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Resistance See other Resistance Articles Title: Is the Decline of Newspapers a Market Failure? Or creative destruction? Over the past year there has been a flurry of government-related activity aimed at stopping the decline of the newspaper business. The Federal Trade Commission (FTC) has held three series of workshops on the subject, drawing dozens of top academics, national politicians, business leaders from companies like Google and News Corporation, and the FTC commissioners themselves. On June 7 the agency released a discussion paper titled “Potential Policy Recommendations to Support the Reinvention of Journalism” (pdf), and a week later it held a workshop at the National Press Club, “How Will Journalism Survive?” to discuss its proposals. This activity has focused on two issues. First, traditional news-producing businesses aren’t making the money they used to make because of competition from new kinds of outlets. Second, this allegedly is a market failure. Regarding the first, print journalism lost income to television, then the Internet, and now from the expanding capabilities of mobile handsets. In this new and still rapidly evolving order, print news media are increasingly discovering they are at a comparative disadvantage in attracting advertising dollars. Like dial-up Internet access, the newspaper is getting left behind. Regarding the second, the FTC argues that journalism is a public good, that the severe contraction of the industry proves that the market has failed, and thus that even tirelessly experimenting entrepreneurs have been unable to find new and sustainable streams of revenues for news organizations, especially for traditional newspapers and their online extensions. As paragraphs 14-15 of the FTC paper argue: 14. There are reasons for concern that experimentation may not produce a robust and sustainable business model for commercial journalism. History in the United States shows that readers of the news have never paid anywhere close to the full cost of providing the news. Rather, journalism always has been subsidized to a large extent by, for example, the federal government, political parties, or advertising. 15. Economics provides insight into why this has been the case. The news is a “public good” in economic terms. That is, it is non-rivalrous (one person’s consumption of the news does not preclude another person’s consumption of the same news) and non-excludable (once the news producer supplies anyone, it cannot exclude anyone). Because free riding is usually easy in these circumstances, it is often difficult to ensure that producers of public goods are appropriately compensated. The policy recommendations, in turn, are intended to raise revenues and decrease costs to news producing organizations, while making life more difficult for online news aggregators and other new media “free riders.” Major New Programs By my count the FTC report contains 30 potential policy proposals, ranging from major new programs to tweaks of existing interventions. I have categorized most of the proposals into six broad areas. * Raise revenues to news organizations by: amending the Copyright Act to allow licensing of news content and expand protections of “hot news” while also narrowing the scope of fair use; and exempting news organizations from federal antitrust laws to encourage collusion in charging end users and online news aggregators. * Reduce costs to news organizations by: granting free access to government computing centers; expanding R&D subsidies to information technologies that journalists use; and standardizing the way governments issue electronic information as fodder for what journalists report. * Increase current funding of journalism by: increasing subsidies to the Corporation for Public Broadcasting; increasing postal subsidies for mailing of print media; and funding newly created domestic counterparts to international radio broadcasting like Voice of America and Radio Free Europe. * Create new federally funded programs including: a new journalism division of AmeriCorps; a national fund for local news in “places the market has failed to serve”; and grants to universities for student-produced investigative journalism. * Offer tax preferences to news organizations including: credits for hiring journalists to “help pay the salary of every journalist”; tax-exempt status for news organizations that convert from commercial to non-profit news organizations; and newly created IRS status of news organizations as “for benefit” organizations that are tax-exempt. * Harvest new funding mechanisms for earmarked spending on news organizations, including: a tax return checkbox for up to $200 to distribute to nonprofit news organizations; new Federal Communications Commission surcharges on new media content; new taxes on spectrum use and spectrum auctions, a new 5 percent tax on consumer electronics, a new 2 percent tax on online advertising, a new 3 percent tax on wireless and Internet phone bills, and more. This is what the best and the brightest have been up to. Now just to be clear, the FTC authors are careful to state that these are merely potential proposals that are intended for discussion only. Yet after a year of workshops and dozens of studies, these are the ideas on the table—a thoroughgoing commitment to the coddling of a dying business model coupled with a seemingly wholesale disregard for the freedom of speech. Since there isn’t enough space here to talk about all the implications of the FTC report, I will focus on the economic argument that lies at the core of these proposals. First, you might wonder what the FTC refers to in saying that journalism has always been subsidized by the federal government. Well, consider postal subsidies for shipping of print news that were first enacted in 1792. Then there are tax breaks to newspapers for costs incurred to increase circulation. Finally, there is direct funding of public radio and television. In light of these examples, it seems apparent that there is a long history of federal subsidies to print journalism. But precedent does not a market failure make. In fact, even if a good does have the properties of being non-exclusive and non-rival, as the FTC characterizes journalism, this still does not make the decline of newspapers a market failure. Voluntary provision of public goods tends to work when the supplier of a good can find indirect ways to charge users of a good, thus converting it from non-exclusive to exclusive. Voluntary Provision of Public Goods History shows us repeatedly that public goods are often and perhaps even usually provided voluntarily—without mandate or subsidy from government. Toll charges have been sufficient incentives to build roads and bridges for centuries. Beekeepers and orchard growers have found ways to contract and cooperate with each other to provide more of two goods – honey and flowers — that have classic potential free-rider problems. Casino hotels in Las Vegas provide free self-parking and security. Even law enforcement itself is not a public good. Neighborhood police forces have survived on a fee-for-service basis in San Francisco, of all places, for over 150 years. The question of whether that classic public good, the lighthouse, was provided privately in England has been a matter of some controversy. But of course, ships don’t rely on lighthouses any longer. When navigation tools enabled precise longitudinal calculations, those tools began displacing lighthouses. More recently, GPS has made lighthouses obsolete. The lighthouse is a now a dead business model. That doesn’t make a lighthouse a public good, though. It makes it no longer a good. The same dynamics are true of journalism. Producers of journalism charge consumers of journalism indirectly through advertising. But the old business model is dying. That doesn’t make journalism a public good. It makes the traditional business model obsolete. Forgotten Consumer But what about the losses to news producers? This is not pleasant to see unfold, but it is not a market failure. A policy-relevant market failure is the experience of real net losses in society as a result of purely self-regulated voluntary action. When people choose to move away from lighthouses and newspapers, it’s because they’re moving to new and better substitutes. The lighthouse’s loss has been society’s gain. Similarly, as news producers’ revenue streams have dried up, this has created more than offsetting opportunities for new media producers and consumers of information. It has also spurred innovation in new forms of journalism. To its discredit, the FTC report barely mentions news consumers in its litany of industry-enhancing proposals. And it treats new media competitors as the bad guys. As a society, we wouldn’t want to go back to horse-drawn buggies unless we were fixing our focus entirely on the welfare of buggy-whip makers to the neglect of carmakers, their consumers and the rest of us. The authors of the FTC report do not seem to get this point. Market-failure theory is of no help in understanding how markets really work and what is happening to journalism. A better framework is creative destruction. Old journalism is failing not because it is a public good that government has not adequately funded. It’s failing because it is being replaced with more innovative alternatives.
