ATB-2012-57-2-06-Romeo, A Theory of Quality Competition in Newspaper Joint Operating Agreements

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By Charles J. Romeo and Aran Canes

Newspaper Joint Operating Agreements (JOAs) are long-term,
inflexible contracts between metropolitan daily newspapers in the
same market. These contracts maintain two editorial voices while
combining all business operations of the two competitors in order
to capture many of the scale economies that have put an end to
newspaper competition in most markets. The question we address is
what, if anything, drives newspapers to compete editorially once a
JOA is formed? With contract terms that run in the tens of years, one
might reasonably question whether incentives exist to prod the
partners to continue rigorous competition. Our study of JOA
contracts indicates that the history of JOAs is filled with instances of
unprogrammed renegotiations and that how the partners fare in
these negotiations appears to be driven by each party’s relative
success in the market since the agreement was initiated. In essence,
forming a JOA does not resolve the issue of which newspaper will
remain in the marketplace once the JOA terminates. Editorial
competition throughout the life of the JOA resolves this issue.

Season: 
2012
Volume: 
57
Number: 
2
Keywords: 
Newspapers, joint operating agreements, quality competition, franchise value.

 Charles J. Romeois a Research Economist, Economic Analysis Group, U.S. Department of
Justice.

Aran Canes is Team Lead Statistician, AdvanceMed Corp., Nashville, Tennessee