The Effect of a Magazine's Free Digital Content on Its Print Circulation: Cannibalization or Complementarity?Daniel H. Sim...
Artikel - The Effect of a Magazine's Free Digital Content on Its Print Circulation: Cannibalization or Complementarity?
Artikel - The Effect of a Magazine's Free Digital Content on Its Print Circulation: Cannibalization or Complementarity?
Artikel - The Effect of a Magazine's Free Digital Content on Its Print Circulation: Cannibalization or Complementarity?
Artikel - The Effect of a Magazine's Free Digital Content on Its Print Circulation: Cannibalization or Complementarity?
Artikel - The Effect of a Magazine's Free Digital Content on Its Print Circulation: Cannibalization or Complementarity?
Artikel - The Effect of a Magazine's Free Digital Content on Its Print Circulation: Cannibalization or Complementarity?
Artikel - The Effect of a Magazine's Free Digital Content on Its Print Circulation: Cannibalization or Complementarity?
Artikel - The Effect of a Magazine's Free Digital Content on Its Print Circulation: Cannibalization or Complementarity?
Artikel - The Effect of a Magazine's Free Digital Content on Its Print Circulation: Cannibalization or Complementarity?
Artikel - The Effect of a Magazine's Free Digital Content on Its Print Circulation: Cannibalization or Complementarity?
Artikel - The Effect of a Magazine's Free Digital Content on Its Print Circulation: Cannibalization or Complementarity?
Artikel - The Effect of a Magazine's Free Digital Content on Its Print Circulation: Cannibalization or Complementarity?
Artikel - The Effect of a Magazine's Free Digital Content on Its Print Circulation: Cannibalization or Complementarity?
Artikel - The Effect of a Magazine's Free Digital Content on Its Print Circulation: Cannibalization or Complementarity?
Artikel - The Effect of a Magazine's Free Digital Content on Its Print Circulation: Cannibalization or Complementarity?
Artikel - The Effect of a Magazine's Free Digital Content on Its Print Circulation: Cannibalization or Complementarity?
Artikel - The Effect of a Magazine's Free Digital Content on Its Print Circulation: Cannibalization or Complementarity?
Artikel - The Effect of a Magazine's Free Digital Content on Its Print Circulation: Cannibalization or Complementarity?
Artikel - The Effect of a Magazine's Free Digital Content on Its Print Circulation: Cannibalization or Complementarity?
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Artikel - The Effect of a Magazine's Free Digital Content on Its Print Circulation: Cannibalization or Complementarity?

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Artikel - The Effect of a Magazine's Free Digital Content on Its Print Circulation: Cannibalization or Complementarity?

  1. 1. The Effect of a Magazine's Free Digital Content on Its Print Circulation: Cannibalization or Complementarity?Daniel H. Simon aand Vrinda Kadiyalib, aDepartment of Applied Economics and Management, Cornell University, 354 Warren Hall, Ithaca, NY 14853, United StatesbJohnson Graduate School of Management, Cornell University, 385 Sage Hall, Ithaca, NY 14843, United States<br />Received 2 October 2006;  revised 4 May 2007;  accepted 5 June 2007. Available online 16 June 2007. <br />Article Outline<br />1. Introduction <br />2. The effect of digital content on demand for print content <br />2.1. Prior research<br />3. Data: sample construction and variables <br />3.1. Sample construction <br />3.2. Outcome variables <br />3.3. Digital content <br />3.4. Estimation sample<br />4. Empirical analysis and results <br />4.1. Main model <br />4.2. The endogeneity of digital content <br />4.2.1. Pre-digital content trends <br />4.2.2. Price adjustments <br />4.2.3. Instrumental variables (IV) analysis<br />5. Discussion <br />5.1. Comparisons with previous studies <br />5.2. Looking to the future<br />6. Conclusion <br />References<br />1. Introduction<br />We examine the following question: How does providing free digital content affect demand for a print magazine? While there is a widely-held belief that readers will substitute free digital content for print magazines and newspapers, little evidence exists to support this point. Some studies have even found evidence of complementarity between digital and print versions. <br />We examine the impact of offering digital content with a panel dataset of US consumer magazines in the period 1990–2001, a period during which nearly all US consumer magazines began to offer digital content. We use a searchable archive of websites to measure each magazine’s free digital content in each year. The results indicate that offering digital content reduces the demand for the print magazine. On average, a magazine’s print circulation declines about 3–4% when it offers a website. A unique aspect of our data is that we can measure the extent of overlap between digital and print content, enabling us to assess whether and how much this overlap affects cannibalization. While offering digital content that has limited overlap with the current print magazine reduces print sales by 2–4%, offering digital access to the entire contents of the current print magazine reduces print magazines sales by about 9%. These results are robust to the inclusion of magazine, publisher, and category-year fixed effects. Moreover, while we initially assume the decision to offer digital content as exogenous, we find little evidence of endogeneity, and our results are robust to relaxing this assumption.<br />The rest of the paper proceeds as follows. In the following section, we discuss the relationship between digital and print content and summarize the related literature. In Section 3, we describe the data that we use and explain how we measure digital content using a digital archive. Section 4 describes the empirical model and the results. In Section 5, we discuss the results, comparing our results to existing research and assessing how the relationship between digital and print content may evolve. Section 6 provides some concluding remarks.