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The Real Reason Newspapers Are Losing Money, And Why Bailing Out Failing Newspapers Would Create Moral Hazard in the Media
Conventional wisdom is that the Internet is responsible for destroying the profits of traditional print media like newspapers.
But Michael Moore and Sean Paul Kelley are blaming the demise of newspapers on simple greed.
Michael Moore said in September:
It’s not the Internet that has killed newspapers ...
Instead, he said, it’s corporate greed. “These newspapers have slit their own throats,” he said. “Good riddance.”
Moore
said that newspapers, bought up by corporations in the last generation,
have pursued profits at the expense of news gathering. By basing their
businesses on advertising over circulation, newspaper owners have
neglected their true economic base and core constituency, he said...
And
Moore cited newspapers like those in Baltimore or Detroit, his home
town, with firing reporters that cover subjects that affect the
community.
Ultimately, he said, this was self-defeating. It
would be like GM deciding to discourage people from learning how to
drive, he said.
“It’s their own greed, their own stupidity,” he said...
Similarly, Sean Paul Kelley writes:
I
don't buy all the hype that the internet is even the primary culprit of
the demise of journalism. The primary culprit is the same as it is all
over the country, in every industry and in government: equity
extraction.
Let me explain, in short: when executives expect
unrealistic profits of 20% and higher per annum on businesses something
has got to give. It's an unnatural and unsustainable growth rate. For
the first ten or so years of a small to medium size company's life?
Sure. But when you are 3M, or GE? Unrealistic and ultimately
impossible.
So, when such rates cannot be achieved by organic
growth in the business, executives start shaving off perceived fat and
before they know it they're cutting off the muscle and then shaving off
bone chips. And when they've gotten to the bone chips they borrow other
people's money to buy new companies, load up those companies with debt
and extract equity form them and then because it looks like the parent
is still growing award themselves huge bonuses. It's a shell game.
That
is what has happened to the news industry in America. The excessive
obsession with unnaturally high profits has led to a vicious circle of
cutting budgets, providing less services, which is then followed by
even more drastic cuts. The local San Antonio paper is a great example
of this. Twenty years ago there were two large dailies in my hometown.
Both competed with each other for real scoops. Both had book reviews by
local writers, providing local jobs. Both covered the local arts and
sports scene. Both covered local politics in depth and local and state
news in depth. Both had vigorous investigative teams. Both had bureaus
in Mexico and both had offices and reporters on the ground in DC.
And
then corner offices of Gannet and Harte-Hanks were populated with
Kinsey-esque managers and the rout was on ... So, today, San Antonio
has one daily that is as flimsy and tiny as the local alternative ...
And 80% of this happened before ... the internet. All in the name of
higher industry profits--not some overwhelming fear of the world wide
inter-tubes. So, who's profiting? Certainly not the intellectual vigor
of the locals? And certainly not the writers who are all now
'journalism entreprenuers.' The only people who profited are the
executives who obsessed over profits, to lard up their own bonus pool
...
You can provide a public service with small profits for a
long, long time, but if you demand large ones you will destroy it. Just
ask the big banks.
Moral Hazard for Newspapers
There has been talk of bailing out newspapers for months.
But
the newspapers have largely driven themselves into the ground with
their never-ending drive for higher profits, which led to a reduction
in news bureaus, investigation and real reporting, and an increase in reliance on government and corporate press releases.
The
newspapers made a speculative gamble that reducing real reporting and
replacing it with puff pieces would increase its profits, just as the
giant banks made speculative gambles on subprime mortgages,
derivatives, and other junk, and largely abandoned the boring,
traditional business of depository banking.
Bailing out these
newspapers would be a form of moral hazard equivalent to bailing out
the giant banks. Instead, we should let the bad gamblers lose, and make
room for companies that will actually serve a public need.
The banking industry has become more and more consolidated, which has decreased financial stability.
Likewise, Dan Rather points out that “roughly 80 percent” of the media is controlled by no more than six, and possibly as few as four, corporations. As I wrote in July:
This fact has been documented for years, as shown by the following must-see charts prepared by:
***
This image gives a sense of the decline in diversity in media ownership over the last couple of decades:
If
traditional newspaper companies are bailed out, they will be encouraged
to continue their business-as-usual, and new, fresh media voices will
face a handicap to competition (just as the small banks are now unable
to compete fairly against the too big to fails).
We need more real
reporting in this country, not less. Bailing out the traditional media
will create more consolidation, just as it has in the banking industry.
The last thing we need is moral hazard in media.
What Do Readers Want?
As I wrote in September:
President Obama said yesterday:
I
am concerned that if the direction of the news is all blogosphere, all
opinions, with no serious fact-checking, no serious attempts to put
stories in context, that what you will end up getting is people
shouting at each other across the void but not a lot of mutual
understanding.But as Dan Rather pointed out in July,
the
quality of journalism in the mainstream media has eroded considerably,
and news has been corporatized, politicized, and trivialized...
