important consequences for the pricing model of newspapers and magazines. We also
review research on targeted advertising in print media.
In
Section 9.6, we review the literature on market power and antitrust in newspaper
and magazine markets, with a particular emphasis on the literature on mergers. We also
discuss joint operating agreements, vertical price restrictions, and restrictions on cross-
ownership of newspapers and other media.
In
Section 9.7, we turn to the effects of the Internet on traditional print media, on
both the subscription and advertising sides. We review the literature on whether a pub-
lication’s print and electronic editions are substitutes or complements. We then discuss
the research on how online competition affects print newspapers and magazines.
Finally, in
Section 9.8 we offer our concluding thoughts on the future of print media
and the challenges that this industry faces.
9.2. AN OVERVIEW OF THE PRINT MEDIA INDUSTRY
In this section, we present some stylized facts on print media. We begin with a history of
these media, emphasizing the newspaper industry in the United States. We then present
statistics and charts that summarize the current state of these industries. We also provide
references to standard data sources that researchers have relied on in the past.
9.2.1 A Short History of Newspapers
As we briefly mentioned in Section 9.1, the founders of the new United States provided
considerable support for the establishment of a reliable distribution network in the early
nineteenth century. At the time, both newsgathering and newspaper delivery were
dependent on horses and, to a certain extent, boats. This severely affected the time it took
to report on events: up to 28% of news stories were a month or more out of date
(
Blondheim, 1994). This situation would have also severely limited the geographic reach
of newspapers, but for the fact that they were granted subsidized postal rates, which
helped newspapers in the early nineteenth century to expand beyond extremely local
markets. In 1794, Congress set mailing rates for newspapers and magazines at less than
one-sixth of the cost of letters, and later many periodicals enjoyed free postal delivery.
2
New technologies in the 1830s reduced the cost of both ink and paper, as well as
improved the quality of printing presses (
Mott, 1950). With lower costs, newspapers
could afford to sharply reduce prices, which in turn led to large jumps in circulation.
A higher number of readers led to interesting changes in the political stances of newspa-
pers, as we discuss in
Section 9.2.2, and was a factor in changing the focus of newspapers
to cover more local news.
2
https://about.usps.com/who-we-are/postal-history/periodicals-postage-history.pdf
401Newspapers and Magazines
The advent of the telegraph in the 1840s sharply reduced the time to report stories,
which also made newspapers far more valuable and appealing to a broader audience. In
the 1870s and beyond, advertising became more important in newspaper markets. Large
national brands were emerging, led by the shrinking of distances brought about by the
railroads. At the same time, printing presses were becoming far more sophisticated but
also more expensive, thereby raising barriers to entry in the industry (
Hamilton, 2004).
Gentzkow et al. (2006) provide an informative discussion of how technological
changes in the late eighteenth and early nineteenth centuries allowed newspapers to
greatly increase their scale. They document how the introduction of a new process
for making paper from pulp in 1867 led to a sharp drop in the price of newsprint. This
made it feasible for newspapers to invest in other production improvements such as high-
speed printing technology. These investments, coupled with dramatic improvements in
communication brought on by the telegraph and the transatlantic cable, allowed news-
papers to substantially increase their scale of production. This also led a drop in newspaper
prices and, as a result, US newspaper subscriptions increased 12-fold between 1870
and 1920. By the end of this period, the average urban adult was purchasing more than
one newspaper per day and was very likely reading even more. These technological
improvements also led to a large increase in the number of newspapers, particularly
independent ones.
By the early twentieth century, newspapers had been growing without interruption
in terms of both circulation and influence. This would start to change with the
introduction of rival news media. The first challenge was posed by radio in the 1930s.
Newspapers’ ad revenue dropped by 28% between 1929 and 1941 (
FCC, 2011). Radio
stations were accused of copying newspaper stories, a charge that is being repeated with
regard to the Internet today. The steady growth in newspaper circulation began to slow
during this period, although it would take the introduction of another news medium for
newspaper circulation to actually start to decline.
The growth of television in the 1950s and beyond marked the start of a long-term
decline in newspapers in North America.
