Newspaper Economics Principal features
Firms and markets • Newspapers a $59 billion industry • Most dailies have monopoly markets • Competition restricted to differentiated newspapers for distinctive audiences
Newspaper ownership • Historically individual/family • Now large chains own most • Tribune, Gannett, McClatchey, Knight Ridder, etc • Only 25% not owned by chains
Competition • Most large cities used to have competing newspapers, morning & evening • Now most have only one major newspaper
JOAs • joint operating agreements • Newspaper Preservation Act of 1970 • 2 papers operate certain business aspects together • E.g., presses, classified ads, distribution • Exempt from antitrust laws
Advertising • “the fuel that makes mass media run” • Establishes the “news hole” • Newspaper advertisers target mass as opposed to segmented audiences • Makes competition virtually impossible.
Advertising • Newspapers receive ~27% of all advertising dollars, the largest amount spent on any medium.
High costs of entry • technology costs • advertiser preferences
Financial Performance • Very profitable with high asset values • Average 100,000 circulation newspaper makes a 15.6 percent annual pre-tax profit margin
Dual product market: sales & ads • 2/3 of content is advertising • Circulation revenue accounts for 20-35% of revenues. • Editorial content accounts for only 16% of costs
Cost Structure • Printing 30-35%, of which half is for newsprint. • Enjoy large economies of scale
Government Aid • Exemptions from newspaper and advertising sales taxes. • Regulatory relief from wage and hour laws. • Postal rate advantages • Antitrust exemptions for JOAs