Media Coverage Is for Sale

The media pay attention to many categories of products and services, and the generated visibility significantly influences consumers and their spending behavior, since media are acknowledged as having information neutrality. If, however, we consider that most of media revenues are generated by paid ads, it's natural to wonder whether decisions are free from bias within these organizations when they cover the products and services of advertisers. It's a vital issue that impinges upon freedom of the press, the autonomy of journalists and objectivity in newsreporting. In to a recent study with Suman Basuroy of the University of Oklahoma, we have explored a sample of 291 Italian fashion companies, for which we have gathered data on advertising spending and editorial visibility in the magazines published by 123 Italian, French, English, German, and US publishers, in addition to a host of control variables. The findings point beyond doubt to the fact that corporate advertisers receive preferential treatment and obtain media visibility that is approximately proportional to their investment.

The phenomenon is more marked in specialized fashion magazines. Apparently, general media are a bit freer in their editorial choices, because their advertising base is wider. There are however significant differences among various brands in their ability to obtain visibility for a given level of investment. It's harder for smaller firms to be out there, even if they spend a lot for advertising. Conversely, more innovative firms get proportionately broader media coverage The implications of the study are manifold. Firstly, in capitalistic economies advertising is a major force able to shape media content. This does not necessarily damages the consumer, though. If big spenders, as it often happens, market good-quality products, consumer welfare could even be improved because of this. Only when inferior products enjoy high levels of "compensatory" advertising, are consumers penalized. The study also suggests that the impact of advertising on sales is probably underestimated. Insofar as media coverage drives sales, advertising campaigns have a direct effect on sales plus an indirect effect via media hype.

Looking at managerial implications, firms have several strategies at hand to maximize media visibility for a given level of investment in advertising. Firstly, media pay greater attention to innovative products, which are a better source of news. It's smaller firms that stand to benefit the most from this hunger for constant novelty. Secondly, firms should consider that there are differences among media outlets in terms of advertisers' influence. Companies focusing on specialized media are likely to get more coverage, especially in certain markets: for instance, per euro spent, Italian companies got more extensive coverage in US fashion magazines than in French magazines.