It’s no secret that the media industry has been struggling for the best part of two decades. Countless hours have been spent considering ways in which to arrest the decline. Aside from the introduction of the subscription model, which only a minority of the industry has been able to make a success of, the sole business model innovation I can think of is a pay-per-article micropayment model. This hasn’t been a success because most people don’t want to pay for a product when they have little insight into how useful it’ll be in advance. There’s no equivalent of electronic product reviews for written news, science and opinion articles – and there never can be. Even many of those that appeared to be granted a stay of execution by a switch to a subscription model are now rethinking their reliance on subs as subscription fatigue has set in among consumers. Although notable success stories continue to exist, the outlook for the industry as a whole remains dire.
Devoid of ideas and losing money on account of ever-dwindling advertising revenues, publications have folded, been bought out by large firms and gutted of staff to cut costs, or propped up by philanthropy. The industry has become ever-more concentrated, an extremely concerning development when we understand the power that comes with control of sources of information. Large parts of countries are no longer served by local news, a phenomenon known as news deserts. What’s worse, trust in these information sources, including scientific publications, is evaporating. Social and micro media are increasingly the venues where people get their information from, sources that are subject to zero quality control. Most concerning of all, across the globe there has been a rise in media censorship. During the last five years alone, 85% of the world’s population has experienced their media’s freedom’s being curtailed in one way or another. Much of the world is regressing into authoritarianism rather than escaping it as many expected it would as rising living standards enlarge and embolden the middle class in the developing world.
Government Responses
The term crisis is overused today on account of the incentives media faces. Ironically, the word can be legitimately used to describe the situation facing the industry. Governments in liberal democracies are acutely aware of the problem and have held hearings to try and understand what’s going on. With solutions not forthcoming from the private sector, they set upon trying to remedy it themselves. Unfortunately rules introduced since suggests a severe misdiagnosis of the problem. The demise of media has bizarrely been framed as a competition issue between it and big tech, specifically Alphabet and Meta, the dominant players in the advertising industry. Consequently rules have been implemented in many jurisdictions that essentially force the big tech platforms to make payments to media platforms any time a link to them is posted on the big tech platforms; rules that have collectively become known as the link tax. The link tax makes no sense for many reasons. Firstly, it is those very links, that news platforms themselves voluntarily publish, that drive traffic to the media platforms in the first place. Secondly, if through their dominance of the advertising market, Alphabet and Meta are unfairly damaging the media industry, are they not unfairly damaging any industry that relies on internet traffic-based advertising revenue? Why the specific carve out for media?
Probably the best heuristic for predicting the effectiveness of a law is the ease with which one can understand both it and the problem it solves. If it leaves you scratching your head, it’s a good tell it’s bad regulation that will make the situation worse. As many of us predicted in advance, this heuristic was accurate in the case of the link tax. Both or one of Alphabet and Meta have pulled out of many of the jurisdictions that have introduced them leaving them poorer than before. For example, Meta hasn’t allowed any links to Canadian news sources on its platform for six months now. One would assume that if Meta had been benefitting so much from unfair competition, they would’ve negotiated with the Canadian news industry as a smaller piece of the pie would still have been lucrative. However, they simply decided the sector wasn’t worth it for them to remain in. That is clear evidence that the source of the Canadian news industry’s travails isn’t big tech. It’s something else. Further evidence of this is that the Canadian news industry is now in an even worse spot than before because it has now lost one of its main sources of web traffic. What’s worse, consumers are faced with greater levels of misinformation as a proportion of total information on Facebook. The Canadian government has grossly miscalculated and made a bad situation worse.
Even in countries such as Australia, that have also introduced a link tax, but Alphabet and Meta have remained, the benefits to the country are dubious. To understand why, let’s consider the type of information that is most widely shared on social media. It’s not thoughtful opinion pieces or data-driven analysis. It’s the worst of sensationalist outrage journalism. That’s precisely what the Australian government is forcing big tech to subsidise. Further, the new rules have made the Australian media industry even more reliant on big tech than it was. Not only is it in a very weak position from which to criticise these companies, it won’t be able to stand on its own feet if the platforms like Facebook and Instagram are replaced, something I believe is a certainty with the advent of web 3 and the superior incentives it offers users. In this context, the Australian government hasn’t put its media industry on a sustainable footing or provided it with incentives to produce high quality information. It’s also further empowered two companies that many feel already have too much power.
The Internet Happened and We Can’t Unhappen It
So if big tech isn’t the problem, what is? The problem, and the reason why much of the media industry, in its current form is doomed, is the internet itself. Not only did it provide everyone with a printing press with which to compete with prospective newspaper readers’ attention, it changed how readers consume information and thus how advertising revenue is earned. It’s now clicks per individual article rather than the purchase of an entire newspaper that dictates earnings, and each news article must compete with a myriad of other online content. Statistics show the articles that garner the most clicks are those that engender a strong emotional reaction, most often a negative one. To survive news platforms must optimise for the click rather than the content, predictably to the great detriment of the quality of the content. Clickbait is king in this highly saturated attention marketplace.
