Effects of In-house and Wire Content Mix on Online Newspaper Subscriptions

Abstract

Declining circulation and advertising revenue have led many small and midsized newspapers to cut costs by reducing in-house staff and sourcing more content from external wire agencies. Inhouse production provides unique content that readers value, while wire content (though nonexclusive) offers convenient access to a broader range of topics at a lower cost. How should newspapers choose the mix of content from these two sources, particularly when increasing share of their revenue is coming from subscriptions? To provide some guidance, we theoretically predict of how content mix affects subscription under a metered paywall. We empirically evaluate the predictions by measuring the effect of the share of in-house content on online readers' subscription decisions using data from a regional U.S. newspaper. To control for sample selection bias (for example, from readers visiting the site on days with their preferred content), we use local precipitation as an excluded variable to indirectly randomize readers' exposure to content mix. We find that increasing the share of in-house content by 1% would, on average, increase daily subscriptions by 0.024% (9% of the baseline) and by another 0.009% (4% of the baseline) if readers face a paywall. The share of in-house content has a lower positive effect on local readers, likely to appreciate the convenience of broad coverage from wire, compared to readers from afar. These results show that, on average, differentiating through in-house content increases subscriptions. However, newspapers can customize presentations to different readers to better deliver on the service they demand.

Keywords: Online Newspapers, Content Sourcing Strategy, Paywall, Willingness to Pay, Endogenous Switching

JEL Classification: M1, M3