Advertising, News Customization and Media Pluralism

We analyze how consumers’ political preferences, advertising and news customization affect media pluralism (i.e.: diversity of political opinions expressed in the news market). If firms choose to customize, media pluralism may increase, since a larger spectrum of political opinions is covered in the news market. However, when a news firm decides on customization, it has to weight the costs and the benefits (search and adaptation costs versus price discrimination in the customized segment, respectively). We show that in a one-sided market (without advertising), maximum political differentiation arises and firms do not customize, i.e.: media pluralism is not increased. In a two-sided market (with advertising), on the other hand, news firms always customize, i.e.: media pluralism increases. Furthermore, when the advertising market is large, maximum differentiation emerges together with a zero price to non-customized consumers. When the advertising market is small, maximum differentiation might be weakened and firms change to positive prices in the non-customized segment.