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One of the most profitable of all media industries even though the circulation is in decline A means of reaching mass audiences, rather than segmented audiences, in the eye of advertisers
Primarily a monopoly (96%) in the U.S. Where there is competition, differentiated newspapers exist (e.g., broadsheet vs. tabloid) Barriers to entry are high, because of
Financial Performance
Dual product market Circulation spiral: circulation advertising Increased prices as a result of inelastic demand for newspapers; i.e., no close substitutes are available for consumers to choose other products at a lower price
Advertising
Newspapers get 5 times more advertising revenue today than they did at the end of WWII 3 major categories:
More substitutability is evident in the advertising than in the information product market
Operating Budgets
Revenues
Expenses
Advertising
65-80%
Circulation
20-35%
Editorial 7-10% Advertising 5-6% Circulation 9-10% Promotion 1-2% Mechanical 13-15% Newsprint 15-30% Administration 8-12% Building and land 1-3%
Cost Structure
High first-copy costs Relatively low reproduction costs because of economies of scale
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Government Policies
No comprehensive economic policy toward the newspaper industry has ever been established in the U.S. Tax exemptions and incentives Anti-trust laws
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Globalization
The newspaper industry is less affected by globalization and remains primarily a domestic industry Agree? Disagree? Newspapers vs. magazines vs. books Overseas Chinese newspapers
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Americans are spending less time and money on consumer books and magazines Books
Intense competition Minimal barriers to entry Mergers and acquisitions since the 1960s
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Magazines
Monopolistic competition Total number of magazines purchased: 1.3 copies/adult Average cost for a single copy at newsstands: US$2.13 Growing consolidation
AOL Time Warner was the largest owners of magazines in the U.S.
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Financial Performance
Books
Most books are discounted by publishers to bookstores, distributors, etc. Profit and loss (P&L) analysis
Revenue streams
Magazines
Business model
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Too expensive
Inconvenient and unappealing
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Web-based Magazines
E-magazines can break new stories, update existing articles, and provide useful links Allow advertisers to buy both print and electronic ads simultaneously Convergence is the key Prospects?
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Globalization
Canada UK Australia Hong Kong Mexico The Netherlands Taiwan The Philippines
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