Effects of Content Sourcing Strategy on Online News Subscription

Abstract

Declining circulation and advertising revenue have led many newspapers to cut costs by shrinking their in-house staff and sourcing more content from external wire agencies. Over time, this could be counterproductive for smaller newspapers: Information Economics literature suggests that they must differentiate through unique in-house content. On the other hand, firm strategy literature suggests that by hosting quality external content a newspaper can charge for convenience. In this study, we empirically examine these predictions by measuring the effects of in-house and wire content on online readers’ subscription decisions using data from a regional U.S. newspaper. To control for sample selection that may occur if readers visit the site on days with their preferred content, we use readers’ local precipitation as an excluded variable that indirectly randomizes their exposure to content from these two sources. We find that publishing 10 additional in-house articles a day would, on average, increase a reader’s rate of subscription by 15% relative to the baseline. Publishing 10 additional wire articles a day, on the other hand, would decrease the subscription rate by 11%. The negative impact of wire content on new subscriptions by local readers is 26% less severe than it is for remote readers. Both positive and negative content effects are approximately doubled for readers who use a tablet as the primary access device. Effects of content in some categories within each source go against the overall trend. Producing more General News, Sports, and Entertainment articles, and wiring more Business articles increase subscription. But publishing more Lifestyle, Health, and Food articles do not, regardless of their sources. These results show that on average differentiating through in-house content increases subscription, but there are specific quality content from external sources that if hosted can increase subscription.

Keywords: Online Newspapers, Content Sourcing Strategy, Paywall, Willingness to Pay, Endogenous Switching

JEL Classification: M1, M3