Archive for July, 2011

Why We Need the New News Environment to be Chaotic

July 9, 2011

The business environment for newspapers continues to be grim. Pew recently reported that advertising revenue rebounded in 2010 for all forms of media, except newspapers.* This might just be a matter of transitioning from print to digital revenues but for the fact that the market values a print reader far more than a digital one. The more or less official label for this problem is “analog dollars to digital dimes”; because of the enormous difference in assumed value per reader, lost value from print is not made up for by gains in digital readership.

The ‘analog dollars to digital dimes’ problem doesn’t actually seem to be a problem. It seems to be a feature of reality. Digital revenue per head is not replacing lost print revenue and, barring some astonishment in the advertising market, it never will. There is no supply-side scarcity to boost margins; power over aggregation has moved from producer to consumer; advertisers prefer selling cameras and shoes on purpose-built sites; readers feel the same about finding jobs and dates; and there are few commercial or geographic restraints on competition. The market values analog readers more highly than digital ones because the market is right.

Seeing this, several people have started looking for ways to exit that market. One of the most widely circulated of these ideas is David Swenson and Michael Schmidt’s proposal that newspapers be subsidized the way colleges or foundations are.* Steve Coll followed this with a suggestion that commercial papers be allowed to reinvent themselves as non-profits.*

The intuition common to such proposals is that advertising revenues can no longer be relied on to fund serious reporting. (Gadget reviews and celebrity coverage, yes, but not the police beat.) Evidence entered for this thesis includes the decline in print’s commercial fortunes*, the attendant downsizing of newsrooms—already 30% smaller, on average, than a decade ago*—and the outright collapse of papers like the Rocky Mountain News, Albuquerque Post, and Cincinnati Post.*

Proponents of market-supported journalism, among them Jack Shafer*, Alan Mutter*, and Jeff Jarvis*, have replied to these non-profit proposals at length, but their common thesis, distilled to its essence, is “Oh please.” This group points out that there is simply not enough philanthropic money to support current news-gathering organizations, and any suggestion that there someday might be isn’t strategy but fantasy.

Evidence for this thesis includes the gap between supply and demand for philanthropic funding* or from the narrowness of funding sources, as with ProPublica’s getting 80 times as much money from its board as from online donations.*

This argument between Journalism as Philanthropy and Journalism as Capitalism (to borrow Jarvis’s phrase) seems like a dilemma, in the literal sense of the word—a forced choice between two alternative premises. It isn’t really, though, because there is also the grandmotherly option: Both groups could be right. It’s possible that for-profit revenue is shrinking irreversibly and that non-profit funding sources won’t make up for the shortfall. The least we can say about this possibility is that it can’t be discounted on current evidence.

* * *

One proposed response is to radically reform newspapers as both organizations and businesses. Here, as one of countless examples, is something from a recent post by Tom Matlack*, the former CFO of The Providence Journal:

[T]here is no longer an uncomfortable ménage à trois between newspapers, readers and advertisers. It’s monogamy at last. Newspapers have to focus all their energy on producing extraordinary journalism—in a form and in substance—which thrills us as consumers. […] So fear not. Your paper is not dead. You just have to demand, and be willing to pay for, a news product worthy of your affections.

Matlack’s sentiment is clearly heartfelt, and creating a high-quality product for a group of loyal and passionate readers willing to pay for it certainly sounds like an interesting business to get into. It just doesn’t sound like the newspaper business.

Here’s what the newspaper business sounds like: the modestly talented son of the founder can generate double-digit margins based on little more than the happy accident that there are people who like football and buy cars living within 30 miles of his house.

That’s the newspaper business, or at least it was until recently. The average US paper runs more soft than hard news, uses more third-party content than anything created by their own staff, and reaches more people who care about local teams than local zoning. Telling the publishers of those papers to create a digital product so extraordinary that readers will pay full freight is a tacit admission that they do not know how to make such a product today.

Much public worry about newspapers concerns a relative handful of excellent dailies with national or international ambitions. Most papers, however, aren’t like that. The New York Times and the Enid, Oklahoma News and Eagle occupy different parts of the news ecosystem, and they face different stresses and fates, but more papers—many more—exist at the News and Eagle end of the spectrum.*

It’s easy to view the current business climate as a culling of the herd, but newspapers are not barbershops; the closing of a hair-cutting business in Oklahoma wouldn’t much affect people in New Hampshire, but the closing of a paper would, because the nation’s news publications are sewn together in a crazy quilt of shared cost and effort.