<br />2. The effect of digital content on demand for print content<br />It is “widely assume[d] that the Internet is cannibalistic” (Porter, 2001). In particular, many argue that magazines and newspapers that offer digital content will cannibalize their print sales ( HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " bib3" [Deleersnyder et al., 2002] and HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " bib15" [Pauwels and Dans, 2001]). The argument is quite intuitive. Magazine and newspaper websites are seemingly perfect substitutes for their print counterparts ( HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " bib11" Kaiser, 2006). A reader who wants to learn about a particular news item can find the same information in digital or print form. Moreover, the internet offers many widely-touted advantages: digital content can be updated on an almost continuous basis; websites can hold unlimited amounts of content; readers can exploit the Web’s superior search capabilities to locate the information they seek; and unlike magazines, websites can be interactive.<br />On the other hand, a magazine’s website may complement its print version by attracting new readers to the print magazine. The magazine’s website can provide a preview of the current print magazine’s content by including a table of contents for the current print issue and/or offering an abstract for one or more stories from the current print issue. Moreover, the Web’s interactive features make buying a subscription much easier for readers who can simply “point and click” to order. Reflecting these potential complementarities, 9% of new subscription sales in 2003, came via the internet, up from 6% in 2002 ( HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " bib2" Capell, 2004).<br />2.1. Prior research<br />Despite popular views, the empirical evidence for digital content cannibalizing print content is mixed. HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " bib5" Gentzkow (2007) estimates a structural demand model, using individual-reader data, to examine the relationship between the Washington Post and its online version, washingtonpost.com. He finds evidence of cannibalization, as the online edition reduced print readership by 27,000 per day. Deleersnyder et al. (2002) look at 85 European newspapers that establish websites. They find that offering a website has no effect on the newspapers’ print sales. HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " bib12" Kaiser and Kongsted (2005) assess the impact of website visits on the demand for 42 German magazines. They find that website visits increase circulation.<br />In one of the two papers most similar to this one, Kaiser (2006) assesses the impact of a magazine’s website on the demand for its print content and for its advertising space in a small sample of German women’s magazines. He finds that having a website has no effect on the demand for either product (Kaiser, 2006). In contrast, HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " bib4" Filistrucchi (2005) finds evidence of substantial cannibalization by four Italian newspapers that offered websites.<br />An important element of our paper is that it considers not just the existence of a website, but also the type or amount of digital content that these publications offer. HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " bib3" Deleersnyder et al. (2002) note that those newspapers that experienced significant cannibalization offered digital content with much higher overlap with their print content. This suggests the need to examine the effect of different types of digital content.<br />3. Data: sample construction and variables<br />3.1. Sample construction<br />We construct our dataset from a sample of 770 magazines covered by the Audit Bureau of Circulation (ABC)’s Magazine Trend Report. ABC provides annual data on circulation, prices and advertising rates for nearly all large consumer magazines, with magazines organized by category (e.g. cooking magazines, sports magazines, automobile magazines, etc.). While there are thousands of consumer magazines published in the US, most are very small, with circulations of just a few thousand readers. Although no precise figures are available, ABC audits the vast majority of large consumer magazines, and is the standard source of magazine circulation and price data used in academic research ( HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " bib17" Oster and Scott-Morton, 2005).<br />From our sample of 770 magazines, we exclude 102 magazines that are offered as a benefit to members of an organization (e.g. AAA Going Places, Audubon magazine) because these magazines are used to sell memberships. In many cases, these magazines’ websites are part of the sponsoring organization’s website, providing information about the benefits of membership. For these magazines, cannibalization is not an issue. Similarly, we exclude 22 magazines with less than four issues annually, because magazines with fewer than four issues are often published only sporadically or annually, with less consistent readership from issue to issue. Moreover, most of these titles either do not offer subscriptions or set a price of zero. Therefore, the impact of digital content on demand for these print magazines is likely much weaker. Finally, we exclude magazines during the year they are acquired (252 magazine–year observations) because of difficulty in properly controlling for the influence of the publisher when the identity of the publisher changes during the year. Excluding these observations does not change the qualitative findings of the paper.<br />3.2. Outcome variables<br />Using these data, we define a magazine’s Circulation as its annual average paid circulation, per issue, as counted by the Audit Bureau of Circulation (ABC). We also examine whether digital content affects a magazine’s prices, looking at the magazine’s per-issue annual Subscription Price, and its Single-Copy Price.<br />3.3. Digital content<br />To gather data on magazines’ digital content, we first searched for each magazine’s website using a variety of Internet search engines (e.g. Google), and a search engine devoted exclusively to magazine and newspaper websites (www.newsdirectory.com). For those magazines for which the search engines did not find a site, we also searched domain registration records at www.register.com. Searching the domain registration records enabled us to locate websites for magazines that had since shut them down (magazines that no longer exist). HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " fn1" 1<br />To measure digital content, we use a searchable website archive, the Wayback Machine, “which allows people to access and use archived versions of stored websites”, dating back to 1996 (www.archive.org). HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " fn2" 2 Using this archive, we determine if the magazine had a website during each year, and we assess the amount of free digital content that each magazine website offered, for each year that it was included in the archive (see Fig. 1). HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " fn3" 3, HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " fn4" 4 To do so, we clicked on the links from the archived web pages of each magazine to determine how much and what type of digital content it offered during each year.