Mass media and special interest groups

Media revenues are an important determinant of media behavior. It is generally accepted that news coverage depends not only on the preferences of media consumers but also on the preferences of advertisers or subsidizing groups. However, existing models reach the opposite conclusions about the relationship between the profitability of advertising and media bias. We present a theoretical model that reconciles these results. The model shows that the sign of the effect of marginal costs of production or marginal advertising revenues on the level of distortion in news coverage depends on complementarity or substitutability between media bias and audience size for an interest group, the existence of a budget constraint for an interest group, and media outlets’ reliance on subscription, in addition to advertising, revenues.