Chapter 12: Digital technology, disruption and the market for news
We need to hew very closely to traditional journalistic values and totally disregard traditional forms. Ben Smith, Editor-in-Chief, BuzzFeed. The purpose of this chapter is to consider how digitization has shaped the industrial organization of media markets, with a focus on the market for news. In doing so, I will consider how the current literature has tackled these topics and highlight areas lacking in theory and evidence. The first generation of economic research in technology and media owes much to important work by Shapiro and Varian (1999). A central idea in that work was the transformative effects of low cost replication, customization and distribution made possible by digital technology. The insights of that work and the literature that followed are still relevant today. This chapter shares the focus of Shapiro and Varian in considering the implications of technology shocks to costs. But in this chapter I consider how digitization altered transaction costs in media markets and the consequences of those changes for media firms and media markets. Relying on fundamentals of the economic theory of the firm outlined by Oliver Williamson (1985), I argue that shocks to transaction costs are an especially important factor in the changing industrial organization of media markets generally, and in the market for news in particular. Deeper understanding of the nature and impact of transaction costs in digital markets offers a key to understanding the future of media industries.
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