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Is the Internet Bad News? The Online News Era and the Market for High-Quality News

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Author Info

  • Frijters Paul

    (University of Queensland)

  • Velamuri Malathi

    (Victoria University of Wellington)

Abstract

We review and model the impact of the internet on the production and uptake of high-quality news. Our review of trends in the market for news suggests three stylized facts: i) particular quality news markets are dominated by merely a few providers, ii) demand for quality news appears stable, but provision of news has become specialized; mainstream news is decoupled from quality news, and iii) the dominant business model of internet news mirrors that of radio, television, and newspapers in that costs of news production are recouped via advertising. We build a stylized model that rationalizes these facts. Our model captures three conflicting effects: (1) economies of scale in the production of news lead to monopolies on particular markets, (2) easy access to information on the internet makes it cheaper to provide high-quality news and to disseminate it via the web, which increases the production of such news; and (3) the existence of bloggers and news aggregators who recycle the stories of news-providers reduces the effective property rights of high-quality news producers, thus forcing the business model of the internet to be advertising-based. For the most likely cases, our model would imply that the internet does not constitute bad news for the provision and uptake of quality news.

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Bibliographic Info

Article provided by De Gruyter in its journal Review of Network Economics.

Volume (Year): 9 (2010)
Issue (Month): 2 (June)
Pages: 1-33

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Handle: RePEc:bpj:rneart:v:9:y:2010:i:2:n:2

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References

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  1. Kaiser, Ulrich & Wright, Julian, 2006. "Price structure in two-sided markets: Evidence from the magazine industry," International Journal of Industrial Organization, Elsevier, vol. 24(1), pages 1-28, January.
  2. Sendhil Mullainathan & Andrei Shleifer, 2002. "Media Bias," NBER Working Papers 9295, National Bureau of Economic Research, Inc.
  3. Matthew Gentzkow & Jesse Shapiro, 2005. "Media Bias and Reputation," NBER Working Papers 11664, National Bureau of Economic Research, Inc.
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  5. Lapo Filistrucchi, 2005. "The Impact of Internet on the Market for Daily Newspapers in Italy," Economics Working Papers ECO2005/12, European University Institute.
  6. George, Lisa, 2007. "What's fit to print: The effect of ownership concentration on product variety in daily newspaper markets," Information Economics and Policy, Elsevier, vol. 19(3-4), pages 285-303, October.
  7. Matthew Gentzkow, 2007. "Valuing New Goods in a Model with Complementarity: Online Newspapers," American Economic Review, American Economic Association, vol. 97(3), pages 713-744, June.
  8. Baron, David P., 2006. "Persistent media bias," Journal of Public Economics, Elsevier, vol. 90(1-2), pages 1-36, January.
  9. Spence, A Michael & Owen, Bruce, 1977. "Television Programming, Monopolistic Competition, and Welfare," The Quarterly Journal of Economics, MIT Press, vol. 91(1), pages 103-26, February.
  10. Steven T. Berry & Joel Waldfogel, 2001. "Do Mergers Increase Product Variety? Evidence From Radio Broadcasting," The Quarterly Journal of Economics, MIT Press, vol. 116(3), pages 1009-1025, August.
  11. Brian G. Knight & Chun-Fang Chiang, 2008. "Media Bias and Influence: Evidence from Newspaper Endorsements," NBER Working Papers 14445, National Bureau of Economic Research, Inc.
  12. David Str–mberg, 2004. "Mass Media Competition, Political Competition, and Public Policy," Review of Economic Studies, Wiley Blackwell, vol. 71(1), pages 265-284, 01.
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Blog mentions

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  1. The internet and news media
    by Nicholas Gruen in Club Troppo on 2009-06-27 08:04:35
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Cited by:
  1. Joan Calzada & Guillem Ordóñez, 2012. "Competition in the news industry: fighting aggregators with versions and links," Working Papers 12-22, NET Institute.
  2. Monic Sun & Feng Zhu, 2011. "Ad Revenue and Content Commercialization: Evidence from Blogs," Working Papers 11-32, NET Institute.

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