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The end of the news

Updated Wednesday 4th February 2009

As newspaper circulation is in decline, will the Internet dominate our newsreading? Alan Shipman looks into the economics of the news industry

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A journalist-turned-economist wonders if network economics has overturned journalism. Google’s chief executive, Eric Schmidt, seems an unlikely defender of newsprint. His company has spearheaded the conversion of news into a free online resource, while also capturing a large share of the advertising on which traditional media depend to keep down their cover prices.

But Schmidt says newspapers’ disappearance would be a “real tragedy”, and his company is exploring ways to form partnerships to shore up their revenue. Google gladly attacks the revenue streams of academic publishers, telecoms and TV broadcasters. So why the worry about flattening Fleet Street?

Newspaper circulations were showing signs of decline before the arrival of the search engine, but their problems have escalated since. Easy access to ‘free’ news blunts people’s appetite to buy the printout, and reader loyalty is harder to build with rival titles just one click away.

Boat made from newspapers Creative commons image Icon Zarko Drincinc under CC-BY-ND licence under Creative-Commons license

Going online has in many cases boosted the number of readers, while accelerating the loss of subscribers – widening exposure for those who spin the words, but ultimately erasing the return on investment for those who own the keyboard.

The instant availability of news, from reliable sources at no cost, looks like a triumph for the freedom of information - complementing the rise of ‘freeware’ as an alternative to expensive proprietary software. But providers of free online news and digital archives are getting genuinely worried about their impact on the paper-based article. They’ve realised that news is a ‘public good’ in its economic, as well as its literal sense.

Once information exists, society benefits by making it available to everyone. Yet if this stops news gatherers recovering the costs of assembling and checking the information, they’ll cease to do so. Free online channels, and the search engines that retransmit them, might find that they’ve killed the media goose by relaying the golden eggs.

Opinion palls

The legendary Guardian editor CP Scott famously observed in 1921 that ‘Comment is free, but facts are sacred.” The downside is that facts are also expensive. Because the same breaking news travels quickly down all wires, newspapers distinguish themselves by the quality and quirkiness of their analysis and interpretation.

But the centrefold opinion pieces can go bizarrely off-beam if the front-page facts they pick up are not accurate. If the costs (and insurance premiums) of sending correspondents to the front line keep rising, while the revenue from selling their stories is driven down, an ever taller tower of free comment will be built on an ever less solid reporting foundation.

In the past, newswire errors with global repercussions – such as the Chinese re-attribution of an 80s heart attack from skiffle king Lonnie Donegan to president Ronald Reagan – were rare enough to make headlines in themselves. Newspapers’ nightmare scenario is that, with commercial pressure shifting resources from costly news to free comment, such misapprehensions could become commonplace and increasingly unnoticed.
Substituting blogs for professional journalists’ reports, and mobile footage for a camera crew’s, can make for further-flung and faster-delivered as well as cheaper coverage.

But it isn’t clear that these new, subject-generated news sources are as accurate or objective as the old professionally mediated ones. If the old don’t survive, there will be no way to check. Even where professional journalists are retained, and not drawn into the blogosphere, their dwindling numbers reduce the scope for monitoring colleagues’ fact-finds, or countering the spin applied by organizations and politicians increasingly skilled at squeezing self-penned news through the Fourth Estate’s unguarded gates.

Restoring the public good?

titles are coming under pressure as falling revenue meets rising print and distribution costs

With other costly-to-produce but freely accessible resources, like roads and policing, the ‘public goods problem’ is solved by having governments pay for provision. But democracies have long rejected state-sponsored news media, regarding the BBC as an exception and Soviet-era Pravda as the truth-twisting rule. Public agencies are trusted to build communication channels – including the internet – but not to sponsor or supply the messages that flow down them.

Private, profitmaking news media are rarely free of bias, and some of the best-read newspapers disappeared because their literate but low-paid readers weren’t the type the sponsors valued. Against this, media historians like the economist James T Hamilton have shown that newspapers’ coverage broadened, and grew less partisan, when the need for advertisers forced them to seek a wider audience. And private lossmaking media may have an even worse impact.

The problem, as Google’s Schmidt confessed recently to Fortune magazine, is that the new channels now swiping papers’ subscribers and advertisers have no way to put the genie back in the news-stand. “Google can’t make the cost of newsprint go down. We also can’t materially change the way consumers behave… We have a mechanism that enhances online subscriptions, but part of the reason it doesn’t take off is that in the culture of the Internet, information wants to be free.”

After decades of investment in reputations and brand-names, the big newspapers still have a significant hold over electronic news flow. They might solve the cashflow problem if, OPEC-like, all agreed to start charging for stories that currently circulate freely. But coordinating such a move is near-impossible. And if achieved, it would soon be undermined by new channels conveying similar items free of charge.

So some of the best known titles are coming under pressure as falling revenue meets rising print and distribution costs. America’s Christian Science Monitor is ending its print edition, while Britain’s The Independent is forced into a resource-sharing arrangement with the rival Mail. The New York Times’ abandonment of charges for its op ed pages means only the financial press still dares to charge for online access.

But even the Financial Times is downsizing in line with its deflating subject matter, and other broadsheets are unable to adopt the tabloids’ shape without suspicion of a matching diminution of content.

At least that’s one upside from the credit crunch. It used to be feared that the wealthy investor class would continue to get an accurate picture of the world through their paid-for pink pages, while the rest had to settle for an ever more diminished and distorted view via station-platform freebies.

Now it’s clear that those who paid twice the price for their news feed, plus an expensive Bloomberg screen, were no better financially informed than the average Metro reader. Perhaps we’re all being made to pay for that free information.


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