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