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Newspapers in Times of Low Advertising Revenues

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  • Angelucci, Charles
  • Cagé, Julia

Abstract

Newspapers' advertising revenues have declined sharply in recent decades. We build a model to investigate the consequences on newspapers' pricing and quality choices of a reduction in advertisers' willingness to pay for readers' attention. In our model, selling subscriptions in addition to newsstand issues allows to price discriminate between readers. We show that lower advertising revenues decrease newspapers' incentives to provide quality, which increases newspapers' incentive to price discriminate whenever readers' sensitivity to quality is sufficiently high. We build a unique dataset on French newspapers between 1960 and 1974 and perform a difference-in-differences analysis using a "quasi-natural experiment": the introduction of advertising on television in 1968, which affects national newspapers more severely than local ones. We find robust evidence of increased price discrimination and decreased quality as a result of the drop in advertising revenues, which may help rationalize current industry trends.

Suggested Citation

  • Angelucci, Charles & Cagé, Julia, 2016. "Newspapers in Times of Low Advertising Revenues," CEPR Discussion Papers 11414, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:11414
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    Cited by:

    1. Julia Cage & Olivier Godechot & Etienne Fize & Maria Camila Porras, 2017. "Who Owns the Media?: The Media Independence Project," Sciences Po publications info:hdl:2441/5ej8oq8p589, Sciences Po.
    2. repec:bap:journl:180104 is not listed on IDEAS

    More about this item

    Keywords

    advertising; Newspaper industry; Newspaper quality; price discrimination; Two-sided markets;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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