To What Extent Might the Contestability of the Markets for Online News and Printed Newspapers Differ?

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In a contestable market there are one or number of firms which profit maximise with no single firm have as significant market share. There is both freedom of entry and exist, Firms may produce homogeneous goods or branded goods. According to this definition, online news seems to be a highly competitive market with a high level of contestability. This can be explained in several ways. The first is the level of brand loyalty. If an established firm has significant brand loyalty such as Coca Cola, then it will be difficult for a new firm to enter the market. This is because they would have to spend a lot of money on advertising which is a sunk cost. On the other hand, if brand loyalty is low, then it will be easier for a new firm to enter the market. Extract 1 shows that brand loyalty for online news is very low. Figure 1 also indicates that “the most popular quality daily paper, got just 8% of their online news from its website”. The second refers to sunk costs. Internet has provided a new entry point for many markets. Online news has low sunk costs, and it is very easy to set up. Many newspapers have been able to offer online services, such as the New York Times, Daily Telegraph and FT.com. This has made the market more contestable because new firms have been able to enter an industry with traditionally high barriers to entry. On the other hand, hard copy newspaper has higher costs of set up, as it needs high levels of equipment. Figure 2 shows hard copy newspaper market is dominated by 4 biggest newspaper firms, including The Financial Times, The Telegraph, The Times and The Sun. Therefore, online newspaper is more contestable than printed version. However, in some ways there might not be significant difference in contestability between online news and printed newspaper. Internet creates its own barriers of entry. For example, it is difficult to

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