TAGHVA: Failing media giants should not be subsidized with more taxpayer debt

Facebook didn't kill news; Google didn't kill news, Craigslist didn't kill news. Sadly the news business killed itself. How? By failing to understand what the role of media is, then refusing to adapt to technological change, and perhaps most importantly by price gouging their customers at every possible opportunity. Looking back in the powerhouse days of the ’90s when each newspaper executive lined their pockets with bonus cheque after bonus cheque, the world was quite the different place. While the internet was rapidly making advances, it remained in a relatively infantile stage assuring that for most goods and services, the non-web based world could still provide a far better business result. In those days, the newspaper functioned as the community, provincial, and international hub for news, entertainment, goods and services, and even love. If you wanted to go to the movies and needed the show times or reviews? The newspaper had that. Interested in getting rid of your car? The same newspaper could solve that problem too. Need a job, a cat, or want to learn about Bill Clinton cheating on his wife on the go? Once again, newspaper to the rescue.

Changes in ad revenue

This intense amount of multi-faceted interest created important “low-work” areas of revenue, such as classifieds, which provided an extremely significant portion of the newspaper's revenue. Over time each and every strand of those “low-work,” high return sections of the business have been swallowed whole by services such as Craigslist, eBay, IMBD, and many others. For example, In 2000, classified ads(Craiglist fodder) accounted for about 40 percent of newspaper industry ad revenue. In 2012, classifieds made up about 18 percent of the ad revenue in an industry that was barely half the size it had been a decade earlier. On top of this, Facebook and Google dominate the modern day digital marketing industry making up a combined 58.6% market share. This number declined for the first time in 2018 amid intense competition from Amazon and Snapchat. Additionally, Google’s audience network is now so large that 90% of the online net is directly reached by it. Meaning almost all publishers likely actively take part in the Google and Facebook network, using their technology and walled gardens, and in turn, have to pay a certain portion of their revenues back to the duopoly. This state of complete dependence and disappearing revenue for the once-mighty newspaper industry did not happen in a vacuum though.

Newspapers use monopoly power to facilitate monopoly prices

The newspaper pre-internet facilitated so much transfer of information and required so much up-front investment and resources to set up, that companies could charge margins that by modern standards seem utterly insane. This is perhaps the crux of the problem that continues to follow newspapers everywhere they go today. The margins in print have and continue to be very healthy compared to digital. This creates a dependence on fundamentally bad advertising (as I will explain further below), while also forcing papers to invest in areas consumers no longer expect them to be in. Firstly, this is due to the attempt to charge monopoly-like prices as according to the Journal of Marketing. Competition within the news industry has been one of non-perfect competition where prices and space were up to the owner and the clients were plentiful, up until recently. Second and perhaps most importantly it is because print has such a poor standard for data reporting that companies can demand payment in near fraud like conditions.

Digital news is more transparent

This isn't to say digital is perfect, it certainly has its own problems, but with modern day technology, it certainly is more transparent. For example, you know online inventory is largely based off of clicks and/or views. This allows ad buyers to actually bid on people, instead of space in print products which may never even be looked at. This want to retain higher margins without investing in real inventory is why many legacy papers continue to invest in propping up decaying sections of their business while forgoing key future needs such as developing their own technologies to advance their work, or the advancement of digital products that consumers need. This, at the same time, that their advertisers are rapidly waking up to the extremely limited nature of print-based advertising. Could you imagine being the leader of a newspaper in the ’90s but not printing or having access to a proper printing operation? Or having absolutely no distribution set up? How about having zero sales employees actively developing close connections with clients? Or paying their executives insane bonuses while the company lacks all the basic necessities for growth? Well by today’s modern standard, news companies are doing just that. Floundering in a sea of mistakes, while drowning in a pile of growing debt, all the while pirating the coffers of their own businesses. This isn’t the truth for all companies though.

New companies are stepping up to the plate

Plenty of new companies have emerged in Canada and the United States which are actively investing in creating amazing content that their audience wants to see, while nurturing a personal distribution system, and perhaps most importantly being able to monetize it in a sustainable way that makes sense. Again, this isn’t to say all modern companies are doing well either, most have sanctioned themselves off into the same sea of repeated mistakes of their legacy predecessors. Companies like UpWorthy, for example, relied on free distribution from Facebook to save their business, something the mainstream relied on as well, again ignoring the fact that in the end just as in print, no distribution can be free. As a result, they too failed, and are suffering the same problems as the legacy print businesses. The fundamental point I am trying to get at here is that there are winners and losers in this rapidly evolving market that is largely dictated by the consumer and market forces.

Government involvement is bad news for private sector

If the government does get involved past the point it already, we could see intense market imbalances further slowing down change rather than allowing for more actual digital news businesses to develop. Something that is perhaps far more relevant today as the Trudeau government prepares to inject nearly $600 million into certain news organizations. Already the colossal and expanding annual grant provided to the CBC is crippling Canada’s capacity to develop private high-value journalism, as the CBC continues to suck up advertising dollars for content most Canadians choose to ignore.

All this while ignoring what many consider the core mandate of our public broadcaster, for example, the CBC chose to run Murdoch Mysteries instead of municipal election content in Ontario. Now I get it, the CBC does good work. It sometimes seems like they do all the work online, but then again that could be because of their rampant history of reporting other peoples exclusives as their own work. This lacklustre success and oversight from our already heavily funded state broadcaster are perhaps one of the biggest reasons why I believe if we were to fund the entire legacy business we would not solve the inherent failure of legacy papers. No, instead we would create a system which incentivizes expensive news that is worthwhile at best, and a state propaganda funding machine at worst. It is time to stop holding the hands of dying dinosaurs and finally allow change to take place. What do you think? Should the government actively support journalists? What is the role of media in society? Join the conversation by commenting below! READ MORE: Trudeau repeats tragic liberal mistake by bailing out mainstream media