<br />Full-size image (59K)<br />Fig. 1. Internet archive.<br /> HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_rdoc=1&_fmt=&_orig=search&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=eaf4f75ccb8aea08f63108e212f3d3b9" l " fig1" <br />View Within Article<br />To assess the overall impact of digital content, a dummy variable, Website, indicates whether or not magazine i has a website during year t. To examine the extent to which different types of digital content substitute for or complement print content, we define four categories of digital content reflecting the extent of overlap between the print and digital versions.<br />We label the lowest level of overlap as distinct, indicating a website that provides no content or description of content from the current print magazine. Distinct content may be nothing more than a paragraph describing the magazine’s editorial focus or history. It may also include archived content from past print issues, or original content related to the magazine’s subject matter. HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " fn5" 5 For example, for several years Sailing World Magazine’s website offered stories about boats, equipment, races, and other sailing-related topics, but none of the content came from the current print magazine. Some websites also offer photographs and other images, multimedia content, interactive tools, games, etc. These are all considered distinct content as well.<br />In addition to distinct content, some magazine websites also offer preview content: a partial or full table of contents from the current print issue, or an abstract of at least one current print article. For example, Vegetarian Times’ website is updated monthly to show the current print magazine’s complete table of contents. Similarly, Ebony Magazine’s website offers a brief summary of the cover story from the current magazine while inviting readers to buy the print magazine for the full story. In this way, magazines use their websites to advertise the contents of the current print issue while limiting the threat of cannibalization.<br />Some magazine websites offer readers the opportunity to download selected articles from the current print issue. Magazines frequently allow readers to read the current cover story in its entirety. In a smaller number of cases, magazines allow readers to view the entire contents of the current print issue in digital form, at no charge. For example, Entrepreneur Magazine’s website provides free access to all of the articles from its current issue. Obviously, the overlap between digital and print content is greatest under these circumstances.<br />Using these categories, we define four dummy variables that measure the “highest” (most overlapping) level of digital content that the magazine offers. Distinct indicates that the magazine has a website, but it offers no content that describes or duplicates the content of the current print magazine. Preview indicates that the magazine has a website which offers a table of contents and/or abstracts for one or more current print articles, but does not offer any full-length articles from the current print issue. Selected Articles indicates that the magazine has a website which offers free access to some, but not all, full-length articles from the current print issue. Fulltext indicates that the magazine provides free digital access to the complete contents of the current print magazine. In some models, we consolidate these four categories into two categories: Complementary Content refers to Distinct and Preview Content, while Duplicate Content refers to Selected Articles and Fulltext access.<br />The number of magazines offering digital content has grown rapidly (see Fig. 2). In 1996, roughly one third of all magazines in the sample had a website. By 2001, nearly all magazines (97%) had a website. While all magazine websites in the sample offer distinct content, the proportion of magazines offering only distinct content grew from 13% to 19%. The fraction of magazines offering preview content (a table of contents or abstracts) increased the most, growing from 10% to 48% over this period, while the fraction of magazines offering access to selected articles from the current issue grew from 6% to 24%. Only a small number of titles offer fulltext access (i.e. access to all articles in the current print issue). At its peak in 2000, 5% of magazines (21) offered fulltext access to the current print issue.<br />Full-size image (24K)<br />Fig. 2. Growth of digital content: 1996–2001.<br /> HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_rdoc=1&_fmt=&_orig=search&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=eaf4f75ccb8aea08f63108e212f3d3b9" l " fig2" <br />View Within Article<br />Published reports indicate that a very small number of magazines first offered digital content in 1993, with the numbers increasing slowly in 1994 and 1995 ( HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " bib13" [Kelly, 1994] and HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " bib14" [Kelly, 1995]). Because the Internet archive only extends back to 1996, we are unable to gather data on digital content during these years. However, a magazine generally registers a domain name before it opens a website. Using the data on web domain registrations, we can identify those magazines that are most likely to have had a website prior to when we are able to observe it, (prior to 1996). In particular, titles that offered digital content in 1996 and had registered a domain name prior to 1996 are the most likely to have had a website prior to 1996. Those that did not offer digital content in 1996 and those that offered digital content in 1996 but had not registered a domain name prior to 1996 seem much less likely to have been offering digital content prior to 1996.