The question in Hoskins et al. Chapter 7 about how to determine whether local newspapers would be considered monopolies helped provide a good framework for understanding the nature of newspapers' current problems. The authors said the key to that question lies in whether there are other firms producing close substitutes in that local market.
The answer to that question varies depending on the type of good being produced by the newspaper, and it's also changed over the past decade or so. Newspapers bundle a variety of goods -- local news, national and world news, lifestyle features, display and classified ads, comics, the crossword puzzle, etc. In most markets, almost all of those goods now have competing substitutes, thanks to the Internet, which operates across every local market.
Take, for example, circular ad inserts. In the pre-Internet days, the local newspaper held a near-monopoly over this type of good -- the only alternative was going into each store and picking up their circular on site. But now, there are local substitutes in the form of sites that list each store's circulars for the week, and stores often list their own weekly deals online. It's not as though a "local" substitute has emerged, but the Internet functions as a local substitute in each market because of its penetration across local markets.
There's one big exception to this -- local news. In most markets, the Internet hasn't yet enabled local news to create a substitute good for newspapers' local news coverage. That's something newspapers like to remind us of often, and it's the reason why many small newspapers continue to do well despite the Internet's disruption of the rest of their industry. But newspapers also need to recognize that though they still hold something of a monopoly over local news, consumers often bought their products for all the other goods bundled with it, and they've found substitutes for those goods elsewhere. Newspapers often view local news as their only good, but they have (or had) many others, and that's where their local monopoly has fallen apart.
The answer to that question varies depending on the type of good being produced by the newspaper, and it's also changed over the past decade or so. Newspapers bundle a variety of goods -- local news, national and world news, lifestyle features, display and classified ads, comics, the crossword puzzle, etc. In most markets, almost all of those goods now have competing substitutes, thanks to the Internet, which operates across every local market.
Take, for example, circular ad inserts. In the pre-Internet days, the local newspaper held a near-monopoly over this type of good -- the only alternative was going into each store and picking up their circular on site. But now, there are local substitutes in the form of sites that list each store's circulars for the week, and stores often list their own weekly deals online. It's not as though a "local" substitute has emerged, but the Internet functions as a local substitute in each market because of its penetration across local markets.
There's one big exception to this -- local news. In most markets, the Internet hasn't yet enabled local news to create a substitute good for newspapers' local news coverage. That's something newspapers like to remind us of often, and it's the reason why many small newspapers continue to do well despite the Internet's disruption of the rest of their industry. But newspapers also need to recognize that though they still hold something of a monopoly over local news, consumers often bought their products for all the other goods bundled with it, and they've found substitutes for those goods elsewhere. Newspapers often view local news as their only good, but they have (or had) many others, and that's where their local monopoly has fallen apart.
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