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You are allowed to make comments concerning the article at the website. Here is the comment I made. Hopefully I don't come across as a paranoid whack job, but if I do, oh well. The decline of newspapers is not a market failure, it’s a failure of newspapers to perform their government watchdog role and to report the news in a truthful and unbiased manner. Instead of being a watchdog, mainstream news has become nothing more than a government propaganda outlet, taking everything said by government officials at face value and vomiting it up to the American people as fact. Examples include the role of the media leading up to the Iraq war as well as the bogus inflation and unemployment numbers the government puts out on a regular basis. This is the basis of the decline of newspapers, not market failure. What more, I believe that both newspapers and the government know this and that these FTC workshops are just another propaganda tool the government is using to justify laws which will strangle online political forums as well as the small online independents that are actually trying to perform a watchdog role. As the various newspaper articles (as well as videos of TV talking heads) get posted upon political forums they are dissected, picked apart and discussed by citizens in ways which are unhealthy for both the mainstream media and their government masters. As more people become introduced to online political forums and to independent news sources the government loses control of “the message.” It’s all about control of the propaganda.
"The Central Intelligence Agency owns everyone of any significance in the major media." ~ William Colby, Director, CIA 1973–1976 Nothing in the State, everything outside the State, everything against the State - Jan Lester, Escape From Leviathan "When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that justifies it." - Frederic Bastiat Good order results spontaneously when things are let alone. - Zhuangzi
my biggest surprise upon entering journalism 5 years ago was to learn that the newsroom and news gathering in general is considered a liability to the company, it does not produce any income in their eyes, the speech was repeated by 3 publishers now from this McNewspaper Corp ~ the purpose of the newspaper is to sell advertising and generate income which must increase by 40% annually or folks get fired.... imo, newspapers are failing here because they are nothing but shopper rags now
your letter is outstanding. you don't come across as a whack job at all.
As to some degree has always been the case. Newspapers/TV/Radio News are in the business of selling advertising space which gets under a lot of noses. The news exists to attract a readership/viewership to sell to the advertiser. So, anything which cuts across that line is edited out. H.L. Mencken commented that the function of a newspaper editor is to "...separate the Wheat from the Chaff, and then publish the Chaff". They are not going to publish anything which pisses the advertisers off. The people reading/viewing/listening only matter when they start going elsewhere - which is why the lamestream nooze finds the internet so disturbing - it's hurting ad revenue. That is why last year, I believe it was last year, there was the scandal about the NYT padding its circulation to keep up its advertising rates. People are leaving in droves because the lamestream media is losing credibility. I can recall a time when I read two newspapers a day. Now I read NONE. It is not because of the cost, but because I do not trust them. They lie both by omission and comission. I recall one local radio station, one of the local 50,000 Watt AM blotorches, that I ceased listening to because they had day in and day out their, what I called it, "Dead Kid of The Day" Story. They would repeat the story of some child dying in an unfortunate way at every news break, and I got tired of the sheer ghoulishness of it as I knew the sole reason was that they thought it got people to listen - and all it did for me was make me sick to my stomach. I love kids and I don't need to be reminded to the point of ghoulishness about the unfortunate, and unusual, death of some poor child. So, I got even - I stopped listening to that station (it was Kleachannel by the way). Proof that "man bites dog" is not the only way to get readers/listeners. So, the nooze media is dying because they are not about news, their audience has gotten wise to the con, and is getting even in the one way they can - effectively a boycott. Count me in.
"One of the least understood strategies of the world revolution now moving rapidly toward its goal is the use of mind control as a major means of obtaining the consent of the people who will be subjects of the New World Order." K.M. Heaton, The National Educator
I have a degree in Mass Communications and was a newspaper reporter and editor. Newspapers are run by idiot MBAs (the degree should not exist) and they've run newspapers into the ground. Degrees in Journalism are also worthless. During the heyday of newspapers Journalism degrees did not exist, and we produced great writers. If you want newspapers to get strong again the first thing to do is have cub reporters, like Jimmy Olsen from Superman. There is also a problem with the starting pay being too low to attract anyone besides moronic leftists, who are too stupid to figure out they are the problem. If I had a newspaper I guarantee you it would make a profit.
St. Ausgustine on the State: "It was a criminal band that achieved legitimacy not by renouncing aggression, but rather by attaining impunity."
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