Saturday, 10 December 2016

Hard Journalism as a Public Good

Earlier this week the Commerce Commission held a conference on the proposed merger between Fairfax and NZME. Most of the discussion involved the applicants responding to questions from the Commission. The transcripts will be available here. This post is not about the proposed merger but was provoked by the discussion at the hearings.

There is no doubt that journalism as a profession is facing serious economic challenges. Advertising revenue is moving away from printed newspapers as readership declines, and the online versions of newspapers aren't gaining as much revenue as their hard copy versions are losing. Google & Facebook (G&F) are scooping up the rest of the cash because they have better ways of matching adverts to eyeballs.

But G&F are distributors of content, not creators, which is why they haven't really cared whether news is real or fake. And by scooping the advertising revenue, G&F are revealing the weakness that was always inside the traditional business model for news media: hard news has been cross-subsidised by soft news. The light, quirky stuff has sold papers day-to-day while journos dug into important but deeper stories that headline less frequently.

Think of the hard-soft distinction as a spectrum that runs from serious investigative journalism through to PR puff pieces. Any story that someone has a strong interest in killing off is likely to be hard journalism. Innocuous human interest stories are neutral - no-one is promoting them or trying to kill them off. And at the other end of the spectrum are PR stories deliberately planted by someone with a position or product to promote. In the traditional model, a bundle of stories is sold in a newspaper and readership of the latter two categories helped to pay for the more important stuff.

Cross-subsidies are not sustainable under competition though. In the modern online world G&F unpick the traditional bundles, allowing readers to focus on the cat-up-tree stories if they so desire. Worse, they also take advertising revenue from the harder investigative pieces.

So how do we ensure that enough hard news is reported?

The first step is to acknowledge that it meets both criteria of a public good. Once created, hard news can be consumed by an infinite number of people, so there is no rivalry for consumption as there is for a sandwich. It is also difficult and inefficient to exclude those who have not paid from the consumption of hard news. Under these conditions, commercial operators will under-provide hard news because it is difficult to monetise.

This under-provision is a serious problem because hard news is the feedback loop by which the general public are sufficiently informed to insist on changes in policy. It is crucial to the sustainable development of our society, environment and economy.

So the question is not whether we should support hard journalism, but how to do so in today's context. Apart from the rapidly evaporating cross-subsidies, there are three main options.

Crowd-funding can work but it has some obvious weaknesses. It is best suited to particular projects rather than the maintenance of an ongoing effort by a dedicated crew. It also risks tipping off the target(s) of the investigation.

Option two is for newspapers to take on G&F at their own game by using a combination of paywalls and permission-based marketing to reclaim advertising revenue. This strategy might possibly succeed, but it would still require internal cross-subsidies and it is not obvious that those seeking cat stories would subscribe in sufficient volumes to support hard news.

Public funding is the third option and more consistent with the way we ensure the provision of other public goods. The main difficulties with public funding are ensuring we get plenty of high quality outputs and finding the dosh to pay for it.

I'll have a crack at these difficulties in another post.

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