Current Affairs

Market Failure in the Media Sector

Columbia University Professor Eli Noam writes in the Financial Times:

The market failure of the entire information sector is one of the fundamental trends of our time, with far-reaching long-term effects, and it is happening right in front of our eyes. The basic structural reason for this problem is that information products are characterised by high fixed costs and low marginal costs. They are expensive to produce but cheap to reproduce and distribute, and therefore exhibit strong economies of scale with incentives to an over-supply. Second, more information products are continuously being offered to users. And information products and services are becoming more “commodified”, open, and competitive.