The availability of non-local products in competition with products that had previ-
ously faced only local competition has had major effects. For example, according to the
Newspaper Association of America, combined subscription and advertising revenue fell
by over 50% from 2000 to 2010.
41
According to Arbitron, radio listening fell 15%
between 1998 and 2007.
42
Many local products have languished in the face of non-local competition. For exam-
ple, many newspapers have folded in the past decade. Some have raised concerns that the
decline of local newspapers will make it difficult for consumers and citizens to remain
well informed. Yet it should be noted that the Internet has also given consumers ready
access to information that is not disintermediated. Whether consumers would grow less
well informed is an open question.
Technological change has reduced the costs of producing media products and has
increased market size by linking consumers together via the Internet. Together, of
course, these developments reinforce the reduction in fixed costs relative to market size
and may mitigate the occurrence of preference externalities. While new technology
reduces the cost of delivering basic products, access to many consumers can give rise
to costs that are endogenously large as firms vie for enlarged—and potentially
global—audiences. Preference externalities are likely to be with us for some time,
although the specific contexts where they arise may change.
ACKNOWLEDGMENTS
We thank Lisa George for useful comments, and Alison Oldham for research assistance. The first author
gratefully acknowledges the NSF for support.
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