Economists are taking a greater interest in the media. Here is an interesting new paper by Andrei Shleifer and Sendhil Mullainathan, The Market for News .
Abstract: We investigate the market for news under two assumptions: that readers hold beliefs that they like to see confirmed, and that newspapers can slant stories toward these beliefs. We show that, on the topics where readers share common beliefs, one should not expect accuracy even from competitive media: competition results in lower prices, but common slanting toward reader biases. However, on topics where reader beliefs diverge (such as politically divisive issues), newspapers segment the market and slant toward the biases of their own audiences, yet in the aggregate a conscientious reader could get an unbiased perspective. Generally speaking, reader heterogeneity is more important for accuracy in media than competition per se.
Also read Alex’s earlier post, Surprise! Fox News is Fair and Balanced!.