Is the Internet Bad News? The Online News Era and the Market for High-Quality News

Review of Network Economics, 9(2), June 2010

Posted: 28 Apr 2009 Last revised: 30 Oct 2014

See all articles by Paul Frijters

Paul Frijters

Queensland University of Technology - School of Economics and Finance

Malathi Velamuri

Chennai Mathematical Institute

Date Written: April 27, 2009

Abstract

We review and model the impact of the internet on the production and uptake of high-quality news. Our review of trends in the market for news suggests 3 stylized facts: i) particular quality news markets are dominated by merely a few providers, ii) demand for quality news appears stable, but provision of news has become specialized; mainstream news is decoupled from quality news, and iii) the dominant business model of internet news mirrors that of radio, television, and newspapers in that costs of news production are recouped via advertising. We build a stylized model that rationalizes these facts. Our model captures three conflicting effects: (1) economies of scale in the production of news lead to monopolies on particular markets, (2) easy access to information on the internet makes it cheaper to provide high-quality news and to disseminate it via the web, which increases the production of such news; and (3) the existence of bloggers and news aggregators who recycle the stories of news-providers reduces the effective property rights of high-quality news producers, thus forcing the business model of the internet to be advertising-based. For the most likely cases, our model would imply that the internet does not constitute bad news for the provision and uptake of quality news.

Keywords: News quality, Internet, Monopolies, Search Costs, Advertising

JEL Classification: L82, L11, L15

Suggested Citation

Frijters, Paul and Velamuri, Malathi, Is the Internet Bad News? The Online News Era and the Market for High-Quality News (April 27, 2009). Review of Network Economics, 9(2), June 2010, Available at SSRN: https://ssrn.com/abstract=1396003

Paul Frijters

Queensland University of Technology - School of Economics and Finance ( email )

GPO Box 2434
2 George Street
Brisbane, Queensland 4001
Australia
(07) 3864 9364 (Phone)
(07) 3864 1500 (Fax)

HOME PAGE: http://www.bus.qut.edu.au/paulfrijters/index.jsp

Malathi Velamuri (Contact Author)

Chennai Mathematical Institute ( email )

Sipcot
Chennai, TN Chennai
India

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