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Hsiang Iris Chyi & Mengchieh Jacie Yang

Chyi, H. I. & Yang, M. J. (2009). Is online news an inferior good? Empirically examining the economic nature of online news among users. Journalism & Mass Communication Quarterly, 86(3), 594-612. 2010-2011 UT Austin College of Communication Faculty Research Award.

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Abstract

The U.S. newspaper industry is transitioning from print to online, but users’ response to online news has fallen short of expectations and thus raised questions about the economic viability of the new medium. To examine the nature of online news, this study explores the economic concept of “inferior goods” and its applicability to online news consumption. Analysis of survey data collected by the Pew Research Center shows that as income increases, consumption of online news decreases, other things being equal. Therefore, online news is an inferior good among users. Important theoretical and practical implications are discussed.

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Researcher’s note

Exactly 10 years ago, when I was finalizing my dissertation, I was trying to figure out whether a newspaper’s online and print editions complete or complement each other. Dealing with survey data collected in the Austin market, I was a bit confused.

My data indicated that most newspapers published minimal unique content on their website — meaning, similar, if not identical content, was published in online and print formats. So, these two products were more likely to be substitutes. Along this line of thinking, some worried that the online edition might erode the print edition’s reader base.

But that was not the case. In fact, the vast majority (over 80%) of online readers of the local newspaper website also read the print edition, suggesting that online and print products actually complement each other. Looked like a happy ending?

However, the online edition’s readership in the local market remained relatively small (compared with that of the print edition), and users’ paying intent was (and still is) extremely low.

Most interestingly, whenever I asked survey respondents (in Austin and Hong Kong) this hypothetical question: “Imagine that you’re provided with both online and print newspapers with the same content and at the same price. Which would you prefer?” The print edition was overwhelmingly preferred, even among Web users.

While I was trying to come up with a plausible explanation, I conducted two focus groups (and later a survey) in Hong Kong and gathered some more evidence suggesting that online news was not as likable as traditional news media.

Those qualitative data were extremely interesting so I came up with the “inferior good” hypothesis in 2001.  (But my focus group study was returned by a journal immediately because the data were based on focus groups.) A German scholar liked the idea and published a synopsis in his book.

After that, I moved from Hong Kong to Arizona, and then back to Texas in 2007. For an unexpected reason, I picked up the idea again for an empirical test and Jacie Yang picked up my half-baked statistical analysis and told me the results actually supported the hypothesis.

So, like Macaroni & Cheese and Ramen Noodles, online news is an inferior good.

Related studies

Chyi, H. I. & Chang, H. C. (2009). Examining the use of and preference for online news in the context of intermedia competition. In L. Leung, A. Fung & P. S. N. Lee (Eds.), New opportunities and challenges of the Internet (pp. 101-123). Hong Kong: The Chinese University Press.

Chyi, H. I. & Lasorsa, D. (2002). An explorative study on the market relation between online and print newspapers. Journal of Media Economics, 15(2), 91-106.

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