Free commuter newspapers and the market for         paid-for daily newspapers                 Michal Maˇika               ...
Do low quality news crowd out high quality news?   Aim:   This paper examines the substitution patterns between low and   ...
Novel dataset of free daily newspapers with considerablevariation over time and across markets   Method: 1. Novel dataset ...
Increased competition by low quality newspapers does notcrowd out high quality newspapers   Results:   An increase in aver...
Contribution: Extension to the studies examining impactsof media competition (novel dataset)   First paper to study the im...
Contribution: Multi-homing is important but overlooked   There are almost no empirical studies considering shared   prefer...
Data and Empirics
Large (Pseudo) Panel from 1999-2008 for Switzerland   Aggregated data based on annual interviews with ca. 23.000   people ...
The newspaper readership per capita: Considerablevariation over time and across markets
The number of multihomers of paid-for papers has beendeclining.
Empirical Strategy: Usage of the panel structure of thedata   Specification   Dependent variable      Independent variables...
Empirical Strategy: Usage of the panel structure of thedata   Specification    Dependent variable          Independent vari...
Identification - Usage of unique features of free newspapers 1. Free newspapers’ expansion is exogenous - via transport sys...
Identification - Usage of unique features of free newspapers 1. Free newspapers’ expansion is exogenous - via transport sys...
Identification - Usage of unique features of free newspapers 1. Free newspapers’ expansion is exogenous - via transport sys...
Empirical Results
Free newspapers are substitute to the paid-for newspapers                                   Extensive               Intens...
Free newspapers take away readership only from localnewspapers                                    Quality: region based   ...
Free newspapers take away only less educated readers                               Highly educated             Less educat...
Conclusion    Free newspaper expansion leads to a decline in paid-for newspaper    readership.    Free newspapers take awa...
Backup
Intensive paid-for                    Extensive paid-for          Heavy paid-for                              readership  ...
The newspaper readership per capita: Considerablevariation over time and across markets      variable     year    N    mea...
The average number of newspapers read by one personvaries over time and across markets.   variable                year    ...
References I   Gentzkow, M. (2007): “Valuing new goods in a model with     complementarity: Online newspapers,” The Americ...
References II   Schauer, F. (1986): “The Role of People in First Amendment     Theory,” in Symposium: New Perspectives in ...
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Free commuter newspapers and the market for
paid-for daily newspapers. Michal Masika. LMU University of Munich. 9th Workshop on Media Economics. 28 October 2011

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Free commuter newspapers and the market for

