South-Western College Publishing - Economics

 

 

U.S. newspaper subscriptions are declining

Subject

U.S. newspaper circulation falls in 2004.

Topic

Supply and Demand

Key Words

Newspaper circulation; readership, costs.

News Story

             Daily U.S. newspaper circulation fell by 1.9% in the six months ending March 31, 2004: the largest drop in circulation in a decade.  Average readership fell from 48,311,581 U.S. households to 47,374,033 households.  Sunday circulation fell 2.5% for that period, to 51,073,104 households.  Analysts surveyed a total of 814 newspapers for the weekly circulation numbers, while 643 newspapers were canvassed for the Sunday numbers.

            The largest newspapers lost the most circulation.  The Los Angeles Times readership fell by 6.5%, and the Chicago Tribune lost 6.6% of its readership during this period.  Newspaper publishers are attributing the decline to the federal do-not-call registry, which limits newspapers’ ability to call non-subscribers.  Estimates indicate that the number of callable households fell by as much as 35% as a result of that legislation.  As a result, newspapers are turning to more expensive ways of attracting new subscribers, resorting to direct marketing and door-to-door sales.  This increases newspapers’ costs, though; median direct-cost-per- new-order rose to $16.36 in 2004 from $13.04 in 2002.

Questions

1.

Indicate with a graph of supply and demand the impact on newspaper circulation described in the article.

2.

What impact, if any, would you expect the Internet to play in altering a newspaper’s circulation?  Indicate this with a graph of supply and demand. Does this represent a change in quantity demanded or a change in demand?

3.

What impact would you expect this change in circulation to have on the price of a newspaper?  Why?  Explain using economic arguments.

Source

Joseph T. Hallinan.  “Newspaper Circulation Declines 1.9%.”  The Wall Street Journal.  3 May 2005.  B4

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