by rival stations that compete for advertising revenue (which depends on viewing) by setting lineups of local news and entertainment broadcasts. Using program-level data on television viewing and advertising prices during evening news hours, we find modest under-provision of local news relative to the levels that maximize viewership, a deficit of about 5 broadcasts per market or 10% of evening timeslots on average. Counterfactual simulations indicate two sources of welfare loss, from the higher value advertisers place on entertainment viewers in a two-sided market context but also from classic business stealing. Losses from competition predominate, with an estimated shortfall of 3 local news broadcasts or 6% of timeslots relative to schedules that maximize joint station profits.
Keywords: Television, media, welfare, news
JEL Classification: L82, L1
Suggested Citation: Suggested Citation