Economies of Scale and the New Technology of Daily Newspapers: A Survivor Analysis

Abstract

The economics of the newspaper industry occupies a special place in industrial organization. Unlike the vast majority of enterprises, this business is intimately linked to the protection of freedom of expression. Constitutional democracies generally have monitored it with special care. In the United States the Newspaper Preservation Act of 1970 provides some antitrust immunity for segments of the industry. Ignoring a captive regulation (pro-producer, wealth-maximizing) rationale for the act, we may presume that the United States Congress deems daily newspaper viability as an objective superior to the conventional reasons for antitrust. The received logic rests on the notion that newspapers are naturally monopolistic. Logical analysis and statistical research support this notion, suggesting that first-copy costs reflect significant indivisibilities. In the absence of local market segmentation, city newspaper markets accordingly evolve to one major daily. In the wake of dramatic technological changes in newspaper production during the last 20 years, however, an interesting question focuses on the validity of the substantial economies of scale conclusion. Informed speculation and casual empiricism suggest that absolutely smaller newspapers have gained in relative efficiency as a result of these changes. Our objective is to examine this question.

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