Digital Opportunities for Local Journalism: A Panel Data Analysis on the Economic Performance of Online-Only vs. Print Newspapers

Digitalisation led to a structural crisis in the newspaper industry, undermining revenues from both readers and advertisers. Economies of scale play a central role in the newspaper business, but in a context of falling incomes, the major route to take advantage of them is the reduction in the asset size and operating costs. The digital business model can be a way to increase companies' profitability, as online-only media publishers do not need as many assets and costs as their print counterparts to operate. Digitalisation is particularly interesting for local news outlets, since they operate in small markets and could have difficulties to reach an optimal size. However, there are little empirical evidence on how digital business models influence the profitability of newspapers. Using a sample of 198 and 69 Spanish print and online-only media publishers, respectively, during the period 2008-2018 and applying a dynamic panel data methodology, this article analyses the extent to which the main features defining print vs. digital business models affect firms' profitability. Empirical evidence reveals a better performance of digital publishers, with lower material costs being the route through which the digital business model benefits from the economies of scale and achieves greater efficiency.