<br />Using these two criteria, we find that from 1993 to 1995 there are 72 magazines (97 observations) which had a website in 1996 and had registered a domain name prior to 1996. These magazines are most likely to have had digital content prior to when we are able to observe it. Therefore, we exclude these 97 observations from our analysis. We assume that no other magazines offered digital content prior to 1996. HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " fn6" 6<br />3.4. Estimation sample<br />After dropping observations for 36 magazines with missing data, our estimation sample comprises 4945 magazine–year observations, and includes 339 publishers offering 610 magazines in 49 categories. HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " tbl1" Table 1 provides definitions and summary statistics for all variables.<br />Table 1. <br />Descriptive statistics<br />VariableDefinitionNMeanSDOutcome variablesCirculationMagazine’s annual average paid circulation, per issue4945580.781253.46Subscription pricePer issue price for a one-year subscription48452.121.00Single-copy pricePrice for a single copy48453.401.52Digital content variablesWebsite=1 if the magazine operates a website during the current year; =0 otherwise49450.360.48Complementary content=1 if the magazine website offers only complementary content; =0 otherwise49450.260.44Duplicate content=1 if the magazine website offers duplicate content; =0 otherwise49450.100.30Distinct content=1 if the magazine website offers distinct content only; =0 otherwise49450.100.30Preview content=1 if the magazine website offers preview content but does not offer duplicate content; =0 otherwise49450.160.36Selected articles=1 if the magazine website offers selected articles but does not offer fulltext access; =0 otherwise49450.080.27Fulltext content=1 if the magazine website offers fulltext access; =0 otherwise49450.020.14Control variablesPublisher’s websites in the categoryThe number of other magazines with websites, competing in the same category, and owned by the same publisher49450.481.43Publisher circulationThe publisher’s total circulation, excluding that of the focal magazine49454680.637226.63Publisher titlesThe number of titles that the publisher offers49457.669.96Multi-category=1 if the publisher offers magazines in more than one category; =0 otherwise49450.580.49IssuesThe number of issues the magazine publishes annually494514.5311.85Acquired=1 if the magazine previously changed ownership; =0 otherwise49450.190.39<br />Full-size table<br /> HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_rdoc=1&_fmt=&_orig=search&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=eaf4f75ccb8aea08f63108e212f3d3b9" l " tbl1" <br />View Within Article<br />4. Empirical analysis and results<br />Our empirical strategy proceeds as follows. We begin by estimating several reduced-form, fixed-effects models of magazine circulation. We then consider whether it is better to treat the decision to offer digital content as endogenous. To do so, we first directly address two potential sources of endogeneity: (1) changes in circulation causing changes in digital content, and (2) contemporaneous price changes. We then consider a more general approach to the potential endogeneity problem using instrumental variables.<br />4.1. Main model<br />To begin, we estimate the following reduced-form model of magazine circulation:<br />(1)<br />where Circulationikt is the average print sales of magazine i, which competes in category k, during year t. Digital Contentikt includes the variables described above, measuring the amount of digital content that magazine i offers during year t. <br />The vector X includes the set of control variables described in HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " tbl1" Table 1. Magazine fixed effects, vi, control for unobservable magazine characteristics that may influence both demand and the decision to offer digital content. The same qualities that attract readers to a print magazine are likely to also attract readers to its website, increasing the incentive of higher-quality magazines to offer digital content. Year fixed effects, wt, control for industry-wide shifts in demand and technology, especially the increasing popularity of the Web during this period. The final term, eikt, is a random error term. HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " tbl2" Table 2 reports the results.<br />Table 2. <br />Effect of digital content on print circulation<br />Magazine and year FEMagazine and year FEMagazine and year FEMagazine, publisher, and category-year FEMagazine, publisher, and category-year FEMagazine, publisher, and category-year FEMagazine and publisher-category-year FEMagazine and publisher-category-year FEMagazine and publisher-category-year FEWebsite−0.033 (0.014)−0.035 (0.015)−0.019 (0.026)Complementary content−0.027 (0.014)−0.031 (0.015)−0.016 (0.028)Duplicate content−0.051 (0.023)−0.050 (0.025)−0.030 (0.042)Distinct content−0.026 (0.018)−0.027 (0.017)−0.032 (0.031)Preview content−0.029 (0.018)−0.033 (0.017)−0.002 (0.031)Selected articles−0.055 (0.025)−0.041 (0.027)−0.014 (0.042)Fulltext−0.034 (0.040)−0.090 (0.039)−0.093 (0.120)Publisher’s websites in the category0.012 (0.005)0.011 (0.005)0.011 (0.005)0.000 (0.008)−0.001 (0.008)−0.001 (0.007)Ln(Publisher Circulation)0.013 (0.009)0.013 (0.009)0.013 (0.009)0.027 (0.011)0.027 (0.011)0.027 (0.011)Publisher titles−0.003 (0.001)−0.003 (0.001)−0.002 (0.001)−0.003 (0.002)−0.003 (0.002)−0.003 (0.002)Multi-category0.045 (0.043)0.046 (0.043)0.046 (0.043)−0.046 (0.070)−0.048 (0.070)−0.047 (0.070)Ln(Issues)0.194 (0.065)0.195 (0.065)0.194 (0.065)0.119 (0.068)0.120 (0.068)0.121 (0.068)0.205 (0.083)**0.205 (0.083)0.204 (0.084)Acquired−0.070 (0.038)−0.070 (0.038)−0.069 (0.038)−0.005 (0.058)−0.005 (0.058)−0.003 (0.059)0.050 (0.133)0.048 (0.133)0.048 (0.133)Constant4.918 (0.158)4.915 (0.158)4.917 (0.158)4.920 (0.173)5.422 (0.979)5.388 (0.179)5.248 (0.208)5.251 (0.210)5.219 (0.214)Within R20.040.040.040.350.350.350.610.610.62Magazines610610610610610610284284284N494549454945494549454945216821682168<br />Full-size table<br /> Significant at 0.10. Significant at 0.05. Significant at 0.01. Standard errors, clustered by magazine, are reported in parentheses. <br /> HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_rdoc=1&_fmt=&_orig=search&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=eaf4f75ccb8aea08f63108e212f3d3b9" l " tbl2" <br />View Within Article<br />Column 1 indicates that offering free digital content reduces a magazine’s circulation by about 3.3%. Although this does not tell us whether the effect of digital content varies with its overlap with the print magazine, this result is not influenced by misclassification of the type of digital content, and provides a good estimate of the average effect of digital content. The results in column 2 indicate that both complementary and duplicate content reduce print sales, although the effect of complementary digital content is only about half as large. Consistent with the results in column 2, the results in column 3 indicate that the cannibalizing effect digital content increases with print sales, while providing no evidence that digital content complements print sales. Surprisingly, however, the results indicate that offering fulltext digital access has a weaker effect on print sales than offer access to selected articles.