Abstract
We review the Economics literature on newspapers and magazines. Our emphasis is on the newspaper
industry, especially in the United States, given that this has been the focus of existing research. We first
discuss the structure of print media markets, describing the rise in the number of daily newspapers
during the early twentieth century and then the steady decline since the 1940s. We discuss print media
in the context of two-sided markets, noting that empirical papers on the newspaper industry were
some of the earliest studies to use the techniques of two-sided market estimation. We then review
the research on advertising in print media, particularly the question of whether readers value print
advertising as a good or a bad thing. We summarize the research on antitrust-related issues in news-
paper markets, including mergers, joint operating agreements, and vertical price restrictions. We then
review recent research on how print media have been affected by the growth of the Internet. Finally,
we offer suggestions for future research and provide thoughts on the future of this industry.
Keywords
Magazines, Newspapers, Two-sided markets, History of newspapers, Pricing behavior, Advertising, Joint
operating agreements, Mergers, Vertical price restrictions, Online competition
JEL Codes
D4, D21, D22, D24, K21, L82, L86, M37
9.1. INTROD UCTION
This chapter reviews the Economics literature on newspapers and magazines, possibly the
two oldest and most influential media in history. We attempt to summarize a vast liter-
ature, both theoretical and empirical, on print media. This is especially challenging since
this industry has undergone enormous changes since its inception, continues to evolve at
a rapid speed today, and also varies in form and structure across cities and countries. Our
emphasis will be on the newspaper industry, given the preponderance of research in this
area. Out of necessity, our review of empirical research will also focus mostly on the
newspaper industry in the United States, again reflecting the great majority of empirical
research thus far.
Print media, especially newspapers, are vital in political and economic discourse.
Society tends to attach particular importance to the newspaper industry as it has tradition-
ally been an important source of information that affects civic participation, but has also
often been monopolized in small local markets.
1
This chapter will examine the economic
forces surrounding these issues, as well as summarize research on the history of print
media, on advertising in these media, and on the relationship between print media
and the Internet.
The importance of newspapers to the democratic process, and in informing citizens,
has long been recognized. In the early years of the United States, its founders viewed
1
This issue is discussed further in Chapters 8, 14, 15, 16, 17, and 19.
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Handbook of Media Economics
newspapers as critical for the development of the new country. They provided the news-
papers of the day with subsidized postal rates and helped create a reliable distribution net-
work (
Federal Communications Commission, 2011). Newspapers have been considered
so integral to civic participation that policymakers are not content with relying on market
provision of this good, and have often exempted newspapers from regulations that would
normally apply in other industries. Perhaps the most famous example of this is the US
Newspaper Preservation Act of 1970, which carved out an exemption for newspapers
from the usual provisions of antitrust laws. Under the Act, newspapers that would nor-
mally compete in the same market were allowed to form joint operating agreements
(JOAs), which allowed them to combine their business operations—in particular, the
advertising side of the business—while maintaining separate news divisions. The stated
goal of the legislation was to allow certain markets to support multiple newspapers, where
otherwise circulation declines would have led to a monopoly.
At the same time, newspapers have usually been given free rein with regard to their
content, in contrast to broadcast media such as radio. As discussed in
Chapter 8, the fact
that broadcast media use publicly owned spectrum has allowed a certain level of content
regulation that has never been the case in the newspaper industry. Indeed, Gentzkow
et al. (2006), discussed in more detail in Section 9.2, point out that in the past US news-
papers never even made an attempt to claim an independent position, instead advertising
their allegiance to certain political parties and publishing overtly partisan coverage of
events.
Another major difference between the newspaper industry and broadcast media lies in
market structure. There are often a large number of radio and television stations within a
metropolitan area, and television, in particular, offers most consumers a wide range of
local as well as national programming. By contrast, most newspaper consumption, in
North America at least, tends to be strongly local. Moreover, the importance of econ-
omies of scale in this industry leads most cities to be local monopolies or duopolies at best,
with recent years seeing a sharp decline in competition. Understanding the economic
causes and consequences of local concentration is therefore extremely important.
Undoubtedly, though, the most important issue affecting the industry these days is the
dramatic decline in both circulation and advertising revenues, particularly in newspapers,
and the challenges posed by online media. As we will see later in this chapter, real adver-
tising revenues in US newspapers have dropped by almost 70% since 2000, driven by a
combination of declining circulation, cheaper and more effective online advertising
options, and the severe effects of the 2008 financial crisis and its aftermath. Whether print
newspapers will survive in their current form is an open question. Some industry
observers believe that over the long term newspapers will simply change their form to
purely digital versions. Even if so, it remains to be seen whether the electronic press
can take the place of traditional daily newspapers with regard to providing factual, infor-
mative coverage of news events.
399Newspapers and Magazines
For magazines, the situation is not quite the same. While the two industries have
much in common, the greatest difference lies in market structure. Newspapers, especially
in North America, have traditionally operated in local markets, which is one reason why
the Internet has disrupted this business so much, by suddenly introducing competition
from around the country and the world. Magazines, by contrast, have always operated
on a national scale and have therefore not been affected severely by digital media. More-
over, magazines have always needed to find ways to differentiate themselves through
their choice of subject matter, in a way that newspapers have often not needed.
These differences perhaps explain the divergent fortunes of the newspaper and mag-
azine industries in recent years. While newspapers have experienced dramatic declines,
many countries have experienced a growth in the number of magazines in recent years.
Data in the US suggests that magazine circulation and advertising revenues have
remained relatively strong over the past two decades, as we will discuss in more detail
in
Section 9.2. Moreover, while a number of magazine titles have closed, there has also
been entry in recent years. As with newspapers, however, the advent of the Internet may
radically affect the physical form that magazines take, and it remains to be seen whether
digital advertising revenues can match those of print editions.
The rest of this chapter organizes the economic literature on print media according to
what we believe to be the most natural division of topics. In
Section 9.2, we provide an
overview of the print media industry, with an emphasis on the history of the newspaper
industry, particularly that of the United States. We present some stylized facts on the
industry and also discuss data sources for empirical researchers.
In
Section 9.3, we discuss market structure in print media, in particular—the number
of firms that the industry can support and the importance of economies of scale in this
industry. We discuss in detail the structure of newspaper markets in the United States, and
examine the reasons that the number of daily newspapers has fluctuated considerably over
time, rising rapidly from the mid-1800s until about 1920, and then declining steadily
since then.
In
Section 9.4, we discuss the economics of print media, especially in the context of
the recent and rapidly growing literature on two-sided markets. In fact, economists
working on the print media industry were confronted with the challenges of two-sided
markets—such as the estimation of multiple, interrelated demand models and cross-price
elasticities—well before the development of the current literature on two-sided markets
and its associated tools. We therefore first discuss an older literature on demand estima-
tion in newspapers and magazines, before surveying the more recent research in this area.
In
Section 9.5, we review the literature on advertising in newspapers and magazines.
Our focus in this section is on papers that examine the intermediary role of print media in
transmitting advertising messages to readers, as opposed to a more general analysis of the
literature on advertising, which is enormous. In particular, we review the research on
whether readers of print media value advertising positively or negatively, which has
400 Handbook of Media Economics
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