I was interested to see that the Department of Culture, Media and Sport
(DCMS) has started a review of the sustainability of the press industry. I
didn’t see anything in the news about this, which is strange. I’d have thought
that the press would love to tell everyone how important they are to a
functional democracy. But then again, since most of the press are engaged in
subverting democracy rather than genuine journalism, perhaps they wouldn’t want
to remind their readers of the fact. It’s precisely this ability to set the
news agenda that makes media companies so powerful. Also, it’s never fun to
remind everyone how badly your business is doing, especially when you rely on
advertising.
Anyway, the review hasn’t even
started yet, but DCMS has commissioned a very interesting report into the state
of the press sector, and it’s worth pulling out some highlights from the 90-odd
pages.
Background
First of all, the report tells us
that the press sector has a combined advertising revenue of £1.9bn, a 70% drop
from 10 years ago. That’s a lot of money, but we need to remember that total
advertising expenditure in the UK is put at £22.2bn
by the Advertising Association, a few % of GDP. This tells us a lot in itself,
as advertising expenditure has grown considerably over the last few years,
whilst print media’s revenue from it has shrunk from over £4.6bn in 2007 (25%
of all advertising). Newspapers get about as much from their sales prices
(£1.7bn) as advertising and although they reach almost half the population,
only 9% use papers as their main source of news. The
average profit margin has dropped from 12% to 0%, and many traditional brands
have legacy debts to pension funds that they cannot meet.
There has been a
50% decline in weekday newspaper sales (11.5m to 5.8m in last 10 years). It might
be the case that those suffering least are those offering 'quality' content,
but they have still seen massive drops. And Daily Mail has done well despite
having lowest quality of all – but ‘well’ in this context means limiting the
drop to a mere 40%. Price increases helped to stem the revenue loss at first,
but have risen by 89% over 10 years (RPI was 36%) and consumers are much less
willing to accept further increases. Similarly, online paywalls work well for
niche content such as in the Financial Times and Economist, but people are
unwilling to pay for news. And we’ll get to the question of whether they should
later.
The entirety of the press has only a bit more reach (for news) than BBC
1, which reaches about 54% of the population. This is partly a sign of how
dominant broadcast news still is, even with online news growing in power. The
other sources (online, print and radio) are about even. However, despite some
newspapers’ constant BBC-bashing, 90% of the population gets news from the BBC
and most still trust it. In the UK, as Nick Cohen wrote, news is hardly news
until the BBC reports it.
Internet is taking
over
Digital advertising is now over half of the whole advertising sector but search sites, social sites and aggregators take most of the money
and data, leaving little for traditional newsbrands in a far more competitive
market. This is a global problem, but the UK stands out because people are
especially unlikely to pay for online news, and because digitial advertising is
a such a big share of the market.
For a relative fogey like me, it’s surprising that so few people use
desktops and only 2/3 own a laptop. Most internet access
(73% is the estimate) is from mobile devices and 1/4 of adults only access the
internet from mobile devices. That's vastly different from my life of sitting
at my desk at work or home and forgetting that I own a mobile for days. When
people talk about ‘mobile’ being the target market, they mean it’s getting on
for the only important market.
Digital
advertising is less valuable because of the high overlap in reach. Pre-internet
a newspaper was very likely to have a loyal cohort of customers whom would be
hard to reach another way. But internet users reach multiple articles from a
variety of publishers and digital advertising can follow them around, helping
advertisers to reach many people even without large newsbrands.
Some outcomes
The effect is
most severe on local press, which often are the only ways for people to
discover local issues or concerns and engage with their immediate community.
The most local paper closures have been around big cities, because young people
are a growing portion of residents in suburban areas as they are priced out of
cities proper, and are more likely to commute into the centre by car rather than
be an engaged member of the local community. Commuter society and the housing
crisis are killing communities, as we already knew.
Finally, journalism is changing.
The number of front-line journalists has shrunk from 23,000 to 17,000. That’s a
decent cut right there, but we should not ignore that the population has grown,
and that the journalists who remain will, like many people nowadays in the
creative industries, no longer have steady jobs, but will be low-paid, often
junior staff, or doing piece-work rather than having salaries. The amount of
solid, reliable journalism with expertise and time-consuming research behind it
must therefore have shrunk far beyond the 26% cut in journalists that we’ve
seen over the last 10 years. Mediatique’s report notes that the press
contributes to newsgathering and serious journalism (my phrase) more than other
media areas; about 50% of all original journalism. Cuts to press journalists
will disproportionately affect genuine journalism (as opposed to listicles or
PR recycling).
Their conclusion
The short of it
is that revenues are dropping to the small fraction of income provided
by sustainable online advertising and no funding model is anywhere near
able to sustain the £1bn or so of direct expenditure on quality journalism. The
report does not consider public policy options, but the implicit message is
that this is the only way to ensure that journalism survives. The press is dying, slowly but surely.
