Maximizing Newspaper Profits from the Internet and Print

The internet poses a number of challenges to traditional media. On the negative side, it has given birth to host of competitors indigenous to the internet, firms who once served geographically distinct markets may become direct competitors in cyberspace, and it makes more direct the competition among firms whose offerings were distinguished by reliance on different delivery technologies in the days before internet distribution was a feasible option. The internet has also amplified losses due to content piracy. At the same time, the internet is a new channel for distributing content once confined to traditional channels. Although almost all firms based in traditional media now have internet offerings, the strategies behind these offerings continue to evolve. It is fair to say there is no consensus on what works best for different kinds of content and for the same kinds of content in different circumstances. To date, research on the impact of the internet on traditional media has been primarily empirical and focused on the extent to which internet distribution, legal or not, cannibalizes or stimulates consumption of the same content in traditional channels. There have been few attempts to construct formal models that identify and parameterize the complex web of tradeoffs involved a comparisons of profits with different online distribution strategies. An exception is Wildman (2008), which considers online and offline channels for television programs. This paper presents a model of a newspaper firm and compares profits for three strategies that differ in restrictions placed on online access to the newspaper’s offline edition. Most restrictive is making content available only in the print. Least restrictive is making the paper’s content accessible on a website for free. Intermediate is to make online access to the newspaper’s content contingent on subscribing to the print edition. The model presented in this paper allows for differences in the costs of online and offline distribution, consumers who do and do not have internet connections, internet subscribers who vary in the amount they value on online access to the daily paper, advertisers who value online and offline readers differently, variation in the extent to which online reading reduces time spent reading the print edition, and differences among readers in the extent to which access to the paper free online reduces their demand for the print edition