The News and Eagle, the Laconia Citizen, the Biloxi Sun-Herald, the Deer Park Tribune, and a thousand more such papers are all but monopoly suppliers of local news, they all train young reporters who go on to work elsewhere, they all employ the stringers who are on the scene when a tornado hits, and they all buy syndicated content from the Associated Press or King Features, who in turn lower costs for some publishers while raising revenue for others. When a paper fires reporters or closes outright, it further weakens that fabric.

* * *

Buy a newspaper. Cut it up. Throw away the ads. Sort the remaining stories into piles. Now, describe the editorial logic holding those piles together.

If you’ve picked a general interest paper, this will be hard. I recently learned, from a single day’s paper, that a bombing in Kirkuk killed 27, that Penelope Cruz has only good memories of filming Pirates of the Caribbean while pregnant, that many U.S. business hotels are switching to ‘shower-only’ bathrooms, and that 30-year fixed mortgages fell from 4.63% to 4.61% the week before.

The rationale for creating such a bundle went something like this: “We will print enough content to fill the hole left after we’ve sold the advertising space. We will include content proportional to the amount and intensity of reader interest, modified somewhat by editorial judgment. Overall, the value of the bundle will be more than the sum of its parts.”

Many people who worked for newspapers didn’t think of this as something that happened to work well in certain cities and towns during a particular era, but as something real: “Of course Ratko Mladic’s arrest belongs in the same package as a photo spread on ornamental grasses! How else would you do it?” For all that selling such a bundle was a business, though, people have never actually paid for news. We have, at most, helped pay for the things that paid for the news.

So long as newspapers faced little competition for advertisers or readers, this was a distinction without a difference, but as papers are being sundered by the internet, we can see how tangled the system always was. Outside a relative handful of financial publications, there is no such thing as the news business. There is only the advertising business. The remarkable thing about the newspapers’ piece of that business isn’t that they could reliably generate profits without accomplishing much in the way of innovation—that could just as easily describe the local car dealership. The remarkable thing is that over the last couple of generations, those profits supported the fractional bit of those enterprises that covered the news.

This subsidy relied on cultural logic peculiar to newspapers; publishers were constrained not just by their investors but by their editors (who expected the paper to be ethical in the short term) and by their families (who expected the paper to be viable over the long term). In return, a publisher could extract some of the value of the paper in prestige and sinecure instead of cash.

This system was never ideal—out of the crooked timber of humanity no straight thing was ever made—and long before Craig Newmark and Arianna Huffington began their reign of terror, Gannett and Scripps were pioneering debt-laden balance sheets, highly paid executives, and short-term profit-chasing. But even in their worst days, newspapers supported the minority of journalists reporting actual news, for the minority of citizens who cared. In return, the people who followed sports or celebrities, or clipped recipes and coupons, got to live in a town where the City Council was marginally less likely to be corrupt.

Writing about the Dallas Cowboys in order to take money from Ford and give it to the guy on the City Desk never made much sense, but at least it worked. Online, though, the economic and technological rationale for bundling weakens—no monopoly over local advertising, no daily allotment of space to fill, no one-size-fits-all delivery system. Newspapers, as a sheaf of unrelated content glued together with ads, aren’t just being threatened with unprofitability, but incoherence.

* * *

This fall, I’m joining NYU’s journalism program, where, for the first time in a dozen years, I will teach undergraduates. Someone who turns 19 this year will have not one adult memory of the 20th century; for them, the Contract With America, the Monica Lewinsky scandal and the first Gulf War are roughly contemporaneous events, just as, for my 19 year old cohort, the Summer of Love, the Watts’ riots, and Kent State all seemed to have happened in that one busy month we called The 60s. When it comes time to explain the media landscape of the 20th century, I will be teaching my own youth as ancient history.