<br />One possible concern with the above analysis is that there may be unobserved category-specific time effects and publisher-specific effects that are correlated with the decision to offer digital content and with the demand for the print magazine. To control for these two sources of heterogeneity, we include category-year (instead of year) and publisher fixed effects. In addition to controlling for industry-wide shifts in demand and technology, category-year fixed effects control for time-varying category-specific unobservables that may be correlated with the decision to offer digital content and with the demand for print circulation. For example, as fishing increases in popularity, it seems likely that both demand for fishing magazines would increase and these magazines might have a greater incentive to offer a website. Similarly, publisher fixed effects control for changes that affect both demand for the print magazine and digital content, which arise when a magazine is acquired by a different publisher with different policies and resources. For example, if a magazine is acquired by a larger publisher, this publisher may be more likely to both set up a website for the magazine and promote the magazine more widely. We report these results in columns 4–6 of Table 2.<br />The results are very similar to those reported above, with one important distinction. When we include the category-year and publisher fixed effects, we see that the effect of offering fulltext digital content becomes more negative. These results emphasize that the relationship between digital content and print sales is distinctly non-linear. Offering fulltext digital access to all current print articles reduces print sales by 9%, while other categories of digital content, which overlap less with the current print magazine, reduce print sales by 2.7–4.1%.<br />In the above models, magazine fixed effects control for time-invariant magazine (and category) characteristics, publisher fixed effects control for unobserved publisher characteristics, and category-year fixed effects control for time-varying category-specific variation. However, there remain three additional categories of unobservable factors that may be correlated with the decision to offer digital content and with demand for the magazine: time-varying magazine-specific, publisher-specific, and publisher-category-specific factors.<br />By including publisher-category-year fixed effects, we control for unobserved, time-varying publisher- and publisher-category-specific factors. For example, these fixed effects control for a change in the demand for all Time Warner magazines resulting from a company-wide promotional campaign, as well as a change in demand resulting from Time Warner increasing its marketing efforts only for its fishing magazines. The only remaining source of unobservables for which these fixed effects do not control is time-varying, magazine-specific effects, such as if one of Time Warner’s fishing magazines revamps its print format at the same time that it establishes a website.<br />The results for the publisher-category-year fixed effects models are reported in the last three columns of HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " tbl2" Table 2. All of the annual variation that is common to magazines within categories and within publishers is differenced out through the fixed effects. As a result, this estimation uses only those observations where a publisher offers more than one magazine in the same category. Similarly, all of the control variables, with the exception of Issues and Acquired, have been dropped because they do not vary within the publisher-category-year cell.<br />Because of the limited sample and variation that we exploit in this model, the standard errors are much larger, rendering all of the digital content variables statistically insignificant. Moreover, including publisher-category-year fixed effects reduces the overall negative effect of digital content, in particular preview content and selected access. However, the effect of related and fulltext digital content remain roughly unchanged in magnitude (though statistically insignificant), with fulltext access reducing print sales by more than 9%.<br />For most of the results that follow, we focus on the specification with publisher and category-year fixed effects, which allows us to exploit the full estimation sample while still controlling for the important sources of unobserved heterogeneity.<br />4.2. The endogeneity of digital content<br />As noted above, there may still be magazine-specific unobservable factors correlated with circulation and the decision to offer digital content. For example, demand for the magazine may also influence the decision of how much, if any, digital content to offer. In addition, titles may make other changes that affect demand for their print content at the same time that they offer digital content. For example, the decision to establish a website may coincide with the decision to change editorial format.<br />The effect of this potential endogeneity is not clear. On the one hand, magazines with declining demand may be more likely to invest in digital content, as a way to improve their performance. If this is the case, the above results overstate the negative effect of digital content. On the other hand, magazines with growing demand may perceive greater opportunities to exploit digital content. If so, the above results understate the negative impact of digital content.<br />To assess whether the endogeneity of digital content is biasing our results, we consider three approaches. First, we compare the pre-digital content trends in circulation for adopters and non-adopters of websites, in order to assess whether the demand for magazines that later offer digital content was already growing at a different rate than the demand for magazines that never offer digital content. Second, we examine whether magazines change prices at the same time that they offer digital content. Third, we instrument for a magazine’s digital content with the amount of digital content that the publisher offers on titles in other categories.