As well as squeezing revenues from increasing competition, the internet also stripped away many secondary product offerings newspapers used to have a monopoly on. Gone are classified ads to the likes of Gumtree, Craigslist and Ebay. Gone are dating ads to the likes of Tinder and Bumble. Gone are property ads to Zoopla and Zillow. Gone is the reliance on newspapers for weather forecasts. Gone are bulletin boards to Facebook groups. Newspapers have essentially been reduced to their core products of news and opinion. Thus, naturally, the advertising market they can command is smaller. To make matters worse, in this more decentralised information and communications system, there are two gigantic hubs that exist in the middle of the spokes, the aforementioned giants Google and Facebook. Due to the nature and levels of usage of their platforms, they have a quantity of data on consumers that is unheard of in history. Accordingly, they can offer a form of targeted advertising no other entity can dream of. The consequence of this is that advertisers demand that most internet apps, the spokes in this system, partner with the hubs in offering ads so they can achieve the most effective use of their money. This is the coup de grâce of the ad revenue squeeze. In summation, the internet has hugely increased competition for ad spend reducing the prices that can be earned, media companies command a much smaller percentage of this attention market themselves as many of their product offerings have been disaggregated into standalone apps, and revenue from those ads they do manage to sell must often be shared with big tech firms. The end result is that advertising revenue has been decimated.
Subscriptions, The Lifesaver That Wasn’t for Most
Desperate and looking for new revenue streams to survive, newspapers began introducing subscriptions to stem the bleeding. For several big brands like the New York Times, Washington Post, The Times, The FT, etc these have been a huge success. Many have now seen earnings recover to such an extent their earnings rival the heyday of print media. Unfortunately, most of the industry hasn’t been able to replicate this success. The switch to a subscription model requires a huge amount of up-front investment. The product needs to be marketed, and generally sold at a loss for a time – one month free, 6 months at half price, etc – to attract subscribers. Once people have signed up, sophisticated algorithms must be employed so that users are retained. Succeeding is tough because revenue per subscriber pales in comparison to revenue per reader in the pre internet era. Newspapers must achieve a much larger readership to support the required headcount to maintain the quality of their product. The larger brands were able to secure the requisite investment to not only switch to the subscription model but to also branch out of their national markets and become global brands.
Given the nature of the content in smaller, local publications, this simply isn’t an option without completely changing their product. As a result, the TAM doesn’t justify investment to switch to a subscription model, leaving most smaller outlets floundering with ever-shrinking ad revenue. With each passing day they are closing or being bought out by large publishing platforms that gut them of support staff their journalists need to do a good job. Editorial resources are pooled in a single location and shared among numerous outlets. With editors detached from local or niche topics and journalists spread far too thin to do their core work properly, the content in these publications is increasingly mirroring that of the larger global players. Differentiated, original content, is often too difficult to produce. So even if an area isn’t ostensibly a news desert, in practice it often is. At this point in many countries almost all the so-called local independent outlets are owned by large companies whose number you can count on one had. There is now only the façade of a pluralist media. This is another frustrating factor element of government intervention in the sector. It is these behemoths that are gutting newsrooms and detaching them from their communities that are being subsidised in the cases big tech doesn’t decide to exit the market. The rules are increasing the levels of concentration in the industry rather than alleviating them.
The middle market players aren’t faring much better. Although unable to match the stellar turnaround achieved by the tier 1 publications, subscriptions saved them from the fate of smaller ones. However, overwhelmed with subscriptions, many consumers are turning their back on the model. Managing multiple subscriptions can be stressful and incredibly inefficient as people are often asked to pay for a bundle of products, many of which they don’t want. This is particularly the case in streaming and print media. The fatigue that has set in has resulted in a drop in revenue in a number of publications. Many are now either reverting to advertising or providing more flexibility for consumers in a hybrid model. Tech Crunch has dropped subscriptions entirely. As has Time Magazine and Quartz. Others like The Atlantic are adopting a more flexibile hybrid approach. Even a tier one publication like the Washington Post is losing subscribers and is considering more dynamically priced subscriptions. Most analysts believe the outlook is once again looking bleak as the subscription overload issue is something that is almost certainly not going to go away.
I have been watching this situation unfold now for the last decade. I share people’s dismay. It is not a good thing for humanity that media institutions are dying. It doesn’t constitute progress. The flourishing micromedia sector, as it is currently structured, will never be a replacement for the institutions that are folding. Good journalism needs large up-front funding and predictability of earnings so it can be viewed as a career. It requires teams of people to free journalists to do actual journalism. Most of all it needs systems of quality control. Micromedia has none of these things. Given the incentives it currently faces, it never will. It costs money to have an editorial board and often pays to not have one. Fact checking can be a big inconvenience to the bottom line.
A New Path Forward
All is not lost however. The success of micromedia shows us how much an open protocol can empower people. Tim Berners-Lee’s hypertext transfer protocol (http) gave these content creators a printing press. What if we built a protocol that had fact checking and editorial review native to it? What if we gave everyone review powers? Twitter’s Community Notes function although inadequate as it uses a suboptimal approach – machine learning instead of economic incentives – and is part of a proprietary rather than open platform, provides some insight into the direction we can take things. Naturally the internet is open, and people are free to challenge untruths wherever they see them already, but Brandolini’s Law applies: “The amount of energy needed to refute bullshit is an order of magnitude bigger than to produce it.” There is a clear need for misinformation to be cut off at source, rather than attempting to catch the horse after it’s bolted. If we had a protocol that enabled such controls, would consumers demand content producers submit their content to it? I strongly believe they would. What’s not to like about people putting in the hard yards of interrogation and verification so you don’t have to? This realisation along with recent developments in funding technologies that can offer the information industry a much healthier business model, has led me to foresee a world where we can allow unprofitable centralised media institutions ill-suited to the decentralised internet economy to die and not lament their death. I believe we can have free-to-read media that isn’t reliant on or polluted by ads yet have well-rewarded content producers. We can have local news without a local newspaper. We can have newspapers without a newspaper period! On the one hand everything will be micro, consisting of inputs from unaffiliated individuals, but on the other, information provision will become a crowd collaboration. The cherry on top is that if the protocol is decentralised, it’ll be robust to interference from authoritarian censors too. The great challenge is to get the incentives right. We have thought long and hard about that particular problem and I will talk about that in a following post.
