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Aggregators and the News Industry: Charging for Access to Content

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The Internet has drastically altered the nature of competition in the news industry. This article develops a model of price and quality competition between firms in the online news industry. In equilibrium, firms randomise in their pricing strategies and this generates the cross-sectional mixture of advertiser and subscription funded business models we observe. The model also plausibly explains why pricing strategies differ across content areas. An important part of my explanation is that aggregators, such as Google and Digg.com, allow consumers to search amongst articles and direct consumers towards high quality articles. The model’s results have implications for the ongoing public debate about the effects of aggregators on the news industry; although aggregators harm firms, consumers benefit.

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