Free Press – at what cost?

This indeed is a thought provoking piece by Craig Moffett. Given the backdrop, or rather, the harsh reality faced by the journalism industry, the literature does make us stop and reflect on the disruptive impact of internet on the fourth estate and demomcracy.

Consider the downsizing in the news paper industry including the likes of The New York Times, The Seattle Times, The Daily Herald, the Philadelphia Inquirer, the San Jose Mercury News, the Fort Worth Star Telegram, and a host of others. According to the American Society of Newspaper Editors, full time news staffs in the U.S. dropped by 2,400, the largest decrease in 30 years. Year 2008 could probably be worse.

USA Today owner Gannett reported an 8% decline in total revenues in the most recent quarter (including both newspapers and broadcasting), marking its fifth consecutive quarter of declining revenues. Gannett's newspaper advertising revenues were down 11% in the U.S. The problem is not just with advertising, which can plausibly be claimed to be cyclical, but with circulation, and the very value proposition of the newspaper itself. The Atlanta Journal Constitution has seen its circulation drop by 8.5% over the past twelve months (through the end of March). The Star Tribune in Minneapolis saw circulation decline by 6.7%. The 90 year old Capital Times of Madison, Wisconsin published its last newspaper.

As circulation has declined, once proud regional papers have been reduced to human interest wrappers around reportage that is increasingly outsourced to the AP and Reuters. Since 1990, a quarter of all newspaper jobs in the U.S. have been lost. And it's not just in the US. France's Le Monde was not published for one daily edition, since the workers were on strike to protest the elimination of 130 jobs. Most of them were journalists. In the UK, revenue from Gannett's regional papers were down 7% from last year. the demise of printed classifieds to likes of eBay, Monster.com, and Craigslist has unquestionably played a part, but there seems to be a broader, and more disturbing, pattern here.

CBS is exiting the news gathering business altogether, outsourcing its news gathering operations to CNN. What we are witnessing is not the demise of newspapers… it is the demise of journalism itself. The culprit for this inexorable decline is not a decline in our interest in news, although there is plenty of evidence of that sad trend, too. Instead, it is our unwillingness to pay for it.

Put simply, the economic model of news gathering – of maintaining costly overseas correspondents and news bureaus, of investigative journalists – is being eviscerated. And it is being eviscerated by the Internet. The Internet is effectively setting the new benchmark price for news. And that price is… "free."

Our need for news is being fed by Internet searches, one-line news "alerts," Wiki-sites, and special interest emails… and we don't actually pay for any of them. The notion of a "free press" was supposed to stand for something grander than this. To be sure, the serious democratic business of reporting the news has gotten a remarkable boost from the Internet. The potent combination of cell phone cameras and instant connectivity has effectively deputized millions of "vigilante journalists," each ready to report news as it happens anywhere in the world. And by posting it online instantaneously, for all to see, the all-important watchdog role of a free press has blossomed spectacularly in places like China, willfully forcing change in a way that would make our own founding fathers proud. But vigilante journalism serves only up to a point. We are rapidly replacing investigative journalism with news. For their part, the news organizations are all racing to the Web. If you can't beat 'em, join 'em, the thinking goes, and incremental revenues are, well, incremental.

But as with so very many other digital businesses, the news organizations are very publicly sowing the seeds of their own demise. The notion that the enormous cost of real news gathering might be supported by the ad load of display advertising, or by the revenue share from having a Google search box , or by a fifteen-second video is not adding up to lost revenues. The dollars and cents of traditional news distribution are being replaced with pennies of incremental advertising, and no amount of savings from avoided paper costs from electronic rather than physical distribution can offset the losses.

It's not just newspapers suffering this fate. Ratings of TV news are at all-time lows. By the time people get home from work, they have already consumed their news – Free – emails, blogs etc. A high-cost business model like journalism can't compete with "free." And so we settle for, simply, less news. Or at least less journalism.

According to EditorAndPublisher.com, the US supports just 25 full-time journalists embedded in Iraq. That's just one twentieth the number from thirty years ago in Vietnam. There isn't that level of reportage on the war because it is not affordable.

Five years into the video-over-the-Internet revolution, we have learned two things. First; consumers won't pay for content on the web, so it will have to be ad supported. And second; it won't be ad supported.

In the cable TV network world, half of all revenues come from affiliate (carriage) fees paid by the Comcasts and DirecTVs of the world. The other half comes from advertising. But in the TV world, a typical half hour show supports an ad load of about 8 minutes. On the web, early evidence suggests that consumers will tune out if they are forced to watch more than 30 seconds or so of advertising up front, and maybe another 90 seconds of advertising over the next thirty minutes. Hulu.com, for example, which has already been lionized by many as the future of TV, serves two minutes of advertising for every 22 minutes of programming (i.e. the programming duration of a typical half hour show from television). Assuming identical CPMs for web video and TV, and after accounting for lost affiliate fees, a 30 minute program on the web with two minutes of advertising yields approximately 1/8th as much revenue per viewer. Are content producers prepared to reduce production costs…by 88%?

Desperate not to be left behind, all of America's news outlets are bravely embracing the web, putting their best content on the web (for free, of course) in a game effort to generate "traffic." At the same time, the Sports section, the Business section, the Metro section… all are being replaced with individualized à la carte stories (clips) on the web. Each news dip is customized to suit our interests. And each consumes our attention (think ad loads) for a shorter and shorter period of time. Production budgets – editorial staffs – are necessarily being downsized and Fast.

However, enrollment in graduate journalism schools has actually increased over the past decade. Unfortunately, there are fewer and fewer jobs waiting for them when they graduate. Fewer jobs in journalism means a less attractive career. A less attractive career means that fewer and fewer of the best and brightest will enter the profession. Worse, a generation of readers will be trained to expect little or nothing of real merit from the news. The culture of "free" on the Internet has already brought low the music industry. But the music industry – or even the TV industry – can be easily dismissed; it's "just" entertainment after all, and selling bundled "albums" was inarguably an antiquated business model, anyway (wasn't it?). The threat to journalism – the Fourth Estate – is something different, however, and it is something profound. A free press that is sufficiently well-capitalized to fulfill its role as the watchdog is at the very heart of democracy.

The technologists behind the news bots and clipping services charge that change is good, and that business models must evolve. Fair enough. But it's hard to view this perspective without some cynicism. Piracy and the devaluation of intellectual property have become so commonplace in the tech community that these very notions have been elevated and recast from something base (stealing) to now something aspirational and high-minded (preserving and protecting "freedom" and "democracy"). But behind all the rhetoric – from all sides – is a simple truth understandable to almost everyone. Generally speaking, "free" is bad for business. And so the press, that pillar of democracy, crumbles. The job cuts are accelerating.
Many thanks to Craig Moffett, May 2008