international analysis and commentary

The multiple crises of journalism in the US

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The decline of print media in the United States is well known and documented. Through the years, and especially in the last decade, thousands of American journalists have lost their jobs as hundreds of storied publications, especially local newspapers and magazines, closed down or drastically reduced operations. The recent global financial crisis only made things worse, and the downsizing continues. The latest domino to fall is New Orleans’ The Times Picayune, which recently announced that it is cutting down its print edition to three times a week in order to focus more on its online contents. As a result, 84 of 173 newsroom staff members are being laid off.

The success of the internet and of new media has stretched traditional media thin. Advertising revenue has collapsed and so have subscriptions and circulation. And whatever money online ventures might have brought in afresh, it has been far from sufficient to make up for the losses. But the ongoing crisis of journalism has implications that go well beyond market fluctuations and economic profitability. After all the press has been one of the foundations of modern democratic systems, particularly in the United States. Its slow but seemingly unstoppable demise begs the question of what journalism’s real significance is in the face of a shrinking monetary value.

The picture that emerges from this year’s Annual Report on American Journalism by the Project for Excellence in Journalism of the Pew Research Center is bleak. The study found that in 2011, industry-wide online advertising increased by $207 million over 2010. However, print advertising fell by $2.1 billion. “So the print losses were greater than the digital gains by 10 to 1,” states the report. Stock prices of newspaper companies dropped by 25% in 2011 over the previous year. Print circulation continued to decline slowly. And while online circulation has been growing, this new audience remains hard to identify and target. Overall, according to the Pew Research Center, “newspapers are now less than a $34 billion-a-year industry, down from $59.2 billion in 2000.”

The problem is not that there hasn’t been plenty of experimentation. The most notable example of the news industry trying to reinvent itself is, of course, the recent reintroduction of pay-walls, a pricing mechanism that provides subscriber-only access to their online content. It is too early to tell how pay-walls will fare, but in all likelihood it will be a mixed bag and not a one-size-fits-all, long-term solution.

“In a perfectly competitive market, price gets competed down to marginal cost,” says Duke University Professor James Hamilton. “The marginal cost of one more page view is near zero, so it is hard to charge for news online, if what you are offering is commodity news that is easily available elsewhere.” Therefore, the success or failure of a pay-wall depends on how many people see a content as distinct, not easily substitutable, and are therefore willing to pay for it.

Experts agree that this is a model that rewards brand names. “The very best firms, those that publish unique content that people will want to read, for example the New York Times and the Wall Street Journal, they will probably do pretty well with pay walls,” says Lisa George, a City University of New York economist and currently a visiting professor at the Wharton School of the University of Pennsylvania. George says she worries not about high-end publications, but rather about the future of local and regional coverage, an area where newspapers and magazines are struggling to offer value-added content to a large-enough number of readers to sustain themselves. A pay-per-click model has also been talked about for some time, but companies do not like it. “I believe that firms are afraid that if they unbundle, they’ll be able to support even less content,” says George.

Other interesting realities include non-profit ventures like the websites MinnPost and Texas Tribune, as well as ProPublica, which relies on philanthropic contributions to run its award-winning investigative journalism enterprise. Some new companies, like Global Post and Politico, offer subscriptions to corporate and professional clients interested in receiving specialized, in-depth coverage on particular beats, in the hope that this will help finance their general destinations websites that are free for everybody to access. Yet other news organizations put up paid events where their journalists interact with the public and with newsmakers. The Washington Post, one of the few brand newspapers that have yet to erect a pay wall, derives much of its revenue from the operations of another company it owns, for-profit test prep giant Kaplan, Inc.

Through the years, media companies looking to tap into new sources of revenue have also launched tablet computer and smart phone applications. And there remain a few ultra-rich Americans investing in the industry for fun, for example Internet entrepreneur Chris Hughes, who recently acquired The New Republic and hopes to turn it around. “The ‘benevolent billionaire’ model for saving journalism may work for a relative few organizations, but it is not a systemic solution and carries with it obvious concerns regarding editorial independence,” says Professor Victor Pickard of the Annenberg School of Communication at the University of Pennsylvania.

Finally, the interaction between news media and social media doesn’t necessarily have to be a drag on the former. For example, social networking websites can contribute to spreading the word about news content. “Facebook can help you learn about news of interest to friends, and to coordinate with others, to find information helpful for your role as a consumer, and to some degree as a voter and worker,” says Professor Hamilton.

But social media also struggle with some of the same financial issues as news producers. “There are differences between the business strategies of legacy news media and new social media like Facebook, but all digital media are trying to design new ways to monetize online content,” says Professor Pickard. “In particular, they are trying to please advertisers.” Once the boom of the last few years slows down, this might turn out to be as hard for social networking websites as for online newspapers. For example, it is thought that the number of Facebook users in the United States – what companies are really after when they pay to place an ad on this website – has already plateaued. At the same time, the number of users of paid apps is decreasing. In June, stocks of Zynga, the biggest makers of gaming apps for Facebook, plummeted to record lows after analysts reported that usage was down as people switched to playing games on mobile devices. Finally, the actual effectiveness of advertising on Facebook is also being debated, with General Motors pulling all its ads in May because they had not helped with selling more cars. Facebook’s underwhelming IPO might just be a sign that the hype surrounding internet companies well exceeds their actual value.

All of this leaves us exactly where we left off. A new economic model capable of supporting journalism, in print and online, and that creates profits is yet to emerge. In the meantime, the US is bleeding good journalists and good publications right at a time when its political system and, in general, the world become more complex and difficult to read for the general public – in short, at the time when the US would need more, not less, quality reporting. “The press simply should not justify its existence based on how much money it is making,” says Professor Pickard. “If we see the press as a public service and a public good instead of a commodity, then profits should be secondary if considered at all.” He suggests seeking ways to reduce or remove commercial pressures from the press, for example via public subsidies. Unfortunately, this is not very likely in the age of skyrocketing public debt, austerity, and anti-government rhetoric.