<br />4.2.1. Pre-digital content trends<br />To assess whether declining circulation preceded magazines’ decisions to offer digital content, we compare pre-1996 circulation trends for adopters and non-adopters of digital content. To do so, we run the following model,<br />(2)<br /> HYPERLINK " http://www.sciencedirect.com/science?_ob=MathURL&_method=retrieve&_udi=B6V8J-4P06C7K-1&_mathId=mml2&_user=499884&_cdi=5872&_rdoc=1&_acct=C000024499&_version=1&_userid=499884&md5=e7e2a3b0dc278914d8e03a00197f054f" o " Click to view the MathML source" Ln(Circulationit)=αAdopteri+βYeart+γAdopteri*Yeart+Xitα+vi+zj+ejkt<br />For this analysis, we use data from 1990 to 1995, (excluding titles that offered digital content in 1996 and registered domain names earlier). Here, Year is the linear time trend, and Adopter is a dummy variable that indicates those magazines that adopted websites between 1996 and 2001 (we cannot estimate the effect of adopter because it does not vary within a magazine). The variable of interest is the Year * Adopter interaction. This interaction term compares pre-digital content circulation trends for adopters and non-adopters. We also include magazine and publisher fixed effects. HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " fn7" 7 We report the results of this analysis in HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " tbl3" Table 3.<br />Table 3. <br />Comparing pre-digital content growth in circulation: adopters vs. non-adopters<br />Ln(Circulation)Ln(Circulation)Year−0.019 (0.010) HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " tblfn5" 0.005 (0.004)Website adopterYear0.030 (0.010)0.017 (0.012)Fulltext adopter YearPublisher’s websites in the categoryLn(Publisher Circulation)0.004 (0.013)0.005 (0.013)Publisher titles0.004 (0.004)0.006 (0.004)Multi-category−0.034 (0.085)−0.033 (0.086)Ln(Issues)0.107 (0.085)0.096 (0.084)Acquired0.027 (0.120)−0.001 (0.105)Constant5.154 (0.223)5.173 (0.219)R20.140.13Magazines522522N23442344<br />Full-size table<br /> Significant at 0.10. Significant at 0.05. Significant at 0.01. Standard errors, clustered by magazine, are reported in parentheses. Both models include publisher fixed effects. These models only use data from 1990 to 1995. <br /> HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_rdoc=1&_fmt=&_orig=search&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=eaf4f75ccb8aea08f63108e212f3d3b9" l " tbl3" <br />View Within Article<br />The interaction term in the first column, comparing pre-1996 circulation trends for adopters and non-adopters of any type of website, indicates that website adopters enjoyed higher growth in circulation prior to 1996. In the second column, we compare pre-1996 circulation trends for adopters and non-adopters of fulltext digital content. The interaction term remains positive, though statistically insignificant. These results provide no evidence that declining circulation preceded or caused magazines to adopt digital content. Instead, they show that rising circulation preceded magazines’ decision to offer digital content, suggesting that the results in Table 3 underestimate the cannibalizing effect of digital content.<br />4.2.2. Price adjustments<br />If magazines raise prices when they offer digital content, then the above estimates overstate the negative effect of digital content on print circulation. To consider this possibility, we examine the impact of digital content on a magazine’s prices: both its subscription price and its single-copy price. The results in columns 1–6 of HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " tbl4" Table 4 provide little evidence that magazines raise prices when they offer digital content. HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " fn8" 8<br />Table 4. <br />Effect of digital content on prices<br />Subscription pricesSubscription pricesSubscription pricesSingle-copy pricesSingle-copy pricesSingle-copy pricesPercent of subscriptions sold at a discountPercent of subscriptions sold at a discountPercent of subscriptions sold at a discountWebsite−0.001 (0.010)0.014 (0.010)1.859 (1.289)Complementary content0.003 (0.010)0.012 (0.010)2.609 (1.323) HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " tblfn8" Duplicate content−0.013 (0.014)0.018 (0.017)−0.951 (1.952)Related content0.003 (0.011)0.015 (0.011)1.678 (1.147)Preview content0.003 (0.013)0.009 (0.012)3.453 (1.118)Selected articles−0.013 (0.015)0.010 (0.018)−0.860 (1.140)Fulltext−0.014 (0.023)0.053 (0.057)−0.801 (2.413)Publisher’s websites in the category0.007 (0.004)0.006 (0.004)0.006 (0.004)0.006 (0.004)0.006 (0.004)0.006 (0.004)−0.426 (0.377)−0.579 (0.379)−0.585 (0.379)Ln(Publisher Circulation)−0.007 (0.004)−0.007 (0.004)−0.007 (0.004)−0.005 (0.004)−0.005 (0.004)−0.005 (0.004)0.314 (0.424)0.308 (0.423)0.297 (0.425)Publisher titles−0.000 (0.001)−0.000 (0.001)−0.000 (0.001)0.000 (0.001)0.000 (0.001)0.000 (0.001)0.010 (0.104)0.129 (0.104)0.127 (0.105)Multi-category0.006 (0.023)0.005 (0.022)0.005 (0.022)0.021 (0.027)0.022 (0.027)0.022 (0.027)0.029 (2.547)0.153 (2.547)−0.080 (2.548)Ln(Issues)−0.825 (0.027)−0.824 (0.027)−0.824 (0.027)−0.049 (0.040)−0.049 (0.040)−0.049 (0.040)−6.646 (1.992)−6.586 (1.989)−6.653 (1.990)Acquired−0.040 (0.041)−0.039 (0.041)−0.039 (0.041)−0.062 (0.028)−0.062 (0.028)−0.061 (0.028)−6.420 (3.986)−6.153 (3.982)−6.580 (3.991)Constant2.835 (0.074)2.930 (0.086)2.947 (0.087)1.349 (0.107)1.352 (0.106)1.348 (0.107)29.007 (11.579)27.188 (11.495)27.475 (11.486)R20.670.670.670.650.650.650.290.290.29Magazines591591591591591591591591591N445744574457445744574457445744574457<br />Full-size table<br /> Significant at 0.10. Significant at 0.05. Significant at 0.01. Standard errors, clustered by magazine, are reported in parentheses. All models also include magazine, publisher, and category-year fixed effects. <br /> HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_rdoc=1&_fmt=&_orig=search&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=eaf4f75ccb8aea08f63108e212f3d3b9" l " tbl4" <br />View Within Article<br />Although the above results provide no evidence that magazines raise subscription prices when they offer digital content, it should be noted that these are list prices, and magazines sell most subscriptions at a discount. This raises the possibility that magazines may offer fewer discounts, rather than increasing the list price, when they offer digital content.