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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
  • Velamuri, Malathi

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 3 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

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 15723.

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Date of creation: May 2009
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Handle: RePEc:pra:mprapa:15723

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Keywords: News quality; Internet; Monopolies; Search Costs; Advertising;

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References

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  1. Tim Groseclose & Jeffrey Milyo, 2005. "A Measure of Media Bias," The Quarterly Journal of Economics, MIT Press, vol. 120(4), pages 1191-1237, November.
  2. Sendhil Mullainathan & Andrei Shleifer, 2002. "Media Bias," NBER Working Papers 9295, National Bureau of Economic Research, Inc.
  3. Kaiser, Ulrich & Wright, Julian, 2004. "Price Structure in Two-sided Markets: Evidence from the Magazine Industry?," ZEW Discussion Papers 04-80, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  4. 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.
  5. Matthew Gentzkow & Jesse M. Shapiro, 2006. "Media Bias and Reputation," Journal of Political Economy, University of Chicago Press, vol. 114(2), pages 280-316, April.
  6. 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.
  7. Chun-Fang Chiang & Brian Knight, 2011. "Media Bias and Influence: Evidence from Newspaper Endorsements," Review of Economic Studies, Oxford University Press, vol. 78(3), pages 795-820.
  8. 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.
  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. 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.
  11. Baron, David P., 2006. "Persistent media bias," Journal of Public Economics, Elsevier, vol. 90(1-2), pages 1-36, January.
  12. Lapo Filistrucchi, 2005. "The Impact of Internet on the Market for Daily Newspapers in Italy," Economics Working Papers ECO2005/12, European University Institute.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  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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