Handbook of Media Economics, vol 1A

Abstract

Media industries typically exhibit two fundamental features, high fixed costs and heterogeneity of con-

sumer preferences. Daily newspaper markets, for example, tend to support a single product. In other

examples, such as radio broadcasting, markets often support multiple differentiated offerings. Both

contexts can deliver preference externalities, when the options and well-being for consumers depend

on the number and mix of consumers according to their content preferences. This chapter presents

evidence on these fundamental features of media markets. We then incorporate these features into

a suite of theoretical models to obtain both a description of media markets as well as predictions

for how they would be expected to function. In

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