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Newspaper Economics Principal features Firms and markets Newspapers a $59 billion industry Most dailies have monopoly markets Competition restricted to differentiated newspapers for distinctive audiences Newspaper ownership Historically individual/family Now large chains own most

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newspaper economics

Newspaper Economics

Principal features

firms and markets
Firms and markets
  • Newspapers a $59 billion industry
  • Most dailies have monopoly markets
  • Competition restricted to differentiated newspapers for distinctive audiences
newspaper ownership
Newspaper ownership
  • Historically individual/family
  • Now large chains own most
    • Tribune, Gannett, McClatchey, Knight Ridder, etc
  • Only 25% not owned by chains
competition
Competition
  • Most large cities used to have competing newspapers, morning & evening
  • Now most have only one major newspaper
slide5
JOAs
  • joint operating agreements
  • Newspaper Preservation Act of 1970
  • 2 papers operate certain business aspects together
  • E.g., presses, classified ads, distribution
  • Exempt from antitrust laws
advertising
Advertising
  • “the fuel that makes mass media run”
  • Establishes the “news hole”
  • Newspaper advertisers target mass as opposed to segmented audiences
  • Makes competition virtually impossible.
advertising7
Advertising
  • Newspapers receive ~27% of all advertising dollars, the largest amount spent on any medium.
high costs of entry
High costs of entry
  • technology costs
  • advertiser preferences
financial performance
Financial Performance
  • Very profitable with high asset values
  • Average 100,000 circulation newspaper makes a 15.6 percent annual pre-tax profit margin
slide10
Dual product market: sales & ads
  • 2/3 of content is advertising
  • Circulation revenue accounts for 20-35% of revenues.
  • Editorial content accounts for only 16% of costs
cost structure
Cost Structure
  • Printing 30-35%, of which half is for newsprint.
  • Enjoy large economies of scale
government aid
Government Aid
  • Exemptions from newspaper and advertising sales taxes.
  • Regulatory relief from wage and hour laws.
  • Postal rate advantages
  • Antitrust exemptions for JOAs