Media competition and media policy

The aim of the project is to analyze how technological progress and digitization can lead to qualitative changes in media market competition and effective media policy. Furthermore, we analyze how different access to information can affect everything from consumer journalism to the media's political influence. While printed newspapers dominated, many were content to buy either VG or Dagbladet (single homing). A key consequence of the digitization process is that many consumers make use of several media sources (multihoming). Most people seek out both domestic and foreign online media, and the media companies' battle for advertising revenue has become significantly more global. Today, an advertisement from the convenience store, for example, can just as well appear digitally in The New York Times and on Facebook as in the local newspaper. Furthermore, technological developments can give rise to strong network effects. This does not only apply to network effects between different user groups (such as between advertisers and newspaper readers in two-sided markets); technological developments can also create or reinforce direct network effects. For example, media companies with a large audience can achieve high efficiency by acquiring valuable information through user data. Main activities and preliminary results. Through the project, we seek to carry out research of high theoretical and empirical quality and anchor the research in issues that are important to the media industry. Communication between researchers and the media industry is therefore important. For this reason, we have organized several national conferences with active participation from researchers and from senior managers of tone-setting media players. The focus has been the interplay between competition and market regulation, with an emphasis on media pluralism, ownership policies and how the media landscape is influenced by dominant, global players. In one of the project's research articles, we have analyzed how the combination of increased multihoming and better opportunities to target advertisements affects competition between newspapers. Targeting tends to be more effective the larger the readership of the newspaper, since more readers generate more consumer data. Previous literature indicates that this leads to stronger price competition and lower profit for media companies. However, we find that this result can break down with increased multi-homing, and that media profit can increase by using targeting tools. In a theoretical work, we analyze the consequences of the EU's directive on copyright in the digital single market. We find that the directive can lead to greater market concentration for digital platforms and reduced economic efficiency if there are strong network effects within a given platform. The importance of network effects is also addressed in another research article on the project. Traditional economic literature finds that the existence of network effects can harm the profitability of media platforms. Through the project, we show that this prediction depends critically on an assumption that consumers are single. If consumers multihome, then profits can increase if network effects become stronger. In two articles on the project, we analyze the consequences of insufficient and uncertain information among consumers of media services. In one of these, we focus on how consumer journalism can strengthen competition between sellers of consumer products by increasing consumers' access to information. In the second article, we take as our starting point the increasingly strong focus on the consequences of biased news reporting. We show that even formally impartial news coverage can influence political outcomes in a biased way. We also analyze competition between media companies that provide "true" information (news) and media companies that produce "false" information, and show that the existence of, for example, public broadcasters may reduce entry of firms that produce fake news. In a related article, we examine the weight that media consumers place on the accuracy of news reporting in relation to their desire to confirm their own opinions. In experiments with American respondents, we find that respondents only reduce their demand for partisan news when partisanship is inconsistent with their own political beliefs. To reduce analytical complexity, most microeconomic research articles abstract from contract negotiations between distributors and content producers. In this project, we explicitly incorporate negotiations into a framework where a distributor can threaten a content producer with replacing parts of its product portfolio with other content. We find that this can reduce the compensation that the content producer obtains for both exclusive and non-exclusive content. A notable result is that the threat of content substitution can reduce the price for both exclusive and non-exclusive content by the same magnitude.

Digitalization and technological progress have changed the economic framework conditions for the media sector, but this is insufficiently reflected in current microeconomic analysis of media firm competition and the corresponding policy advices that economists provide. Media firms' fight for advertising revenue has become significantly more global; a local craftswoman might for instance find it equally natural to advertise her services through Facebook as through the local newspaper. A major methodological challenge of this project will be to extend present microeconomics to appropriately incorporate the consequences of this development. Recent work by participants in this project indicates that the pricing behaviour of media firms both in the user markets (e.g. towards newspaper readers) and in the advertising market may change qualitatively. In this project we will go beyond the study of pricing behaviour; a main objective is to obtain a better understanding of how digitalization and a more global advertising market affect the incentive structure and the strategic behavior of national media firms, and to uncover essential market failures (e.g. with respect to generating efficient media diversity and quality). Among the questions we ask, is whether the growth of "non-editorial providers" in effect tends to reduce the quality of journalism because they steal advertising revenue as well as consumer attention. Or will the necessity of offering a unique product increase investment incentives? Relatedly, how does competition between editorial media firms and non-editorial media firms affect the incentives for investigative journalism? We will also focus on policy issues, including the question of how to tax firms like Facebook and Google, whether competition policies should change as a consequence of the changed framework conditions, and how digitalization affects competition between NRK (the public service broadcaster in Norway) and commercial media firms.