No wonder trust in the news media is crumbling.
Indeed, people want change - that's why we voted for Obama - but as Newseek's Evan Thomas admitted:
By
definition, establishments believe in propping up the existing order.
Members of the ruling class have a vested interest in keeping things
pretty much the way they are. Safeguarding the status quo, protecting
traditional institutions, can be healthy and useful, stabilizing and
reassuring...."If you are of the establishment persuasion (and I am). . . ."
So
traditional newspapers are also losing readers to the extent they are
writing puff pieces instead of writing the kinds of things people want
to read: hard-hitting stories about what is going on in the country and
the world.
Finally, as I wrote in March, the whole Internet-versus-traditional-media discussion misses the deeper truth:
The whole debate about blogs versus mainstream media is nonsense.
In fact, many of the world's top PhD economics professors and financial advisors have their own blogs...
The same is true in every other field: politics, science, history, international relations, etc.
So
what is "news"? What the largest newspapers choose to cover? Or what
various leading experts are saying - and oftentimes heatedly debating
one against the other?
The popularity of some reliable internet news sources are
growing by leaps and bounds. For example, web news sources which run
hard-hitting investigative news stories on the economy - and do not
simply defer to Bernanke, Geithner, Summers and other people "of the
establishment persuasion" - are gaining more and more readers.
It
is not because it is some new, flashy media. It's because people want
to know what is going on ... and some of the best reporting can now be
found on the web.
Subtle, Unintentional Propaganda?
If there are bailouts of the newspaper industry, will the government
take ownership of the media corporations, as it has in AIG and some of
the giant banks?
Will that - in turn - lead to a situation in
which the government representatives subtly and innocently censors
anti-government stories? After all, the object of criticism might be
the employer or friend of the government representatives on the
newspaper board.
Indeed, the most cynical view is that this could eventually open the door to Pravda-style government control of media.
- advertisements -
I fought the newspapers as a Radio Advertising Bureau trained operative for 20 years, selling Radio ad time. Newspaper advertising has always been highly over-priced due to its tangible nature. Newspapers ruthlessly increased rates to advertisers every year despite steadily decreasing circulation, pass-along readership and time spent reading. Of course Radio was a better medium in many ways, but as a completely intangible and audio medium, newspapers usually won the lion's share of budgets. It's bittersweet to see their demise, but as the story concludes, it's their own damn fault!
With the exception of Fox news and talk radio, Obama already controls the U.S. media.
Look a bit higher up the wealth chain brother.
Merry Christmas! I recommend many cases of beer and the good orange acid this Friday.
Yeah good point bro, thank god Fox news is there to tell us the truth.
excellent commentary.....the jackals were sent into the news outlets to consolidate control....the 1984 agenda is burning on rich oxygenated fuel....fewer news sources means easier control of newsspeak....
but this is more complicated than my summary....there are layers of players with different levels of knowledge of the grand strategy....it's a form of compartmentalization where some are naively gung-ho on some stupid idea whereas others callously pull the strings of evil - causing the tards to do the work of their masters....
of course continuous 20% growth is unrealistic but is this taught in statistics, business school, or anywhere for that matter? not at all.....and even if it were would anyone be so bold as to challenge the senior executive hell-bent on the delusional course when his jackal boss has said it must be done? not a chance....and remember this is all from the best and the brightest....the consulting firms grab the young kids out of college - who don't have a clue and never will - so that they can be brainwashed into pursuing retarded goals....after all, they will be long gone when the damage emerges which in turn calls for another consulting engagement....
and how could anyone stand up against the farce who has been drugged with add medicines, toxic vaccines, and other mind control agents?....
sorry, george, nothing changes but you are indeed right and have hit an important nerve....your commentaries are by far the most important on this website....
Any idiot that cares a rat's ass about what Michael Moore has to say is, well, an idiot.
I love your sophisticated, well reasoned, dispassionate analysis of Michael Moore's opinions.. you must be a neo-con intellectual
Neo-con intellectual? A true oxy-MORON if I've ever heard one.
A neo-con is just a Fabian in sheep's clothing.
If five companies have a majority (>50%) of the media, how many companies control the balance (<50%)? Is it hundreds of companies? Or thousands?
This observation (how many own 50%) is a big "so what."
How many auto companies have a majority of auto sales? How many PC makers have a majority of PC sales? How many handset makers have a majority of cell phones? How many meatpackers have a majority of chicken, pork and beef processing?
The list is endless. So what? Companies with a $hitty product/service should be left to fail and go out of business.
Bailouts subsidize failure. And that's for losers.
