ch 5 & 6

I never gave too much thought on the supply side, at least not until now. So, being an ignorant amateur, let me try to articulate what is on my mind now. Do bear with me.

Newspaper companies have fixed costs and variable costs, fixed costs being their printing machine, computer servers; variable costs being the paper and ink, the staff members needed for news production. When newspaper companies are making less profit now, they gain less in terms of total revenue from subscription number (or subscription fee) and advertising revenue. Since from the economics perspective, profit equals total revenue minus total cost, if the newspaper companies are saying they are not making profits, this should mean their total cost is bigger than their revenue.

There are two ways a newspaper company can do to make the total cost to be smaller than total revenue: decrease the total cost or increase the total revenue. I think I see newspaper companies worry about their total revenue more than worry about their total costs. They ask why people (especially young adults) do not read newspapers anymore and worried about their advertising figure decrease year by year.

They do worry about the total cost, but more often I see them cutting off staff members, which is a reduction of a variable cost. The other variable cost is the ink and paper, which the newspaper companies are not yet willing (or willing but not yet ready) to give it up. And indeed, the ad revenue and subscription fee obtained from the print might still be bigger than the total revenue gained form their Web site, but if I remember it right, the total ad revenue for print newspapers in the U.S. is decreasing and the total ad revenue for their Web sites is constantly increasing over the past year. I will look into that and possibly bring the number tomorrow.

However, what I feel is it is not the newspaper companies’ fault. With the new technologies and new platforms, the equilibrium point is not yet reached.