Daily paper Financial matters - PowerPoint PPT Presentation

newspaper economics n.
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Daily paper Financial matters

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  1. Newspaper Economics Principal features

  2. Firms and markets • Newspapers a $59 billion industry • Most dailies have monopoly markets • Competition restricted to differentiated newspapers for distinctive audiences

  3. Newspaper ownership • Historically individual/family • Now large chains own most • Tribune, Gannett, McClatchey, Knight Ridder, etc • Only 25% not owned by chains

  4. Competition • Most large cities used to have competing newspapers, morning & evening • Now most have only one major newspaper

  5. 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

  6. 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.

  7. Advertising • Newspapers receive ~27% of all advertising dollars, the largest amount spent on any medium.

  8. High costs of entry • technology costs • advertiser preferences

  9. Financial Performance • Very profitable with high asset values • Average 100,000 circulation newspaper makes a 15.6 percent annual pre-tax profit margin

  10. 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

  11. Cost Structure • Printing 30-35%, of which half is for newsprint. • Enjoy large economies of scale

  12. Government Aid • Exemptions from newspaper and advertising sales taxes. • Regulatory relief from wage and hour laws. • Postal rate advantages • Antitrust exemptions for JOAs