[What follows are my thoughts, not the report’s]
Democracy
It’s an old argument that a free
and flourishing press is essential for a healthy democracy. If people don’t
have correct information and good debate then they cannot make good decisions.
The only way that journalism is going to survive is if people either willingly
start to pay for good journalism, which seems unlikely, or the BBC and other
broadcasters take on the burden of doing investigative journalism as well as
merely reporting others’ work factually. We can’t rely on the press any more.
It is in this context that Nick
Cohen’s recent article about the BBC’s failure is so insightful. We live in a
country in which right-wing outlets such as the Daily Mail and Sun insult and
attack the BBC continually. They and right-wing politicians complain that its
factual, conservative (small-c) biases are against them, for the simple reason
that facts are indeed contrary to their delusional world-view. Similarly, the
cultish left-wingers complain that its conservative leanings (of not rocking
the boat too much) are right-wing bias,
and that the BBC is the mouthpiece of the rich and powerful. There is no
conspiracy here; the BBC is not colluding with the right-wingers. It has simply
been cowed by the vicious attacks, and has become hugely risk-averse. The fear
of doing anything that might attract the attention of yet another excessive political
backlash has led the BBC to retreat from real journalism, or from eliminating
bias. Instead it pursues policies of giving all opinions equal weight.
Without good journalism protected
in our national news outlet, we’ll end up with a few niche outlets and bloggers
unable to expose all the corruption in the country, and most of the population
unaware of the stories that they do uncover, as it will cost too much and be mostly
unknown.
The decline of the press, and the
inability for people to make money from good news any more, underlines even
more the need for a publicly-funded broadcaster that isn’t threatened by
Conservative austerity. Good journalism is a public good that benefits the
country, and the country needs to pay for it, no matter what the whingers at
the Mail, or Murdoch’s subordinates say. Once the press dies, perhaps the BBC
will no longer be scared of their clout. But I doubt that they will die before
either our democracy or the BBC suffers from the lack of journalism. There are
too many rich people willing to pay their losses for the chance to sway public
opinion.
Competition
Competition authorities are wary
of further newspaper mergers even though no group comes close to the dominance
of Facebook and Google in the digital world. We need to get a grip on the
online world. It has been an unregulated ‘wild west’, and the dominance of two
major corporations is finally producing the inevitable fruit, of electoral
manipulation by Russia and vast data-tracking scandals and fears.
The belief seems to have been that
as the services are free there is no risk of monopoly pricing. But pricing isn’t
the only bad thing about monopolies. The EU has just fined Google 5 billion
euro for keeping other organizations out of mobile by using their market power
to bundle Android with their own apps for other things. They have stifled
innovation, as the Chinese market shows: they have multiple competing
possibilities doing impressive things. Strange that the supposedly capitalist
West has a monolith, and the single-party state has innovative competition.
That’s before we consider that the
value Google and Facebook get is from the data. If we had genuine competition,
it’s likely that people would be paying us for our data. In that sense we do
have monopoly pricing: we are giving away for free what has value, simply
because we have no other choice if we are to participate in the modern world.
This is beginning to consider more
than just news, but the point is clear. We need to break up digital monopolies
if ‘new’ entrants, such as the old press brands and new competitors, are to
stand a chance of survival. That means fines that are more than just small
change, it means forcing Facebook and Google to provide genuine APIs so that developers
can interface with their customers (and vice versa). For those who don’t understand,
it means that I can be on a new social network and still be friends with people
on Facebook. That would give us competition in social media, and it has to be
law, because no company is willingly going to do it.
In this context, the new GDPR regulations are also massively important. People
have been given ownership of their data, and organizations are forbidden from
using it except as they need to provide the service they are offering.
This should be rigorously enforced, and powers expanded to allow this,
if necessary. And if we exclude advertising as a service to the consumer, it
will ensure that no-one can collect your personal data on the sly when
providing another service.
My conclusions are simple:
the markets are failing in this area of public good.
- We need wider national support for journalism.
- We need the BBC to be given an explicit mandate for investigative journalism, possibly at the cost of entertainment, which profit-making companies can definitely do themselves, with no need for state funding.
- We need the BBC to be protected from political interference, even at the cost of Conservative or Momentum agendas.
- We need the creation of a better online market, which needs the quashing of anti-competitive practices.
- Google should be forced not to bundle products, even if it claims that makes it easier.
- GDPR should be policed rigidly, if necessary through expanding the powers of the tiny commissions currently overseeing it.
- Collections of the public’s data should be taxed, heavily, or forcibly made public (but anonymised) for anyone to research. The ability to distort public opinion or form insights into it that the rest of the country does not have is an obvious threat to democracy, and that externality should be priced.
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