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Can We Sell the News?

Questions about my age (or, weirdly, my omniscience) aside, this Matt Welch post furiously attacking my argument for publicly subsidized news organizations is useful in outlining the various positions in the debate.

Welch is the editor of the libertarian periodical Reason. Like many such outlets, it has a sort of peculiar business model: It does not support itself by selling the magazine that is its ostensible product. Nor can it rest on advertising. Rather, a major portion of its funding comes from ideologically aligned donors like Whole Foods founder John Mackey and the right-wing Koch Foundation.

Possibly for obvious reasons, this doesn't figure into Welch's post very much. Nor does the word "advertising." Or "classifieds." Instead, we get snarky jewels like, "we have all observed, and participated in, the buying and selling of news products." We have indeed. In fact, I myself have actually purchased Reason Magazine. But that sentence obscures a lot more than it illuminates. It's not how the bulk of the industry supports itself now, nor has it been in memory. It's not even how Reason supports itself.

News organizations do not sell news. News, it turns out, isn't very profitable. Rather, they sell space to people selling things. Advertisers, say, or people who want to get rid of their car. Others sell a version of newsroom access: Welch's magazine is dependent on funding from people who are trying to push a particular point of view. That's a perfectly appropriate model. I imagine we're going to see a lot of growth in the partisan press over the next few years, and that's probably a good thing. But it's not what Welch means, I imagine, when he talks about "the buying and selling of news products."

Nor is it even a sufficient answer to the question at hand. It's of virtually no use to the sort of news that's actually being lost in large numbers: local and regional reportage. The majority of partisan money is national in focus. It's not terrifically interested in reporting out the condition of Atlanta's public transit system.

Welch also engages in some pretty slick sophistry when he says that "the much-maligned and bankrupt Tribune Co., to pick one wobbly newspaper/television company out of a hat, has actually earned a higher net profit margin this year than Wal-Mart–an estimated 8 percent to around 5.5 percent." The fact that the company is bankrupt should tell you something. But more than that, the trends for Tribune, and all the major media companies, are the real problem. A few years ago, people talked about 20 percent margins. And a few years from now, those margins will be negative. Welch believes in the market. He should check the valuations of those two companies.

Welch also suggests that this problem can be tied to an anachronistic affection for "expensive 20th century models of staffing and deliverance" -- which is to say, paper. As a blogger, I sure wish that were true. The problem is that paper makes money. Advertising sells for much more there, and the gap doesn't look likely to close. Indeed, no one has figured out how to generate online revenue that can sustain a large newsroom, much less a bunch of them. Hopefully, writers and reporters are not actually a staffing model confined to the 20th century.

All that said, Welch is a professional free-market ideologue, so I'm not actually trying to convince him of the worth of government subsidies for the news business. But if you drill down into Welch's post, I think you're left with three primary options, at least if you think it's useful for the country to have journalism. First, a media that's largely funded by foundations and donors -- some of them partisan, some of them not. It's not clear to me, or anyone else, that there's enough money there to actually sustain much reportage. But maybe! Second, a mutation of the advertising model that leaves you with a press that's funded by essentially selling newsroom assets to advertisers. A lot more in the way of advertorials, underwritten salons and various other efforts that muddy the waters of the outlet's agenda. And lastly, a press that's funded by some sort of public subsidy, presumably provisioned either through an automatic process as in some European countries, or an independent, grant-making agency akin to the National Institutes of Health.

In reality, we'll probably have a combination of two or more of these models (in fact, we already do have a combination of all three), plus some we haven't thought of yet. Maybe that will work and maybe it won't. An overreliance on any of them has obvious dangers. But if there is to be a media, it will need to be funded somehow. And the one thing we can confidently say is that very little of it will be funded by selling the news to consumers willing to cover the costs of its production.

By Ezra Klein  |  July 8, 2009; 6:59 PM ET
Categories:  Journalism  
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I'm a little surprised you mentioned the NIH but not the CPB - the Corporation for Public Broadcasting. The government already subsidizes television and radio organizations like PBS and NPR (and their various local affiliates) that perform many of the same functions as newspapers, ever increasingly so as newspapers start making audio and video podcasts while broadcasters are increasingly publishing online versions of their content. I think your all-of-the-above prediction about the future of newspapers is likely, and I think the most logical way to achieve the third path is to simply change the CPB to the CPM - the Corporation for Public Media.

Posted by: josephanzalone | July 8, 2009 8:35 PM | Report abuse

The internet clearly makes the industry's future difficult to predict. I see one possibility being a shrinking national news media - Perhaps a combination of privately funded (more partisan) sources along with a more limited number of surviving traditional newspapers that are able to sustain their business model out of the increased market share that will come from the oncoming failure of other similar outlets. State and local news may come more and more from independent, donation-based operations or from individuals who report/commentate for free out of personal interest.
Still, the willingness of large profitable companies (like Google) to lose money in non-profitable internet sites (like Youtube) is definitely something to think about.

