Upset about Political Bias in the Media? Blame Economics

Consumers of news media want the truth — but not always the truth alone: They are looking, to some degree, for news that confirms — or, at least, acknowledges — their beliefs.

Astute advertisers know this, and when the appeal of a product matches the general slant of a news organization’s approach to coverage, companies will advertise in these news outlets in order to target consumers who have political beliefs similar to the news outlets’.

But the very inclusion of advertising in a news organization’s revenue model, whether it supplements or supplants subscription fees, could serve as either a moderating or a reinforcing force on that outlet’s slant, according to Wharton marketing professor Pinar Yildirim. Yildirim — along with economist Esther Gal-Or and Tansev Geylani of the University of Pittsburgh — examined this issue in a recent paper titled, “The Impact of Advertising on Media Bias.”

“Given that [readers] are looking for confirmation of their beliefs, it only makes sense for newspapers to take a biased stance, because they are providing a product — a news product — to consumers that is … in line with their [consumers’] expectations,” Yildirim says. “And when [news outlets] can provide a product that’s in line with expectations, they can charge higher prices.

“As a result, in a competitive marketplace, where there are two [newspapers] earning revenue from subscription fees, it makes sense [economically] that they are polarized, and that they provide different products than each other — one appealing to Republicans, the other appealing to Democrats,” Yildirim adds.

The Economics of Bias

The researchers created a game theoretical model to see how competition, revenue from subscriptions vs. advertising and other factors impact bias in a news organization’s coverage.

Considering a hypothetical market with two newspapers resembling major news competition in the U.S., the researchers found that supplementing subscription fees with advertising creates two counteracting effects. First, any slanting of coverage is moderated when newspaper management is aiming to increase readership as a way of attracting more advertisers. In order to reach out to a larger audience, a newspaper may forfeit its conservative or liberal position and try to appeal to everyone in the market regardless of their political opinions.

But when advertisers opt to pick just one news organization with which to do business, the opposite may take place. That’s because newspapers that seek to appeal to moderate readers are also forced to compete more aggressively for both subscribers and advertisers, which in turn compels them to drop prices. To avoid this effect, “newspapers may choose to increase polarization,” the researchers write. “We demonstrate that when the heterogeneity among advertisers in appealing to consumers with different political preferences is significant, the attempt to alleviate price competition dominates.”

The researchers introduced into their model “a product-specific variable that measures the extent to which political preferences play a role in enhancing consumers’ probability of purchase of the product.”

Some products — a toothbrush, for example, or an insurance policy — may not have any correlation with the political opinions of a person. But sales of pickup trucks and hybrid vehicles, for example, have been shown to correlate with consumers’ conservative (in the case of the former) or liberal (in the case of the latter) political opinions, Yildirim notes.

“Bias,” in this case, refers solely to the political sort — the paper does not consider, for instance, the bias that might be inherent when a magazine opts not to cover the known side-effects of cosmetics sold by its most valuable advertiser. Political bias, which the researchers say can be stirred by selective omission, word choice or the varying credibility of primary sources, seems to correspond with more successful advertising campaigns, when the bias of coverage and the appeal of a product are appropriately matched.

Rupert Murdoch, then, has found success with his conservative-leaning media empire not because Fox News or The Wall Street Journal reflects a more accurate approach to news, but because, as Yildirim says, “He’s just a smart businessman,” and is essentially giving his audience what it is looking for. Some studies, she adds, have suggested the political opinions of media outlets’ owners seem to have an effect on their coverage, but those sources are few.

“And over time … as the [parent companies of news outlets] become public, as more and more [executives] get involved, it’s likely that the [political] position will change,” Yildirim notes. “It’s more important to understand that the reason for political bias is really economic, more than just the owner’s ideas or journalists spreading their ideological views. Businesses don’t survive in that way.”

A Response to Expectations

According to Yildirim, the practical implication of the paper’s findings for businesspeople is to understand a consumer product’s place in political culture and how the push to attract advertisers might impact a news outlet’s political leanings. “If, for example, you are placing an ad for a product that appeals to conservatives versus liberals,” she notes, “knowing whether competing media outlets earn revenue from advertising versus subscription fees can help choose the right outlet to advertise with.”

Advertisers “know very well that the products they are selling are correlated to consumer lifestyles and values, and they choose outlets that match those lifestyles and values,” Yildirim adds.

An advertiser might choose to advertise in a single outlet — a strategy the researchers refer to as single-homing — versus multiple news outlets, or double-homing. “Firms advertising at a single outlet might be targeting a specific consumer group, even if it is a smaller group. It is also less costly,” Yildirim points out. “Advertisers working with multiple outlets will pay a higher cost, but can reach out to a larger audience…. [For example,] the manufacturer of a ‘green’ product may be interested in targeting a small audience of liberals. But the manufacturer of a cell phone may want to target everyone.”

 The authors of the paper, seeking simplicity and consistency, use the word “newspaper” as a catch-all for a variety of news media — radio, television and the Internet — and the word “readers” where “audience” might seem appropriate.

For consumers of news, the authors suggest that the slanted coverage about which readers often bicker is, at least in part, evidence of supply meeting demand. “If people had no expectations with regard to confirming their opinions,” Yildirim says, “that would force newspapers to provide news stories that are slant-free. If [accuracy] was the only expectation, news outlets would have no other reason to put a slant on the stories. So this is partially the expectations of news consumers.

“When we are looking for news, we are not only looking for facts. We don’t listen to news completely open-minded,” she continues. “If you hear something that is completely against what you believe in, most [of us] seem to think, ‘Well, that’s not true,’ as opposed to saying, ‘Oh, really? I didn’t know that. Let me change my mind about it.’ We are very stubborn when it comes to our beliefs and our opinions.”

That preference, regardless of a reader’s awareness of it, can shape the bias of a news outlet. “Newspapers are providing news products that consumers want. If consumers want news with bias, we cannot tell newspapers to provide news that is bias-free,” Yildirim notes. “That is not going to make newspapers better off, and it is also not going to make the consumer happy.”

The political bias of a newspaper, as the paper details, shifts based on whether its revenue comes from advertising or subscription. “In fact,” Yildirim says, “we believe that if advertising is the only source of revenue, it could help to mitigate some of the political bias in news media.”

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