Study: Media consolidation reduces diversity of business news coverage

Business news outlets owned by the same media holding companies produce more similar news stories covering companies’ earnings announcements, reducing the amount of unique news content available to investors, according to a recent study.

The study also suggests that fewer unique sources of news make investors less efficient at interpreting and processing information in earnings reports. The work was published in the American Accounting Association’s journal The Accounting Review.

At issue are common media holding companies that own and operate multiple media outlets.

“In recent years, many business news outlets have come under the control of an increasingly small number of common media holding companies,” says Ken Merkley, co-author of the study and the Conrad Prebys Professor of Accounting at Indiana University.

“You don’t always realize the media outlets where you get your news are owned by the same company and may not be truly independent of each other in their coverage. That means investors are getting fewer distinct voices in the business news marketplace, which limits the range of information available to investors.”

For this study, the researchers collected news stories covering earnings announcements from 2007-2019 covering 4,462 publicly traded companies, focusing specifically on stories from 34 major media outlets. Across those 34 outlets, 12 were independent throughout the sample period, while the others belonged to a media group for at least part of the sample period. In total, this data set included 288,385 media articles regarding 95,820 earnings announcements.

The researchers used a suite of statistical tools to analyze this data set and identify similarities and differences in coverage both within and across common media holding companies.

“Essentially, we wanted to see if stories on a given earnings announcement by news outlets owned by the same company were more similar than stories on the same announcement from outlets owned by different companies,” says Merkley.