<br />To assess this possibility, we examine the impact of digital content on the percentage of subscriptions that a magazine sells at full (list) price. The results, which we report in the last three columns of Table 4, suggest that magazines offer fewer discounts when they offer Complementary Content. In particular, magazines offering Preview Content increase the fraction of subscriptions sold at full price by nearly 3.5% points. This suggests that the negative effect of complementary content on print sales may be partially explained by magazines’ offering fewer discounts. In contrast, magazines offering selected articles or fulltext access do not sell more subscriptions at full price. Therefore, it does not appear that subscription price discounts explain the reduction in circulation for magazines that offer duplicate digital content.<br />4.2.3. Instrumental variables (IV) analysis<br />Although the results in HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " tbl3" Table 3 and HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " tbl4" Table 4 offer no evidence that endogeneity is driving our results, we estimate IV models to control for any potential form of endogeneity. As an IV, we use the number of websites that a publisher offers for magazines in other categories.<br />For example, consider Child magazine, published by Gruner and Jahr (G&J). In addition to selling Child in the Parenthood category, G&J offers titles in two other categories: Home Service and Home and Women’s. Therefore, as instruments for the digital content offered by Child, we use the number of websites offered by G&J in the Home Service and Women’s categories. The logic driving this choice of instruments is that there are substantial economies of scope in website development and operation ( HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " bib6" Goldfarb, 2004).<br />Opportunities for cost sharing can be found both in back-office and in front-end operations. For example, two of the largest publishers of consumer magazines, Hachette Fillipacchi and Conde Nast, use the same subscription-service software for all of their magazines’ websites ( HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " bib1" Barsh et al., 2001). Similarly, magazines owned by the same publisher can use a common template for their websites. Later adopters can simply add content to a “sibling” magazine’s existing website, reducing set-up and operating costs ( HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " bib1" Barsh et al., 2001).<br />However, the publisher’s other magazine websites in the same category may be correlated with the demand for the focal magazine. Therefore, we only include websites that the publisher offers in other categories, as these would offer most of the same economies of scope, while being uncorrelated with the demand for the magazine. The identifying assumption underlying this strategy is that the decision to create websites for magazines in other categories is correlated with the decision to offer digital content for a focal magazine, but uncorrelated with demand for the focal magazine, after controlling for other factors including magazine, publisher, and category-year fixed effects.<br />We report the results of the IV models in HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " tbl5" Table 5. The first column includes the number of websites that the publisher offers in other categories as an instrument. The second column includes a quadratic term as a second instrument. This allows for diminishing returns to the scope economies associated with operating multiple websites. In both cases, F-tests reveal that the excluded instrument(s) is highly significant in the first stage. In the second model, a test of overidentifying restrictions provides no evidence that the instruments are not exogenous. The second-stage results indicate that offering a website has a negative effect on the magazine’s circulation. Although statistically insignificant, the results are fairly similar in magnitude to the OLS results, and provide no evidence that endogeneity is biasing our results.<br />Table 5. <br />Instrumental variables estimation of the effect of digital content on print circulation<br />1st Stage (dependent variable is website)2nd Stage (dependent variable is Ln(Circulation)1st Stage (dependent variable is website)2nd Stage (dependent variable is Ln(Circulation)Website−0.057 (0.053)−0.049 (0.051)Publisher’s websites in the category0.047 (0.006)0.001 (0.005)0.041 (0.006)0.001 (0.005)Ln(Publisher Circulation)0.015 (0.007)0.027 (0.005)0.013 (0.007)0.027 (0.005)Publisher titles−0.027 (0.002)−0.003 (0.001)−0.020 (0.003)−0.003 (0.001)Multi-category−0.027 (0.041)−0.047 (0.027)−0.029 (0.041)−0.047 (0.027)Ln(Issues)0.040 (0.032)0.124 (0.021)0.039 (0.032)0.123 (0.021)Acquired0.114 (0.063)−0.002 (0.042)0.109 (0.063)−0.003 (0.042)Publisher’s websites in other categories HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " tblfn10" a0.022 (0.002)0.026 (0.002)Publisher’s websites in other categories2 (divided by 10) HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " tblfn11" b−0.002 (0.000)F-test for significance of instruments in first stage154.2283.80Sargan statistic for overidentification testNA (model is perfectly identified)0.266 (p-value=0.606)ConstantR20.770.350.770.35Magazines620620620620N4945494549454945<br />Full-size table<br />a The number of websites that the publisher offers on magazines in any other categories is the instrument for website in column 1.b In column 2, we also include the square of this term as an instrument. Significant at 0.10. Significant at 0.05. Significant at 0.01. Standard errors are reported in parentheses. All models also include magazine, publisher, and category-year fixed effects. <br /> HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_rdoc=1&_fmt=&_orig=search&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=eaf4f75ccb8aea08f63108e212f3d3b9" l " tbl5" <br />View Within Article<br />5. Discussion<br />Contrary to popular opinion, previous studies find mixed evidence that digital content cannibalizes print sales. However, these studies all treat digital content as a dichotomous variable: a magazine offers a website or it does not. Using an Internet archive, we construct a unique dataset of consumer magazine websites that tracks the amount of free digital content that each magazine offers and how much it overlaps with the print magazine, over a 6-year period. With this dataset, we are able to examine the impact of different types of digital content on demand for print magazines.