Journalism in the Digital Age: Falls in Newspaper Quality and Policy Responses

ABSTRACT This article presents a theoretical model of the strategic interaction between a newspaper and a digital platform. According to this model, entry by the digital platform causes the newspaper to reduce its readership, quality and advertising, and also to lose advertising revenue. Thus, the model helps to explain the observed falls in newspaper revenue and employment of journalists that have accompanied the rise of digital platforms. As journalism has public good characteristics, it is at risk of being undersupplied. We establish conditions under which, in our model, subsidies on readership and quality stimulate expenditure on journalism and improve welfare.