Any more bright ideas?
an excellent post. The similar view was expressed during his guest lecture by by Carl Icahn a few years ago:
"The thing about corporate America--few people that go to college, like where you are now, and most people in America don't realize how poorly most of our companies are run in this country, with many exceptions. They're really very poor and when you get inside the company you realize this. The real reason is there's no accountability; there's no corporate democracy and I've been saying that, prophesying it, writing about it. The reason that we can make so much money when we go into one of these is--I'm not even a manager; I never took a course in management and I wouldn't profess to really know much but I don't micromanage--I put in a very good manager. They cut the heck out of our costs, but they change the structure of the companies. This is the problem in America today, in my opinion--that we are basically undermanaged. We can't compete because the best and the brightest don't get to be at the top of the corporate ladder.
I have a sort of a metaphor that's a little facetious, but not completely, about it. I call it anti-Darwinian; it's anti-Darwinian in America's corporations. That means, a guy goes to college and this is the guy that gets to be the CEO and, yet, he's in college and he's the kind of guy that was the president of the fraternity. Now, all these presidents of fraternities aren't bad guys, but basically the normal guy that I remember at college was--he's always there at the fraternity or the eating club. He's always there to be there. If you have a bad day, you walk over to the club and you're feeling bad--your girlfriend left you; you did bad on a test score or whatever--and you go over there; he's always there.
He buys you a drink and you sit around with him; he commiserates with you; you play a little pool or whatever and he tells you whatever it is. Yeah, my girl left me; yeah well, they're all no good--usual conversation back and forth. What would happen would be--you'd like the guy. You can't help but like him; you used to wonder a little bit, when the hell did he do any work? But, he was always there for you. He never made many waves; he never said anything too obtrusive; or, he never showed too much intelligence. But, he was a good guy. He goes--that same guy goes out into corporate America and politically he's astute. He knows how to get along with people and he never really rocks the boat. He never comes up with any great idea; he's not a threat to his superior and, as a result, he moves up the ladder because, really, in corporate America, there's really very little accountability. What happens in corporate America--he moves up that ladder.
There's a good show, "How to Succeed in Business," that was out many years ago that sort of sums it up. If you say--if a genius has an idea in corporate America--the genius has an idea; the next idea is, they give him an idea to resign. So, he moves along the ladder and he gets up slowly up to the top. Now he has two attributes: he's likeable, he's politically astute and he's a survivor--he's not really a threat and he gets to the top. These are the attributes of today's CEOs for the most part, with exceptions. He doesn't ruffle feathers; he doesn't get the board upset; and as he moves up the ladder, he finally gets to be number two to the CEO. Now, the CEO has the same attributes--where he doesn't want to be threatened and he's a survivor. The CEO will never let anybody be number two who's smarter than he is. So, by definition, the assistant to the CEO is a little dumber than the CEO; now this guy now is the assistant. The board likes him; the CEO eventually retires and they make this guy the CEO--the fraternity president we're talking about. Now he's now the head guy--the CEO--and he'll bring in a number two guy that's a little dumber than he is because he doesn't want to be threatened. So, by definition, we'll be run by morons pretty soon."
love him or hate him, but he's right to the point.
transcript:
http://oyc.yale.edu/economics/financial-markets/content/transcripts/tran...
Icahn is a stooge/cipher on this issue.
Yes, he may know about corporate governance, but this issue has absolutely nothing to do with that other than the fact that the newspapers are controlled by business interests who line up with the government on policy.
If you take the most important issues in the last 10-15 years, our mainstream media has essentially fed the delusion of a population unable to think critically. To say that they have merely been inaccurate would be an incredible understatement. Rather, they have fed the blather to keep the uninitiated in that constant state of delusion.
As a consequence, so many do not believe them anymore.
But it is not enough.
How sad is it that on important news and economic issues Russia Today, and the alternative press are substantially more accurate than our MSM.
BTW- Did you know that Michael Jackson was interned with green shoes? Fuckin'A.
And yes, it is that bad.
I am sensing some generalisations in this speech.
Is Max still making movies? I heard he got in trouble somewhere in Europe. How come Entertainment Tonight isn't keeping us informed on this?
Thanks for a very nice article, as a Washingtonian (DC) I attest to that 20 years ago the Wash Post did a decent job in coverage, that was gradually lost when it became pretty much the mouthpiece of (1) the adminstration of the day (2) the regular establishment columinsts (3) and trivialities in the name of dumbing coverage. The result is it lost half of the circulation, and cut its size by as much... I unsubscribed 5 years ago and got the Financial Times, and will never look back:-)
What? Open the door to Pravda-style government media? GW come on, we have long been past the relative objectivity of Pravda in it's heyday(compared to the MSM of today). Hell look at the Georgia/South Osetia incident, funny how the MSM lied openly to America. Ironically I'd be less pissed with a newspaper/media bailout because it would openly show the people that the mainstream media is simply another arm of the parasite government. If we had ANYTHING like real journalism in the mainstream we would have seen real change in our political system a long time ago.
I care less about bailouts for the MSM and more about limiting the internet and bloggers. That's where the best real information comes from so that of course it he real target of the regime. Can't have people freely expressing their views and accurately reporting on world events! We have spin that needs to get put out there!