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

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  • 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.

Suggested Citation

  • Frijters, Paul & Velamuri, Malathi, 2009. "Is the Internet Bad News? The Online News Era and the Market for High-Quality News," MPRA Paper 15723, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:15723
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    References listed on IDEAS

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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 13:04:35
    2. Could sortition help against corruption, part II
      by Paul Frijters in Club Troppo on 2016-09-19 10:25:33

    Citations

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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.
    3. Man-Lui Lau & Bruce Wydick, 2014. "Does New Information Technology Lower Media Quality? The Paradox of Commercial Public Goods," Journal of Industry, Competition and Trade, Springer, vol. 14(2), pages 145-157, June.

    More about this item

    Keywords

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

    JEL classification:

    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
    • 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

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