I could tell these students that when I was growing up, the only news I read was thrown into our front yard by a boy on a bicycle. They might find this interesting, but only in the way I found it interesting that my father had grown up without indoor plumbing. What 19 year olds need to know isn’t how it was in Ye Olden Tymes of 1992; they need to know what we’ve learned about supporting the creation and dissemination of news between then and now. Contemplating what I should tell them, there are only three things I’m sure of: News has to be subsidized, and it has to be cheap, and it has to be free.

News has to be subsidized because society’s truth-tellers can’t be supported by what their work would fetch on the open market. However much the Journalism as Philanthropy crowd gives off that ‘Eat your peas’ vibe, one thing they have exactly right is that markets supply less reporting than democracies demand. Most people don’t care about the news, and most of the people who do don’t care enough to pay for it, but we need the ones who care to have it, even if they care only a little bit, only some of the time. To create more of something than people will pay for requires subsidy.

News has to be cheap because cheap is where the opportunity is right now. For all that the Journalism as Capitalism people can sound like Creflo Dollar mid-sermon, they are right to put their faith in new models for news. If for-profit revenue is shrinking and non-profit funding won’t make up the shortfall, we need much cheaper ways of gathering, understanding, and disseminating news, whether measured in information produced or readers served.

And news has to be free, because it has to spread. The few people who care about the news need to be able to share it with one another and, in times of crisis, to sound the alarm for the rest of us. Newspapers have always felt a tension between their commercial and civic functions, but when a publication drags access to the news itself over to the business side, as with the paywalls at The Times of London or the Tallahassee Democrat, they become Journalism as Luxury. In a future dominated by Journalism as Luxury, elites would still get what they need (a tautology in market economies), but most communities would suffer; imagine Bell, California times a thousand, with no Ruben Vives to go after the the politicians.*

The thing I really want to impress on my students is that the commercial case for news only matters if the profits are used to subsidize reporting the public can see, and that civic virtue may be heart-warming, but it won’t keep the lights on, if the lights cost more than cash on hand. Both sides of the equation have to be solved.

* * *

Real news—reporting done for citizens instead of consumers—is a public good. This is true both in the colloquial sense of ‘good for the public’ and in the economic sense of ‘best provisioned for a whole group at once.’

The supplier of last resort for public goods is usually the government, but in the United States, public funding of media has always been politically fraught, outside a few subsidies like reduced postal rates. This leaves us the problem of producing a public good without much in the way of public monies.

Taking cash from advertisers is one way to do this, though a less good one than it used to be. As Jay Rosen points out*, many other ways are possible: gets money from its conference business*; The Guardian from the Scott Trust*. Donations are still another: some organizations have a syndicate of large donors, as with ProPublica * or The American Independent*. Others have many small donors, as with the crowdfunding of projects, or the listener donations to NPR.

And, critically, subsidy can be in savings rather than cash. Some of what professionals did in the old model can now be done in combination with amateurs, or crowds, or machines: MAPlight* and PoliGraft* and Sunlight’s Lobbying Tracker* couldn’t track links between money and politics without online databases; the Charlotte News Alliance* and the Tuscon Citizen * rely on local bloggers; the Davis Wiki* and the the Oil Spill Crisis Map* provide structure to user-contributed material; Tackable is betting that the first photographer on the scene will be a citizen with a phone*.

None of the models being tried today are universally adoptable; the most we can say is that each of them happens to work somewhere, at least for the moment. This may seem like weak tea, given the enormity of the current changes, but if our test for any new way of producing news is whether it replaces all the functions of a newspaper, we’ll build things that look like newspapers, and if replicating newspapers online were a good idea, we wouldn’t be in this mess in the first place.

If we adopt the radical view that what seems to be happening is actually happening, then a crisis in reporting isn’t something that might take place in the future. A 30% reduction in newsroom staff, with more to come, means this is the crisis, right now. Any way of creating news that gets cost below income, however odd, is a good way, and any way that doesn’t, however hallowed, is bad.

Having one kind of institution do most of the reporting for most communities in the US seemed like a great idea right up until it seemed like a single point of failure. As that failure spreads, the news ecosystem isn’t just getting more chaotic, we need it to be more chaotic, because we need multiple competing approaches. It isn’t newspapers we should be worrying about, but news, and there are many more ways of getting and reporting the news that we haven’t tried than that we have.