Concentration and Self-Censorship in Commercial Media

Abstract

Within a simple model of non-localized, Hotelling-type competition among arbitrary numbers of media outlets we characterize quality and content of media under different ownership structures. Assuming advertising-sponsored, profit-maximizing outlets, we show that (i) topics sensitive to advertisers can be underreported (self-censored) by all outlets in the market, (ii) self-censorship increases with the concentration of ownership, (iii) adding outlets, while keeping the number of owners fixed, may even increase self-censorship; the latter result relies on consumers' most preferred outlets being potentially owned by the same media companies. We argue that externalities resulting from self-censorship could be empirically large.

Paying positive to go negative: Advertisers׳ competition and media reports

“…7 The conspicuous advertisements of car manufactures also seem to represent one of the key factors leading media to present evidence on the sources of global warming which appear to be largely unbalanced with respect to the consensus within the scientific community (Oreskes, 2004;Boykoff and Boykoff, 2004;Ellman and Germano, 2009). This type of advertisers-induced distortion in the accuracy of news reports is referred to as "commercial media bias" or "self-censorship" (Ellman and Germano, 2009;Germano and Meier, 2010). Nevertheless, products defects, the dangerous effects of smoking, the ineffectiveness of a drug product, the effects of car pollution on global warming, are all news likely to negatively affect the revenues of the advertiser whose product is the subject of such news.…”

A Citizen-Editors Model of News Media

“…Hence, when choosing between a media outlet with a moderate editor and one with an ideologically closer editor, any citizen will trade-o¤ the expected accuracy and the value of information provided by these di¤erent types of editors. 23 In turn, as shown by the above lemma, the presence of this trade-o¤ implies that there will always be an upper bound on the "extremism"of an editor above which the demand for news by rational citizens will be strictly decreasing. That is, depending on the opportunity cost of acquiring information, rational liberal (conservative) citizens may prefer a slightly more moderate-liberal (conservative) editor to a less moderate one.…”

Competition and Commercial Media Bias

“…The two media outlets are horizontally differentiated. Hence, readers can access the news reports from both media outlets but have to incur in a transportation cost to move from a media outlet to the other (as in Germano and Meier, 2010). Specifically, we capture the presence of competition between the two media outlets and the presence of readers' transportation cost, by assuming that the incumbent media outlet will charge a subscription fee s < s to the unit mass of readers and, upon not observing any news on firms' products, only a fraction 1 − > 0 of them will get informed also from the entrant media outlet.…”

“…Specifically, we can assume that (n) ≡ n . That is, transaction costs are strictly decreasing in the number of entrants (see Germano and Meier 2010). Thus, by substituting this function into (13), we can characterize a threshold in the number of media outlets competing in the market for news, above which the news reports of the incumbent are accurate (no commercial media bias).…”

“…Moreover, the endogenous demand of politically "slanted" news by viewers may result in a "demand-driven" bias in news reports (Mullainathan and Shleifer, 2005;Gentzkow and Shapiro, 2006;Chan and Suen, 2008;. While the literature has been trying to address the sources and the welfare implications of political media bias, less attention has been devoted to analyze the advertisers-induced distortions in the informative contents of media outlets, i.e., to commercial media bias (Ellman and Germano, 2009;Germano and Meier, 2010).…”