Posted by: mehh | July 8, 2009 8:49 PM | Report abuse

Ezra, you're getting sloppy on the business side of the news. Two examples:

"The fact that the company is bankrupt should tell you something."

Yeah, it tells me that Trib has a mountain of debt born from a stupid LBO spearheaded by Sam Zell. Similarly, McClatchy's woes are mainly due to paying way too much for media properties, and that's even arguably true of the Times Co.

"A few years ago, people talked about 20 percent margins. And a few years from now, those margins will be negative."

This completely discounts the possibility that, like a bunch of other companies (Xerox is one example that comes to mind), these media companies can do some smart cutting and innovating to stop their downward slide. However, media companies are in a bad spot because, instead of innovating in the late '90s and early '00s, they engaged in an orgy of buyouts and leveraging instead of doing the R&D necessary to shift from print to Internet.

It's far too simplistic to assume that all media companies will die. There are some that will survive in an attenuated form without subsidy, and they'll do so by figuring out how to create a product that readers want to read and advertisers want to buy.

Posted by: mistermix | July 8, 2009 9:06 PM | Report abuse

Oh, Ezra. Why are you responding to something from Reason? That's like responding to a comic strip in Mad Magazine.

Posted by: obliterati | July 8, 2009 9:08 PM | Report abuse

I continue to be impressed by the higher information content in most medias outside the US including most notably the BBC. The BBC reports MORE INFORMATION and has wider flung reporters in more parts of the world. Yes, it benefits from a post-Imperial sense of "oblige" by the British public that they must maintain English as an export, but still. If we had a television and radio tax here, NPR could have full-time investigative correspondents in all 50 states and in tens of countries.

And our corporate media...contrary to the free market ideal propounded by extremely uncritical of both corporate malfeasance and is slow to criticize government malfeasance. There is also a rightward ideological bent to both the formal and informal commentary.

Even if we leave ideology to one side, Americans are spectacularly ill-informed in part via the media. We need, as a society, to become better informed citizens. The clash of opinions only goes so far if you don't have a base of facts to inform your own. We need as a society, I believe, to make a commitment to learn about the world, to command more accurate facts about it. Part of that commitment might be to fund some news organizations through taxes on the British model.

Posted by: michaelterra | July 8, 2009 9:39 PM | Report abuse

There may not be room in the market for a media outlet that pays union wages but there is plenty of room for outlets that pay market wages. An inability to pay union wages doesn't justify public financing of the media. It sounds like you just want a new lucrative union contract on the taxpayer's dime.

Posted by: fallsmeadjc | July 8, 2009 11:43 PM | Report abuse

Sometimes you think libertarians aren't so bad, but then they make ridiculous arguments, get mad about things that don't make sense, and link steve sailer.

Posted by: StephenBank | July 9, 2009 2:18 AM | Report abuse

"Rather, they sell space to people selling things."

Technically, they (we) sell readers to advertisers.

Posted by: GingerYellow | July 9, 2009 8:58 AM | Report abuse

I suspect there are many more people who wrongly believe WaPo is "news" than there are people who don't understand exactly what Reason is.

Maybe you should be supported by government, since you do seem to be part of its public relations wing.

You could even rename your paper, "Truth." (Quotes work in so many ways here.)

Posted by: whoisjohngaltcom | July 9, 2009 9:10 AM | Report abuse

Jesus. Rather than debate any sort of merits of what you say, the intellectual giants over in their comments section decided to debate whether you are a premature ejactulator or not. Nice place.

Posted by: flounder2 | July 9, 2009 10:15 AM | Report abuse

Welch takes you to task for claiming that news is not a "market good." I think you probably meant that it's not a "private market good" - it's more like a "public good." Public goods are nonexcludable and nonrival. That is, like national defense, once you produce a public good you can't prevent all people from receiving its benefits, and one more person receiving the benefits doesn't reduce the benefit to all the other people doing the same.

News isn't perfectly nonexcludable (although in the age of Google News and instant global communication it's close), but it's pretty darn nonrival. And (for better or worse) the textbook solution for public goods is to get governments involved in providing them. (other solutions enumerated within)

Posted by: AronB | July 9, 2009 12:05 PM | Report abuse

Wow. Those comments would be pretty insulting if they weren't coming from Libertarians .

Tell me again how you guys don't support the dissolution of the state but reject the mechanism that upholds the state and how you reconcile that?

Keep waiting for your herd of unicorns to take you off to Brigadoon guys.

Posted by: ThomasEN | July 9, 2009 1:58 PM | Report abuse

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