Gentzkow (2006) shows that television
expanded rapidly across the country: typically it took less than 5 years after the introduc-
tion of television in a given market for penetration to reach 70%. Gentzkow shows that
the growth of television is correlated with a decline in newspaper circulation. Moreover,
these forces end up reducing voter turnout, a topic to which we return in
Section 9.2.3.
Genesove (1999) discusses in detail the adoption of two new technologies in the US
newspaper industry in the 1960s: photocomposition and offset printing. Together, these
technologies reduced labor requirements, increased the print quality of the newspaper,
and also lowered the marginal costs of production. These came at the expense of
considerable one-time investment costs. Thus, adoption of the new technologies was
a strategic decision that depended not just on the newspaper’s own scale, but also on
the existing market structure. Genesove shows that the pattern of adoption of offset
402 Handbook of Media Economics
printing, in particular, was partially consistent with an economic model of preemption.
Among the set of monopoly newspapers, those of smaller scale were quicker to adopt the
technology. However, within duopoly markets, the newspaper with the smaller market
share was, on average, 4 years slower to adopt the offset press. Genesove stresses that this
was a period when a number of duopoly markets saw, or expected to see, exit by one of
the competitors, which complicated the adoption decision.
We postpone a detailed examination of the decline of newspapers to
Section 9.3.
Briefly, though, it is now clear that the deleterious effects of radio and television on news-
paper circulation continued throughout the twentieth century, in conjunction with
other factors. Newspapers have been steadily losing readers and revenue; when measured
in real terms and on a per-capita basis, these losses have been staggering, as we discuss in
detail in
Section 9.2.4. The challenges posed by the Internet have been immense, but the
Internet also provides a glimmer of hope for newspapers and magazines to possibly con-
tinue, and perhaps even thrive, in a new form, a topic that we return to in
Sections 9.7
and 9.8
.
9.2.2 Partisanship in Print Media
Television and radio news shows in contemporary America are often accused of political
bias. However, such accusations are leveled far less often against print media, with the
exception of influential national newspapers. This would seem strange by the standards
of the nineteenth century, when most newspapers were overtly partisan, in many cases
declaring explicit affiliations with one of the two major political parties. This led, in many
cases, to newspapers receiving funding not only from the parties, but also from the gov-
ernment.
Baldasty (1992) describes how printing contracts for the executive branch, and
for each chamber of Congress, went to three separate Washington, DC newspapers in the
1820s, with opposing political views.
Academic research on newspapers has covered the industry as early as the nineteenth
century, and the natural topic to examine from this time period was partisanship.
Gentzkow et al. (2006) point out that, unlike today, there was no expectation of unbiased
news coverage during most of the nineteenth century. As late as 1870, 89% of daily news-
papers in urban areas were affiliated with a political party. This situation changed dramat-
ically over the next 50 years, with a sharp rise in the proportion of newspapers that were
independent, along with a focus on hard news instead of on political scandals and partisan
reporting.
Gentzkow et al. (2006) document the rise of the informative press by showing
that the fraction of newspapers that claimed to be independent rose from 11% to 62%
between 1870 and 1920. This was due both to the switching of previously partisan papers
to becoming non-partisan, as well as the entry of independent papers. They use textual
analysis of newspaper articles over this period to show that there was a substantial drop in
partisan and biased language over this period. They also analyze newspaper coverage
403Newspapers and Magazines
of two major scandals: the Credit Mobilier scandal of the 1870s and the Teapot Dome
scandal of the 1920s. They show that the language used to cover these events changed
significantly over this 50-year period, with even partisan newspapers reducing their use
of inflammatory and accusatory language. Moreover, this period also saw the growth of
independent newspapers, which covered stories that were suppressed by the partisan
publications.
The reason for the growing independence of newspapers in this period was at least
partly due to improvements in technology, as described in
Section 9.2.1, which increased
the ability of newspapers to reach a much wider audience than before. Appealing to larger
audiences required newspapers to take less partisan positions. Newspapers therefore
focused more on hard news, often local in scope, instead of reporting on Washington
scandals and partisan positions (see
Hamilton, 2004; Starr, 2004).
