If the Commercial Miracle of Newspapers is Over, What will Replace It?

Newspapers have been a commercial miracle. For a very small outlay one got access to a surprisingly wide range of news, opinion and information. Part of the explanation was economies of scale, but the trick was that much of the industry’s revenue came from advertising. The symbiosis was that advertisers attracted readers’ attention to their products by subsidising the paper’s news-gathering activities which attracted readers.

In recent years, much of the advertising – especially classified advertising – has collapsed or, more precisely, it has moved to other venues, most notably, locally, the TradeMe website. (Some newspapers once gained perhaps a third of their advertising revenue from small ads.) As it fell the cross-subsidy to journalism also fell and workers have had to be laid off. That means there is less news, or that it is more superficial and of poorer presentational quality – subediting has been especially heavily hit.

A poorer news service means the paper is less attractive to readers – especially as they can turn to news websites. So circulation has fallen, newspaper sales revenue has further fallen and they are less attractive to those advertisers who are left. It is not difficult to see newspapers, here and in much of the world, in a death spiral despite some innovative adaptations to reduce costs.

That means that their role as news collectors is diminishing too. Even those newspapers with paywalls on their websites generate insufficient revenue to employ a lot more journalists (or subeditors). The miracle is over.

If journalists, once our guardians and generators of verifiable facts, are diminishing, any gap is being filled by commercial and political interests, by opinions and by false news.

Recently the Northern Advocate of Whangarei published a story of a pseudo-historian who claimed that Celtic sailors reached New Zealand around 4000 years ago – circumnavigating the world before they could circumnavigate Britain. Once the stupidity of the article was pointed out, the paper dropped the article but it is there in cyberspace (if you must, here). What interested me, for this column’s purposes, was that the newsroom of the Advocate (circulation about 10,000) is so shallow that their journalists’ common sense did not stop the story before publication. How much bigger do you have to be to avoid being vulnerable to a more sophisticated hoax (including those sourced by commerce and politicians)?

 Broadcasting funded by advertising faces a similar challenge of alternative outlets and diminishing revenue. Meanwhile, what is loosely described as ‘social media’ (including Google) is proving to be extremely profitable from the advertising revenues diverted to it. They are natural monopolies, for their dominance is hardly threatened by competitors.

 People overuse the term ‘crisis’ – it is a word the media loves to use to grab your attention – but it seems to me that democratic society as we understand it is greatly challenged by the end of the media miracle. It was founded on the Enlightenment notion of rational debate leading to progress and improved wellbeing. I am not sure that has occurred during some recent political kerfuffles. For example, one of the requirements of a rational response to climate change is an understanding of the underlying science which deniers seem unaware of. (Reflecting, this economist has seen a similar phenomenon riddle through our economic discussions; he shares the bruising of climate scientist.)

 What can be done? It is no good hoping the trends will reverse themselves. Classified advertising is all but gone and there is not going to be a lot more display advertising. It still works in some areas because the web has not provided a viable alternative. Most of us use the property and travel supplements with a followup to a website. Community giveaways seem to work because they are focused on smaller communities (but their contribution to great journalism is likely to be limited). Many provincial papers are drifting towards community giveaways – they may prove viable. Sponsorship is a kind of advertising which may add a little to revenue.

 What about government funding? Yes, it can help but it should not dominate as authoritarian state-funding demonstrates. (The Soviet Union produced the state-owned Pravda (truth) and Izvestia (news). Its citizens knew there was no news in Pravda and no truth in Izvestia.) Yet we should not be completely dismissive. Both the BBC and RNZ (Radio New Zealand) provide great news services. (As an aside, plaudits to Minister of Culture Maggie Barrie, who managed to squeeze some extra money for RNZ out of her, no doubt grumpy, colleagues in the 2017 budget round.)

 There are also ‘angels’, people or trusts which subsidise the media. The Washington Post is owned by billionaire entrepreneur Jeff Bezos, the Amazon.com founder, who apparently sees this as a public commitment. The paper has recently changed its masthead slogan to ‘Democracy Dies in Darkness’. Even, so it needs revenue, including from a paywall on its news-site. The Guardian website has no paywall. It is owned by a trust which has been chewing through its financial reserves.

 The public is another source of funding. Subscriptions to hard copy help, but paywalls don’t seem to be big revenue generators. Yet the news-sites are becoming an increasing element of the media industry, either standalone or as a part of a hard-copy publication. I shan’t be surprised if they are becoming the preferred source for the younger generation rather than subscribing to papers. If the news-sites do not generate sufficient revenue there will be insufficient journalism.

 Many news-sites depend upon crowdfunding and donations. There is not the same tradition in New Zealand as in the US for such funding but my guess is that it will become more common. (I am not saying we are ungenerous; rather that we dont think about such things in the way many Americans do.)

 You will see at the top of this page an invitation to ‘become a supporter’ of Pundit. It would not be quite this column’s style to urge you to click on it, but unless sufficient people do the possibility is that the website will die. I am less reticent at encouraging readers to support financially all the free news-sites they value. Without that support there is a danger that our open democracy, such that it is, will descend into darkness.

 

Footnote: If you have doubts about the importance of good journalism look at this report on the collapse of the CTV building and the death of 115 people on 22 February 2011.Thankyou to the team of journalists and to the editors who thought it worth doing. One may wonder how many advertisements paid for it.