Newspaper Economics

Posted by Milos Sugovic

Note the blog post from The Economist titled “Newspaper Economics” which echoed our discussion on the bankruptcy of the Tribune.  Our analysis of supply and demand forces and the sustainability of the business model - the Achilles heal of the newspaper industry - was spot on. Look at the following:

“Technology hasn't just changed the demand for newspapers, it's also changed the supply of information. News used to be an oligopolistic business, now it's just about perfectly competitive. Barriers to entry are minimal, and plenty of suppliers are happy to provide content at next to nothing. That's a recipe for a big drop in price, and any organisation built on market power and rents is sure to fail in such an environment.

Does this mean that news, as a business, is dead? Not necessarily. Some papers will survive by selling things other than news—reputation, say, or exclusivity. Others will hang on until the print market shrinks enough that profitability is possible for a handful (or fewer) of national papers. Survivors in both groups are also likely to capitalise on the demand for news products that remain scarce—especially investigative reporting.” - Economist, December 15, 2008

Newspapers are increasingly becoming commodities, and that means they’re under pressure from perfect competition. Until the introduction of the Internet, there was room for markup and market power. Not any more. The newspaper business will follow the footsteps of the music and movie industry, and with it comes “market” consolidation and a new set of opportunities.  Monopolies are inefficient, so seeing a few papers belly up might be good for the public eye.