Newspaper Economics

1
Newspaper Economics

• Principal features

2
Firms and markets

• Newspapers a 59 billion industry
• Most dailies have monopoly markets
• Competition restricted to differentiated
  newspapers for distinctive audiences

3
Newspaper ownership

• Historically individual/family
• Now large chains own most
• Tribune, Gannett, McClatchey, Knight Ridder, etc
• Only 25 not owned by chains

4
Competition

• Most large cities used to have competing
  newspapers, morning evening
• Now most have only one major newspaper

5
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

6
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.

7
Advertising

• Newspapers receive 27 of all advertising
  dollars, the largest amount spent on any medium.
  

8
High costs of entry

• technology costs
• advertiser preferences

9
Financial Performance

• Very profitable with high asset values
• Average 100,000 circulation newspaper makes a
  15.6 percent annual pre-tax profit margin

10

• 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

11
Cost Structure

• Printing 30-35, of which half is for newsprint.
• Enjoy large economies of scale

12
Government Aid

• Exemptions from newspaper and advertising sales
  taxes.
• Regulatory relief from wage and hour laws.
• Postal rate advantages
• Antitrust exemptions for JOAs