Commercial publishing - a quiet life? Market power and performance on the Dutch market for consumer magazines

The study analyses the Dutch market for consumer magazines. Magazines share a number of characteristics with other information goods: they are experience goods, non-rival, have high fixed and low marginal cost, and content can be subsidised or sponsored by advertising. We develop a simple theoretical model to show that, if readers value content, it is profit maximising for publishers to use pricing power in the advertising market to subsidise the price charged from readers. The empirical analysis is based on a panel data set of 71 Dutch magazines over the period 1990 - 1998. The regression results suggest that magazines with a higher circulation are indeed sold at lower newsstand prices, while ad rates tend to be higher for these magazines. The analysis of the market indicates that policy makers should be on the look-out for anti-competitive actions taking place in upstream or downstream markets.