The Impact of Internet on the Market for Daily Newspapers in Italy

Recent years have seen a surge in websites that provide news for free and, up to the end of 2001, daily newspapers in Italy have shown a growing trend towards making available online for free; the exact articles published on paper. To assess whether on-line news and traditional daily newspapers are substitute, complement or independent goods, I model the choice between different daily newspapers as a discrete choice among differentiated products. Considering the availability of a website as a newspaper characteristic and controlling for other observable and unobservable characteristics of newspapers and of the outside good, I estimate a logit model of demand on market level data from 1976 to 2001 for the main national daily newspapers in Italy. Results suggest that opening a website had a negative impact both on the sales of the newspaper who opened it and on those of its rivals. I calculate the implied short-run and approximated long-run losses in both sales and profits and provide some evidence of the additional negative effect stemming from the general availability of Internet and on-line news. Results also contribute to explaining why, starting from the end of 2001, many publishers introduced a fee to read on-line the paper edition of the newspaper.

[1]  James N Rosse,et al.  ESTIMATING COST FUNCTION PARAMETERS WITHOUT USING COST DATA: ILLUSTRATED METHODOLOGY , 1970 .

[2]  D. McFadden.  Conditional logit analysis of qualitative choice behavior , 1972 .

[3]  W. Reekie.  The price elasticity of demand for evening newspapers , 1976 .

[4]  Daniel McFadden,et al.  Modelling the Choice of Residential Location , 1977 .

[5]  D. McFadden.  Econometric Models of Probabilistic Choice , 1981 .

[6]  D. McFadden,et al.  Specification tests for the multinomial logit model , 1984 .

[7]  Stephen G. Cecchetti.  The frequency of price adjustment: A study of the newsstand prices of magazines , 1986 .

[8]  M. Nerlove,et al.  Biases in dynamic models with fixed effects , 1988 .

[9]  James N. Dertouzos,et al.  ECONOMIC EFFECTS OF MEDIA CONCENTRATION: ESTIMATES FROM A MODEL OF THE NEWSPAPER FIRM , 1990 .

[10]  D. Booth.  AN EMPIRICAL MODEL OF CAPACITY EXPANSION AND PRICING IN AN OLIGOPOLY WITH BAROMETRIC PRICE LEADERSHIP: A CASE STUDY OF THE NEWSPRINT INDUSTRY IN NORTH AMERICA* , 1991 .

[11]  Roger D. Blair,et al.  Pricing Decisions of the Newspaper Monopolist , 1993 .

[12]  Steven T. Berry.  Estimating Discrete-Choice Models of Product Differentiation , 1994 .

[13]  Patricia A. Curtin,et al.  Electronic Newspapers: Toward a Research Agenda. , 1995 .

[14]  Steven T. Berry,et al.  Automobile Prices in Market Equilibrium , 1995 .

[15]  André de Palma,et al.  Discrete Choice Theory of Product Differentiation , 1995 .

[16]  Andrew Whinston,et al.  The Economics Of Electronic Commerce , 1997 .

[17]  Aviv Nevo.  Measuring Market Power in the Ready-to-Eat Cereal Industry , 1998 .

[18]  Badi H. Baltagi,et al.  UNEQUALLY SPACED PANEL DATA REGRESSIONS WITH AR(1) DISTURBANCES , 1999, Econometric Theory.

[19]  Centro studi investimenti sociali.  Rapporto sulla situazione sociale del paese , 1999 .

[20]  Alan Miles,et al.  Beyond Print: A Future for Magazines , 1999 .

[21]  Aviv Nevo.  A Practitioner's Guide to Estimation of Random‐Coefficients Logit Models of Demand , 2000 .

[22]  William L. Goffe.  The Economics of Electronic Commerce , 2000 .

[23]  Peter B. White,et al.  Profiting from online news The search for viable business models , 2000 .

[24]  Timothy C. G. Fisher,et al.  Synchronization of price changes by multiproduct firms: evidence from Canadian newspaper prices , 2000 .

[25]  D. McFadden,et al.  MIXED MNL MODELS FOR DISCRETE RESPONSE , 2000 .

[26]  Jonathan L. Willis.  Estimation of Adjustment Costs in a Model of State-Dependent Pricing , 2000 .

[27]  Ulrich Kaiser,et al.  The Effects of Website Provision on the Demand for German Women's Magazines , 2001 .

[28]  Marc Rysman,et al.  Competition between Networks: A Study of the Market for Yellow Pages , 2002 .

[29]  Amil Petrin.  Quantifying the Benefits of New Products: The Case of the Minivan , 2001, Journal of Political Economy.

[30]  Ralf Dewenter,et al.  Rational Addiction to News? , 2003 .

[31]  K. Train.  Discrete Choice Methods with Simulation , 2003 .

[32]  R. Dewenter.  Rational Addiction to News? : Habit Formation and Print Media Usage , 2003 .

[33]  Demand Estimation for Italian Newspapers: the Impact of Weekly Supplements ∗ , 2004 .

[34]  L. Filistrucchi,et al.  Estimating Market Power in a Two-Sided Market: The Case of Newspapers , 2005 .

[35]  Ulrich Kaiser,et al.  Do Magazines' 'Companion Websites' Cannibalize the Demand for the Print Version? , 2005 .

[36]  Daniel H. Simon,et al.  The Effect of a Magazine's Digital Content on its Print Circulation: Cannibalization or Complementarity? , 2006 .

[37]  F. Verboven,et al.  Liberalizing A Distribution System: The European Car Market , 2006 .

[38]  M. Gentzkow.  Valuing New Goods in a Model with Complementarity: Online Newspapers , 2007 .