Thursday, March 11, 2010

When the economics of journalism stinks

Remember this parody from Slate last year?

I was reminded of it by an email this morning, a fund-raising pitch with the subject line "We Want You."

It told me I could join a special group whose members "understand the importance of watchdog, tell-it-like-it-is journalism." Then it outlined what my money could do:
  • $35 buys a journalist dinner with a confidential source in New York;
  • $75 pays for an interpreter for a reporter researching a story in Afghanistan;
  • $150 covers an Amtrak ticket to Washington so a writer can testify before Congress;
  • $250 pays for an editorial taking Goldman Sachs to task;
  • $300 buys a labor reporter's ticket to Detroit for a piece on unemployment;
  • $500 (expenses extra) rewards a brilliant article by a young journalist on Tehran dissidents.
And if I really wanted to show some cojones, it said, I could pony up $15,000 to subsidize eight fact-checking interns for six months.

I shouldn't make fun. As the email stated, "Newspapers are hemorrhaging. Funding for hard-hitting investigative reporting that speaks truth to power is drying up. And although we run a tight ship, every year we face new, expensive obstacles like huge increases in postage and paper prices. We don't carry big corporate advertising and subscriptions just aren't enough to sustain us."

It's a plea that could have come these days from any nonprofit media organization -- or, for that matter, a growing number of for-profit ones, too.

Indeed, "newspapers have never made much money from news," Hal Varian, a professor at the University of California at Berkeley, currently on leave and serving as chief economist at Google Inc., told the Federal Trade Commission Tuesday as he opened two days of workshops in Washington, D.C., on the future of journalism.

Hal Varian
Instead, "They’ve made money from the special-interest sections on topics such as automotive, travel, home and garden, food and drink, and so on," he said. "These sections attract contextually targeted advertising, which is much more effective than non-targeted advertising. After all, someone reading the automotive section is likely to be more interested in cars than the average consumer, so advertisers will pay a premium to reach those consumers." (Read his FTC remarks here. SlideShare has slides from his presentation here.)

And it was that advertising that papers used to "cross-subsidize" their real bread-and-butter: the community, national and world news that is so costly to produce -- what some have taken to calling "broccoli journalism," or the stuff you should be fed to be a well-informed citizen.

But nowadays, Varian said, readers interested in cars, travel and food are as just as likely to go to the Internet and seek out websites like Edmunds, Orbitz and Epicurious. "Not surprisingly, advertisers follow those eyeballs, which makes the traditional cross-subsidization model that newspapers have used far more difficult," he told the FTC.

The solution? An ideal one has not crystallized yet, although a number of suggestions were offered at the FTC workshop this week (audio recording here) and one held in December.

FTC Chairman Jon Leibowitz, who on Wednesday opened the second day of the latest program, made this observation: "There's a lot of good experimentation going on that holds some promise for the future of news ..." but "it is too early to know for certain, though, whether these creative solutions can remedy the destruction of existing news organizations that's occurred thus far. But what we do know for certain, though, is that there is no going back. Obviously, the Internet is here to stay and these changes, at least in part, will be here to stay as well."

The FTC plans to use the information gathered from the workshops -- and submitted in response to a notice in the Federal Register -- for a report it will submit to the government that likely will offer ideas for changes to some tax or other policies "to support the optimal -- or I might even say -- the minimally necessary amount of journalism that we need in our society," Leibowitz said.

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