The economics of the press

This week’s Free exchange column looks at the work of economist Matthew Gentzkow, of the University of Chicago. Mr Gentzkow was recently named the latest winner of the John Bates Clark medal, given each year to a top American economist under the age of 40. He earned the honour by turning the tools of economic analysis on the news business, with fascinating results:

As Mr Gentzkow points out in recent research, newspapers’ woes are not due entirely to readers’ defection to free alternatives online. Time spent reading newspapers did indeed fall by half between 1980 and 2012, but most of the drop came before 2000, while the web was in its infancy. From 2008 to 2012, as time spent on the web as a whole soared, time spent reading newspapers fell much more slowly. Enchanting cat videos, in short, do not seem to have crowded out much news consumption.

Rather, it is a plunge in advertising that has hit newspapers hardest. Their ad revenue, adjusted for inflation, is back to the level of 1953. From 2008 to 2012 the revenue for every hour readers spent perusing a printed newspaper fell by almost half, as the web provided advertisers with an exploding supply of alternatives. The news is not all bad, Mr Gentzkow reckons: online ads…Continue reading

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