  1. 1. Free commuter newspapers and the market for paid-for daily newspapers Michal Maˇika s LMU University of Munich 9th Workshop on Media Economics 28 October 2011
  2. 2. Do low quality news crowd out high quality news? Aim: This paper examines the substitution patterns between low and high quality news (free newspapers vs. traditional daily newspapers in Switzerland) Motivation: Free newspapers constitute good measure for low quality news The impacts on the overall quality in newspaper industry were hotly debated (e.g. court cases)
  3. 3. Novel dataset of free daily newspapers with considerablevariation over time and across markets Method: 1. Novel dataset of Swiss daily newspapers including multihomer data and sociodemographic data 2. Time span with variation over time, across markets and across sociodemographic groups in the market 3. Usage of specific features of free newspapers (e.g. distribution via transport system) for the identification
  4. 4. Increased competition by low quality newspapers does notcrowd out high quality newspapers Results: An increase in average number of free papers by one leads to a decrease in average number of paid-for papers by 0.14. This effect is largely driven by multihomers’ substitution activities Free papers take readership only from local low quality papers No significant effect on readership of paid-for papers among highly educated people
  5. 5. Contribution: Extension to the studies examining impactsof media competition (novel dataset) First paper to study the impact of expansion of free newspapers on traditional daily newspapers. Literature: Positive effect of press competition on the news quality (Gentzkow and Shapiro, 2008) Negative impact of market competition on the news quality (Zaller, 1999; Schauer, 1986)
  6. 6. Contribution: Multi-homing is important but overlooked There are almost no empirical studies considering shared preferences and possible multi-homing among readers. Literature: Developing of empirical model allowing for multi-homing (Gentzkow, 2007) Shared preferences play an important role in media markets (George and Waldfogel, 2003; Waldfogel, 2003, 2004)
  7. 7. Data and Empirics
  8. 8. Large (Pseudo) Panel from 1999-2008 for Switzerland Aggregated data based on annual interviews with ca. 23.000 people older 14 Data of daily newspapers (60 newspapers) Number and characteristics of readers (for 155 counties) Data on multihomers Number sold (for 2400 municipals, no data for 2005) Internet/TV/Radio Data Number and characteristics of consumers (for 83 counties) Market (= county) characteristics Aggregated sociodemographic data for 155 counties
  9. 9. The newspaper readership per capita: Considerablevariation over time and across markets
  10. 10. The number of multihomers of paid-for papers has beendeclining.
  11. 11. Empirical Strategy: Usage of the panel structure of thedata Specification Dependent variable Independent variables 1. Share of paid Number of free papers + Controlsmt newspaper readersmt read by one personmt 2. Number of paid papers Number of free papers + Controlsmt read by one personmt read by one personmt
  12. 12. Empirical Strategy: Usage of the panel structure of thedata Specification Dependent variable Independent variables 1. Share of paid Number of free papers + Controlsmt newspaper readersmt read by one personmt 2. Number of paid papers Number of free papers + Controlsmt read by one personmt read by one personmt Controls: Effects of outside media (online media) - direct Prices, business cycle... - time dummies Sociodemographics, ... - market fixed effects
  13. 13. Identification - Usage of unique features of free newspapers 1. Free newspapers’ expansion is exogenous - via transport system → Usage of longitudinal data (variation over time and markets)
  14. 14. Identification - Usage of unique features of free newspapers 1. Free newspapers’ expansion is exogenous - via transport system → Usage of longitudinal data (variation over time and markets) 2. However, there are endogeneity concerns - demand for information
  15. 15. Identification - Usage of unique features of free newspapers 1. Free newspapers’ expansion is exogenous - via transport system → Usage of longitudinal data (variation over time and markets) 2. However, there are endogeneity concerns - demand for information Usage of instrumental variable (fraction of commuters commuting on public transport to counties with free newspapers) Identification of effect from the relationship between changes in free paper penetration and changes in traditional paper readership for different sociodemographic group (e.g. young vs. old)
  16. 16. Empirical Results
  17. 17. Free newspapers are substitute to the paid-for newspapers Extensive Intensive Paid-for paper Usage Usage Circulation FE IV FE IV FE IV Number of free papers 0.016 -0.050 -0.076** -0.144* -0.012 -0.057*** read by one person (0.28) (0.29) (0.34) (0.070) (0.013) (0.016) Usage of online 0.013 0.003 0.002* media (0.007) (0.004) (0.001) SE clustered county county county county county county Observations 830 820 830 820 14859 14562 Increase in average number of read free papers by one leads to decrease in average number of paid-for papers by 0.14. This effect is largely driven by multihomers.
  18. 18. Free newspapers take away readership only from localnewspapers Quality: region based Quality: price based high low high low FE IV FE IV FE IV FE IV Intensive free 0.003 -0.005 -0.078** -0.144** -0.005 -0.029 -0.071** -0.120* paper readership (0.013) (0.019) (0.030) (0.062) (0.011) (0.027) (0.031) (0.064) Usage of the 0.003* 0.011* 0.002 0.011* Online News (0.001) (0.006) (0.002) (0.006) Constant 0.192*** 0.824*** 0.258*** 0.758*** (0.003) (0.010) (0.006) (0.010) Fixed effects County County County County County County County County Counties 830 820 830 820 830 820 830 820 Increase in average number of read free papers by one leads to decrease in average number of paid-for local papers by 0.14.
  19. 19. Free newspapers take away only less educated readers Highly educated Less educated IV Estimation without with without with multihomers multihomers multihomers multihomers Number of free papers 0.068 0.079 -0.070 -0.152* read by one person (0.78) (0.50) (-1.30) (-1.69) Observations 820 820
  20. 20. Conclusion Free newspaper expansion leads to a decline in paid-for newspaper readership. Free newspapers take away readership only from local newspapers Additional implications: ⇒ Not considering multihoming leads to bias. ⇒ The concerns that expansion of free newspapers leads to a decline in overall quality could not be confirmed. Thank you for your attention.
  21. 21. Backup
  22. 22. Intensive paid-for Extensive paid-for Heavy paid-for readership readership readership FE IV FE IV FE IV Intensive free paper -0.076** -0.144** 0.016 -0.050* -0.040 -0.078 readership (0.034) (0.070) (0.028) (0.029) (0.034) (0.066) Usage of online 0.013* 0.003 0.007 media (0.007) (0.004) (0.006) Constant 1.006*** 0.712*** 0.851*** (0.011) (0.006) (0.012) Fixed effects County County County County County County Time dummies yes yes yes yes yes yes Counties 830 820 830 820 830 820Notes: Standard errors in parentheses: Standard errors are clustered on the county level* p < 0.10, ** p < 0.05, *** p < 0.01
  23. 23. The newspaper readership per capita: Considerablevariation over time and across markets variable year N mean sd p5 p95 Paid-for 2000 155 0.708 0.137 0.345 0.875 newspaers 2008 155 0.647 0.135 0.357 0.810 Free 2000 155 0.037 0.068 0.000 0.191 newspapers 2008 155 0.330 0.167 0.000 0.552
  24. 24. The average number of newspapers read by one personvaries over time and across markets. variable year N mean sd p5 p95 Number of paid papers 2000 155 0.975 0.247 0.385 1.296 read by aver. reader 2008 155 0.852 0.226 0.406 1.184 Free 2000 155 0.037 0.068 0.000 0.191 newspapers 2008 155 0.330 0.167 0.000 0.552
  25. 25. References I Gentzkow, M. (2007): “Valuing new goods in a model with complementarity: Online newspapers,” The American Economic Review, 97(4), 713–744. Gentzkow, M., and J. M. Shapiro (2008): “Competition and Truth in the Market for News,” Journal of Economic Perspectives, 22(2), 133–154. George, L., and J. Waldfogel (2003): “Who Affects Whom in Daily Newspaper Markets?,” The Journal of Political Economy, 111(4), 765–784.
  26. 26. References II Schauer, F. (1986): “The Role of People in First Amendment Theory,” in Symposium: New Perspectives in the Law of Defamation. Waldfogel, J. (2003): “Preference Externalities: An Empirical Study of Who Benefits Whom in Differentiated-Product Markets,” The RAND Journal of Economics, 34(3), 557–568. (2004): “Who Benefits Whom in Local Television Markets?,” Brookings-Wharton Papers on Urban Affairs, pp. 257–284. Zaller, J. (1999): “Market Competition and News Quality,” .

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