Gentzkow et al. (2006) also show that the increase in the size of the newspaper market
between 1870 and 1920 was accompanied by an increase in the number of newspapers.
This increase in competition led newspapers to provide more information relative to
spin. Moreover, newspapers with higher circulation were more likely to be informative,
and to provide factual, important stories in a timely manner.
Onthesametopic,
Petrova (2011) uses data on American newspapers from 1880
to 1885 to sho w that the growth of an advertising market promotes media indepen-
dence from pol itical influence groups. Specifically, she sho ws tha t in areas with
faster-growing advertising markets, newspapers wer e more likely to be independent.
As was the case in
Gentzkow et al. (2006), Petrova shows that this was due both to
existing partisan newspapers becoming independent, and the entry of new, indepen-
dent papers.
9.2.3 Newspapers and the Electoral Process
Perhaps the most important effect of newspapers on society is their influence over
the electoral process. Recent empirical research has studied the relationship between
newspapers and the electoral process, and we attempt to summarize some of this research
here. Note that this chapter will not deal specifically with issues concerning media bias.
We refer readers to
Chapters 14 and 15 for detailed discussions of these issues.
Gentzkow et al. (2011)
examine how the entry and exit of newspapers affects electoral
politics. They show that the presence of an additional newspaper increases voter turnout
in both presidential and congressional elections by about 0.3 percentage points. This
effect is mostly driven by the entry of the first newspaper in a market, which increases
turnout by 1 percentage point; subsequent increases in competition have a much smaller
effect on political participation. This implies that, for the average adult, reading at least
one paper increases the probability of voting by 4 percentage points.
404 Handbook of Media Economics
Chiang and Knight (2011) estimate the extent to which newspaper endorsements
affect voting intentions in the US using survey data at the time of the 2000 and 2004
elections. They point out that many voters view the media as biased, and therefore it
is not clear that endorsements should sway voters’ minds, either because voters choose
to subscribe to newspapers which endorse their own political opinions, or because they
discount media opinions that are at odds with their own. Therefore, in their model,
Chiang and Knight allow readers to account for the credibility of endorsements. Nev-
ertheless, they find that newspaper endorsements do increase the likelihood of voting
for the endorsed candidate, but that this effect depends on the credibility of the endorse-
ment. Thus, an endorsement of a Democratic candidate from a left-leaning newspaper
carries less influence than one by a centrist of a right-leaning newspaper.
George and Waldfogel (2006) provide evidence that the national expansion of the
New York Times between 1996 and 2000 had a significant effect on local newspapers.
In particular, markets where the Times expanded its home delivery service saw circulation
declines in local newspapers among the type of readers targeted by the Times, which the
authors proxy by the share of the population that is college educated. As a result, there is
some evidence that local newspapers then repositioned their products, by providing more
local and less national coverage. This in turn may have led consumers of the type not
targeted by the Times to increase their consumption of the local paper. Concretely,
the results indicate that in areas with the highest penetration of the Times , local newspaper
circulation was 16% lower among highly educated readers and 7% higher among less edu-
cated readers than in markets with the lowest penetration of the Times . They also spec-
ulate on the possible effects on readers who do switch to consuming the Times.
Presumably these readers are now exposed to less local news, which may reduce their
engagement with local affairs, including local political participation.
The importance of the newspaper industry that these studies have highlighted perhaps
gives us some cause for concern. Newspapers have been instrumental in stimulating polit-
ical discourse, and
Gentzkow et al. (2006) show that an increase in the number and cir-
culation of newspapers in the early twentieth century was accompanied by an increase in
their informative content. But newspapers in their traditional form have been declining at
a rapid rate in a number of countries in recent decades. It is by no means clear that elec-
tronic media are ready to take the place of the world’s oldest and most powerful medium
of disseminating information.
9.2.4 Stylized Facts on Newspapers and Magazines
Table 9.1 plots the number of daily newspapers in the United States since 1940, using data
from the Newspaper Association of America. Two trends are apparent: first, that evening
newspapers, which used to be ubiquitous in mid-sized American cities, have rapidly
declined since the 1980s. Some of these evening papers converted to morning editions,
405Newspapers and Magazines
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