Production and Revenue

Two recent news of New York Times have illustrated how the newspaper industry tends to reduce its fixed cost in order to survive the financial hardness. To reduce the sections printed in the NYC metro area, NYT executives promised that “Given the business challenges we face, we are constantly looking for ways to reduce costs that do not affect the quality or quantity of the journalism we provide to our readers”. Also, the reduction to four section is only used to ease the cost of printing paper, but it does not affect the online version. Another recent incident of reducing production cost from NYT involves the cut on distribution cost, which shut down a subsidiary that distributes in the NYC area. In the long run, when the equimarginal principal applied, what kind of input mix should the media firm like NYT choose to maximize its output? Would the choices inevitably harm the quality of production?

The economies of scale can explain why many traditional media moves online. By reproducing the same content on the Internet, media companies can achieve a larger scale. Especially, as the example given on page 97, the television program can benefit a lot from selling additional copies. As the TV station posted their news videos online, the news may be consumed by a larger population, which includes those who can not watch it when the program is broadcasted on TV. However, the problem may occur as Picard (yes, the one who wrote the other text book used in this class) wrote in his blog post “how to obtain revenue for content distributed by digital media and how to share revenue from those downloads.”