Supply Demand Change in Price

¶ … demand: A Change in News Consumer Demand in Britain

Pfanner, Eric. (28 Feb 2005) "British Papers Stem Losses, but the reader grows fickle." International Herald Tribune. From The New York Times. World Business News Retrieved 28 Feb 200528 Feb 2005 at http://www.nytimes.com/2005/02/28/business/worldbusiness/28paper.html?

Consumer demand is fickle, particularly when it comes to non-necessary commodity goods and services. Media consumption, biologically speaking, is not a necessity. Nor do the physical productions of the newspaper industry take the form of durable goods. Rather, newspapers are disposable good. Famously, newspapers are used to wrap fish and chips in Great Britain the day after they are eagerly read. This metaphor of the reality of the news industry reveals how the news industry is especially subject to shifts in consumer demand, based on taste and income.

For a long time, the dominance of the British papers was thought to be unassailable, given the lesser importance of television and other media. However, incursions from other, competing sources of news such as the Internet have cut down the market demand for newspapers in Great Britain. This has changed the positioning strategy of many papers. Some sober papers have now begun to adopt tabloid topics and strategies to desperately cope with a downslide in circulation.

But this strategy may prove counterproductive, as it only consolidates the market even more, lessening the variety of papers offered to the public and making price rather than quality the chief determining factor of consumer choice. While there is no question the British newspaper industry will have to deal with a continuing erosion of sales, many of its efforts have resulted in a news marketplace that looks increasingly crowded in the middle. As, the papers show less distinction between one another. "Consolidation" will be "inevitable in the long-term, given the increasing costs of production." (Pfanner, 2005)

Consolidation, of course, is a gentle euphuism for the fact that many great papers of the British press will fold, in the face of lost profits and lesser demand. Eventually, the implication is, that the invisible hand of the market will force a new equilibrium, with fewer papers in response to lesser demand. There is, in essence, an opportunity cost that all papers currently in the marketplace must consider. They must make a sacrifice, the price of a choice between two mutually exclusive alternatives -- either they can upgrade their image and content or downgrade their image and their content. Regardless, the great papers must distinguish themselves in an increasingly over-stuffed and uncompetitive marketplace. Robert Thomson, editor of The Times, is attempting an upgrading strategy. He insists the "audience for serious journalism is increasing," although he also admits that such serious journalism is seriously expensive," and does not always produce an immediate return on investment, like tabloid journalism traditionally has (Pfanner, 2005)

Even The Times has changed its product design and format to attract younger readers with a smaller, easier-to-read format -- which is also cheaper. Both The Times and The Independent switched from broadsheet to cheaper tabloid format last year, and The Guardian plans its own style and format shift, to defray costs. The Financial Times has tried to gain readers through online subscriptions that are cheaper and hopefully attract younger readers, as well as reflect the increasingly online nature of the financial industry, its customer core. Cutting the costs of production The Daily Telegraph and The Sunday Telegraph have announced plans to lay off 90 journalists, or 17% of the news staff, in part to help pay for color presses. This will hopefully draw in additional revenue as well as newer, younger readers, and defray increasing costs and decreasing circulation. Other papers may follow the Telegraph and attempt to take in more advertising through investing in new printing capacity as they seek to sell more color advertising.

Yet ironically, the tabloids are facing competition, too, even while the major papers have begun to imitate either their content or their formats. The News Corporation's chairman, Rupert Murdoch, acknowledged recently that The Sun was losing sales to a free paper, Metro. (Pfanner, 2005) Despite the decline in demand, there has been a proliferation of free, tabloid-style papers, in Britain, causing an excess of supply in the absence of a substantially increased demand. The law of demand states that as price goes down, demand goes up -- and there is no way a paying paper can compete with a free paper, if the free paper's tabloid-style journalistic slant and format is virtually identical.