Newspapers in times of low advertising revenues

Abstract

We model the consequences on newspapers' content and prices of a reduction in advertising revenues. Newspapers choose the size of their newsroom, and readers are heterogeneous in their ideal amount of journalistic- intensive content. We show that a reduction in advertising revenues lowers newspapers' incentives to produce journalistic- intensive content. We also build a unique dataset on French newspapers between 1960 and 1974 and perform a difference- in-differences analysis exploiting the introduction of advertising on television, which affected national newspapers more severely than local ones. We find robust evidence of a decrease in the amount of journalistic- intensive content produced and the subscription price.