9/15/2009

Print Media Gone Before Too Long

According to a recent article on FT.com, (Financial Times.com) the method in which we receive our news will no longer exist as a paper organism. What is happening with this method of receiving our news? It is being taken over my other forms. This has been happening for many years and will continue to happen until there are no more news paper companies that exist.

The demand for this form of media is dwindling at a rapid pace. Subscribers might still be using the news paper company for their information source but they are no longer purchasing the paper itself. They are sifting through the news online and they are downloading the newspaper on to their electronic devices. This has caused, and will continue to cause, a demand shift to the left.

What does that shift mean? In the short run, the supply will remain somewhat the same until those companies that cannot afford to be in business, will be long gone. Those that do stay in business will have to raise their prices for the ads that are being placed by other businesses, they will have to charge more the physical paper itself, and they will also need to charge more for the online subscription. The online subscription has been free to utilize for most newspapers around the country but all that will change in the future. The author feels like that future will be within the next twenty years or less.

In the long run, the supply curve will shift as well and the supply will be less. This means that the prices will go up because the demand has shifted and the supply has shifted. There is nothing else the newspapers can do except charge more for the services that they are offering. It is a vicious cycle that might be a downward spiral for them in the near future. If subscription base falls, then so will advertisement. If advertisement falls, where is the revenue?

Some of the variables for these rising costs in the past year or so have been that newspaper subscription has been falling and so has the ad revenue from businesses advertising with the newspapers. People have been able to find the same news somewhere else on the internet. This has caused many of the newspapers to start charging for the online subscription already. I feel that most people will even opt out of paying for their online subscription because there are so many places from where one can get news that is from a reliable source. Newspapers will have to come up with some ways to entice people to keep their subscriptions or they will be asking for bailouts and they might even become run by the government.

Although this was not the meat of the article, the demand shift can very easily be taken from this article because of what has been said in it.

2 comments:

Brooklyn said...

I think this is an interesting dilema with the ever growing availability of free information. Who is going to pay for the information you can get for free? It sounds like you might also be touching on the elasticity of demand or the demand in relation to the price of the news. What is the impact of lower income on the price of news in this economy?

Dr. Tufte said...

"Paper organism"? What's that? ;)

I'm waiving penalties for the first block, but in later blocks I'd ding this post for a few of them.

I think you're right that there will be a demand shift to the left. But, you don't interpret that correctly: it will lead to a decline in prices. This will force some firms out of the market, which will produce a leftward supply shift (which you got right). The net effect on prices is unclear: it depends on the elasticities of supply and demand and the size of the shifts.

This is getting into later chapters, but what we are really seeing here is the unbundling of a bundled good. News gathering always had high fixed costs, and low marginal costs. But, what is killing newspapers is that they were selling a bundled good: news with advertising (primarily classified, believe it or not). The loss of classifieds is what is really killing newspapers. Who knew?