<br />We find that digital content cannibalizes print sales. On average, having a website reduces a magazine’s circulation by 3–4%. However, the effect varies with the overlap between the digital and print content: greater overlap results in greater cannibalization. We find that allowing readers to read the entire contents of the current issue on line reduces print sales by more than twice as much. We also find some evidence that offering digital content that overlaps less with the current print issue – original and archived content, a table of contents and article teasers, or access to selected full-length articles from the current issue – cannibalizes print sales, although the effects are smaller and the results are less robust. Nonetheless, the results reveal no evidence of complementarity between digital and print content. It appears that magazines do not boost their circulation by offering digital content.<br />Although it is intuitive that offering selected articles and, especially, fulltext content cannibalizes print sales, it is somewhat surprising that distinct and, especially, preview content do not complement and may even cannibalize print sales. It seems unlikely that readers substitute a table of contents or a one-paragraph summary of the cover story for the print magazine. However, a 2003 survey of magazines that viewed their websites as successful found that more than three-quarters of these titles’ websites offer “editorial or database” content which is not in the print magazine, while about two-thirds offer interactive tools and nearly two-thirds offer archives (all of which we categorize as distinct content) ( HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " bib8" FIPP, 2003). As discussed above, these kinds of distinct content may be quite substitutable with the print magazine. Therefore, the negative effect of preview content may reflect the effect of distinct digital content which all websites offer, in addition to other types of content.<br />5.1. Comparisons with previous studies<br />In the study most similar to this one, Kaiser (2006) finds no effect in his sample of German women’s magazines. However, in an earlier version of the paper, Kaiser notes that, “There is very little overlap between the printed magazine and the website information. Neither are full text downloads of articles available nor do the topics covered by the website coincide with the contents of the current magazine edition. All of the websites offer, however, online subscription possibilities … and a table of contents of the most current magazine issue” ( HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " bib10" Kaiser, 2002).<br />Based on this description, it appears that HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " bib11" Kaiser (2006) may find that digital content does not cannibalize print sales because the magazines in his sample offer only content that overlaps very little with the current print issue. Readers are not likely to substitute such content for the print magazine.<br />In the other paper most similar to this one, HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " bib4" Filistrucchi (2005) finds that in the short run, establishing a website reduces a newspaper’s print sales by about 3%. While this result is very similar to the results that we find, Filistrucchi estimates the long-run impact of the website to be far more negative, reducing print sales by more than 26%. This effect is strikingly large, which Filistrucchi attributes to the fact that the Italian newspapers offered fulltext sites. Moreover, Filistrucchi focuses only on single-copy sales, where the greater convenience of digital content may increase the extent of cannibalization.<br />5.2. Looking to the future<br />While digital content offers many advantages over print magazines, there are also a variety of reasons why readers may not view digital content as a good substitute for print content. According to one magazine executive, “a big question on everyone’s mind is the readability issue: how easy is it to read a mag (sic) on the screen?” ( HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " bib9" Joukhadar, 2004). Echoing these sentiments, an executive at Business Week agrees that “readability is a very big issue, especially with consumer magazines…. ‘If anyone has ever tried to read Business Week digitally, it’s not ideal”’ ( HYPERLINK " http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8J-4P06C7K-1&_user=499884&_coverDate=10%2F31%2F2007&_rdoc=1&_fmt=full&_orig=search&_cdi=5872&_sort=d&_docanchor=&view=c&_acct=C000024499&_version=1&_urlVersion=0&_userid=499884&md5=7d1bd835e81dbcaf293f50ee627a2562" l " bib9" Joukhadar, 2004). Despite ongoing technological improvements, digital content remains less convenient than print content, because of the need for a computer. While readers can print out digital content, this creates additional hassles. Moreover, downloading full-length articles is sometimes a slow process. Nonetheless, as technology continues to improve, and Internet usage increases, it seems that the threat of cannibalization will only increase.<br />6. Conclusion<br />The Internet poses tremendous opportunities and challenges to providers of information goods. Some have argued that the Web will destroy traditional publishing (Hickey, 1997), while others argue that it enhances publishers’ ability to attract new customers. This is the first study to demonstrate a negative relationship between the demand for digital and print magazine content. The results indicate that digital content substitutes for print content, while providing no evidence of complementarities. However, the results also emphasize that, for most consumers, digital content is not a good substitute for print media. More than 90% of readers continue to buy the print magazine when the identical content is available on line, for free.<br />We hope that this study will help to spur additional research assessing the impact of firms’ digital products on their traditional goods. This is a major issue of increasing importance that many firms, particularly providers of information goods, must confront.<br />

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