Discussion Paper Details

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Title: Newspapers in Times of Low Advertising Revenues

Author(s): Charles Angelucci and Julia Cagé

Publication Date: July 2016

Keyword(s): advertising, Newspaper industry, Newspaper quality, price discrimination and Two-sided markets

Programme Area(s): Industrial Organization and Public Economics

Abstract: Newspapers' advertising revenues have declined sharply in recent decades. We build a model to investigate the consequences on newspapers' content and prices of a reduction in advertisers' willingness to pay. Newspapers choose the size of their newsroom, and readers are heterogeneous in the relative amount of journalistic-intensive content they prefer. We show that a reduction in advertising revenues lowers newspapers' incentives to produce journalistic-intensive content, which affects the composition of their readership. We also build a unique dataset on French newspapers between 1960 and 1974 and perform a difference-in-differences analysis using a \quasi-natural experiment": the introduction of advertising on television, which affected national newspapers more severely than local ones. We find robust evidence of a decrease in both the amount of journalistic-intensive content produced and the subscription price, which may help rationalize current industry trends. We also provide evidence that national newspapers' readership became less educated and affluent following the change in prices and content.

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Bibliographic Reference

Angelucci, C and Cagé, J. 2016. 'Newspapers in Times of Low Advertising Revenues'. London, Centre for Economic Policy Research.