Mass Media and Special Interest Groups

Media revenues are an important determinant of media behavior. News coverage depends not only on the preferences of media consumers but also on the preferences of advertisers or subsidizing groups. We present a theoretical model of the interaction between special interest groups and media outlets in which the media face a trade-off between a larger audience and lower payments from special interest groups versus a smaller audience and more biased content. We focus on the relationship between the costs of production of media product and the level of distortion in news coverage that can be introduced by interest groups. Speciically, we look at the effect of falling marginal costs or the growing reliance on advertising revenues. We show that if people do not want to tolerate bias, or if special interest groups have budget constraint, then this effect is negative. If people do not pay attention to bias, or if the size of the audience is very important for the interest group, then this effect becomes positive. If markets are fully covered, and all consumers buy one unit of media product, then the effect disappears.