Is Advertising a Good or a Bad? Evidence from U.S. Magazine Subscriptions

This paper investigates whether advertising has a beneficial or deleterious impact on the demand for magazine subscriptions. If consumers consider advertising a ‘bad,’ publishers must subsidize consumers through lower subscription prices or additional editorial content. If advertising is a ‘good,’ then consumers are willing to pay because it adds value to the magazine bundle. We employ data describing 95 U.S. magazines for the years 1996-1998 and find that if advertising is substituted for editorial content on a one-to-one basis, advertising reduces both the quantity and price of magazine subscriptions. However, the full impact of additional advertising on subscription price and quantity is ambiguous given that it is tied to the percentage of a magazine bundle dedicated to advertising. We show how this ambiguity is reflected in the magazines included in our sample. JEL Classifications: L13, M37