Following the closure of the News of the World, research economist Ryan Bourne examines the consequences for the newspaper industry
Over the past two weeks, much has been said about the ‘market dominance’ of Rupert Murdoch’s news operations. But is this justified? To assert that an individual or a company has ‘market dominance’ requires a clear definition of what the market under consideration actually is. This is more difficult than it first seems. What exactly is the product which News Corp is ‘dominant’ in?
At its most general, I suppose we might just define a market for news. Though there is scant evidence that Murdoch’s company has a high degree of market power in this area at all. Even if the BskyB deal had gone ahead, the EU commission had ruled that the takeover would not have been detrimental to media plurality. There exists a powerful arms-length state broadcaster in the BBC and a relatively competitive newspaper market. With the recent proliferation of free web-based news on top of this, there is not legitimate ground for concern about a dominant News Corp.
To find evidence of dominance we need to look more closely at the newspaper market. News Corp certainly has power here – but even then we would have to be more specific to pin-point areas of market dominance. The whole newspaper market should include free and local newspapers such as the London Evening Standard, the Metro, regional newspapers and City AM - which are widely read as alternatives to the traditional national newspapers. But given that many of these are handed out for free, and not sold, the circulation data around them is extremely weak.
So let’s focus on the bought national newspaper market, split up into daily newspapers and Sunday newspapers. News Corp’s News International was the largest media group in terms of circulation of daily newspapers, and indeed Sunday newspapers in June 2011 – with market shares of 33.5% and 41.1% respectively. The company operated four newspapers: The Sun, The Times, The Sunday Times and the News of the World. The Sun had the largest daily circulation of any national newspaper, with 2.8 million daily sales. Meanwhile, the News of the World sold an average of 2.7 million copies every Sunday in the same month. The Times sold 441,000 daily and The Sunday Times over a million. Clearly, News Corp had a large degree of market power within the relatively narrow range of large media groups.
It remains to be seen, however, whether viewing the sale of national newspapers alone constitutes a genuine economic market. Is there really a large enough degree of substitutability between, say, the Daily Star and the Financial Times to warrant them being considered in the same market? To a certain extent all newspapers are competing in the paid market for news, but it would probably make more sense to split up the overall national market into the traditional groupings of ‘Quality newspapers’, ‘Mid-Market newspapers’ and ‘Popular newspapers’ to give us a clear indication of where News Corp’s real power lies.
The largest player in the ‘Quality’ newspaper market was the Daily Telegraph, which had 30.8% share of total circulation. News International’s Times had the second largest share with 21.8% - large, but hardly a position of substantial dominance. No, News International’s real power lay in the ‘Popular’ and Sunday newspaper markets.
The Sun was by far the largest player in the daily popular market with 56.2% of the daily circulation – and even if the mid-market papers (Daily Mail and Sunday Express) are included in the definition of ‘popular’, still had a 37% share.
The News of the World’s share of the Sunday popular market was larger still (59%, or 38% if mid-range papers included), whilst The Sunday Times was by far the largest quality Sunday paper with 52% market share. With these more specific market definitions, many could well have described News International’s titles as having effective monopolies in the Sunday and daily popular markets. It is this fact which makes the closure of the News of the World all the more extraordinary – it will have profound consequences on the Sunday newspaper market.
Providing that News International do not release a ‘Sun On Sunday’ it looks like the two main beneficiaries of the former’s demise will be the Mail on Sunday and the Sunday Mirror. Indeed, a recent survey suggested that 49% of former News of the World readers would buy another Sunday newspaper – with a third of these likely to buy the Mail on Sunday, a third the Sunday Mirror and 19% the People. This would profoundly change the market share of the Sunday market: