Coyote Blog

A great morality play is running in southern California that gives a pretty clear view into where government funding of newspapers will lead.  Unfortunately, the article I have (via Glen Reynolds) is not written very clearly.  Here are the key facts:

1. New ownership buys San Diego Union-Tribune, apparently the city’s largest newspaper
2. The new ownership group is funded in part by investments from public pension funds
3. Public officials argue that since the paper is owned in part with some of their money, the newspaper should no longer be allowed to criticize public officials

Here is their demand:

As [police union] League President Paul M. Weber views it, that makes the League part owner in the flagging Tribune and League officials are none to happy with the paper’s consistent position that San Diego lawmakers should cut back on salaries and benefits for public employees in order to help close gaping budget deficits.

“Since the very public employees they continually criticize are now their owners, we strongly believe that those who currently run the editorial pages should be replaced,” Weber wrote in a March 26 letter to Platinum CEO Tom Gores.

Seems pretty plain to me.  And I see no reason why government officials, who always long to avoid criticism, wouldn’t use investments of public funds to exercise the same leverage.  By the way, I loved this line:

“It’s just these people on the opinion side. There is not even an attempt to be even-handed. They’re one step away from saying, ‘these public employees are parasites,’ ” Weber said.

OK, if they won’t say it, I will: “Those public employees are parasites.”

I am sure I could rattle off a myriad of problems at newspapers – changing lifestyles, the explosion of free content over the Internet, competition from cable TV, etc.  Built into these trends are some structural problems that newspapers probably cannot overcome.  At some point, there comes a time of survival when you have to stop fighting trends and start figuring out how to make money in the new regime.

Here is one thing I can say with certainty:  Every single newspaper in this country, with the possible exceptions of the WSJ and USAToday, but including the NY Times, are under-scale.

How do I know?  Just listen to the situation.  If they cut costs, they fear the quality of the product will fall and they will lose readership.  But the readership is already not covering costs and is in fact already falling.  This is a classic death-spiral of an under-scale entity.  It almost does not matter what caused the company to suddenly be under-scale when it previously was fairing OK — technology change, new competition, shifts in customer expectations in habits, or all of the above.

There is no tweaking one can do in an underscale business.  One either needs to get much bigger, or find a defensible niche.  The latter is hard in the newspaper business, since these publications have essentially focused on just one metropolitan area or city, its hard to find a tighter niche that both has a customer following and would allow massive cost cutting.   Community newspapers are one example.  The only forward-looking idea I can come up with is a metropolitan sports-only daily.  Could such a thing sell in New York?  Possibly — one can argue that is what the Dallas Morning News is, a sports daily with some news sections attached.

This scale problem should not be a particularly surprising finding.  The local newspaper business has always known it had a scale problem.   With thousands of newspapers across the country all reporting many of the same stories, there has always been a huge issue of duplication of effort.  Newspapers took a swipe at this problem with the formation of the Associated Press, which effectively acts as a shared reporting resource.

But it has been decades since this model has even been tweaked.  In that time, sophisticated new readers expect more than just bland 5-paragraph AP stories, and newspapers who rely on such content find most of their stories online for free, if not in their own paper, then in others.  And most large papers have been progressively tempted, for a variety of reasons, to have their own writers on national stories.  Ever seen the press pool for a Superbowl game?  The staff and talent they have built that could serve a whole country is only serving one city.

Many other local distribution models are dying or dead.  Local TV network affiliates were created when local re-broadcast was the only technologically feasible approach to getting TV signals to homes.  They survive today only through constant lobbying which has produced must-carry rules on cable and TV operators, or most of us would be just fine getting the network feed without local content (after all, how many folks watch CNN and FOX and MSNBC?).  Local auto distributorships and beverage wholesalers similarly fight rear-guard actions in the legislature against new national channels.

I think the time has come for publications like the NY Times to give up its city-centric model and go to full-bore national distribution.  My Arizona Republic has 4-5 standard sections plus an additional section (e.g. “Scottsdale”) customized to my neighborhood.  I don’t see why such a model would not work nationally  (the WSJ does something a bit similar but it is only customized regionally).  I would love a Washington Post delivered here that had an Arizona/Phoenix section and possibly a local sports section.

I can hear the cries now – but what about competition?  We will see thousands of newspapers collapse to 7 or 8 national brands.  But this is a false view of competition here.  Right now I have one newspaper choice.  Even having two or three national offerings with an Arizona section would increase my choice substantially.

I don’t have time right now to editorialize in depth, but I found many of the links in this Reason piece on newspaper bailout proposals to be really creepy.  Nothing could be worse for the First Amendment than making news organizations dependent on government largess.   This bit from the Nation is not only totally misguided, but it demonstrates an utter lack of understanding of history, to the point of demonstrating contempt for hist0rical accuracy:

Only government can implement policies and subsidies to provide an institutional framework for quality journalism. [...]

Fortunately, the rude calculus that says government intervention equals government control is inaccurate and does not reflect our past or present, or what enlightened policies and subsidies could entail.

Our founders never thought that freedom of the press would belong only to those who could afford a press. They would have been horrified at the notion that journalism should be regarded as the private preserve of the Rupert Murdochs and John Malones. The founders would not have entertained, let alone accepted, the current equation that seems to say that if rich people determine there is no good money to be made in the news, then society cannot have news.

I find the arguments that such intervention is needed because publishing is too expensive and effectively excludes all but the largest players to be hilarious in the Internet age.  The real problem of newspapers is in fact that it has become so cheap to publish, and competition is rampant.  The problem papers are struggling with is not monopoly, but just the opposite — that their historic monopoly is gone.   (Take yours truly, for example.  With a $10 a month hosting fee and some of my free time, I have a circulation of almost 5,000 per day).

This appears to me to be yet another veiled attempt by current incumbents to use the government to give them a boost against competition.  Murdoch’s empire is utterly assailable — all you have to do is a better job.   The only thing that makes a business position unassailable is government protection or political advantage aimed at selected players.

Which reminds me of an interesting story.  Ben Franklin  (you know, one of those founders that the Nation refers to as horrified by domination of journalism by moneyed interests) is pretty famous for being among the country’s first postmasters.  Before the Revolution, he was postmaster of Philadelphia and later one of the lead postmasters for all the colonies.  We all read in school how he did all kinds of innovative things, because Franklin was a freaking smart guy**.

What you may not know is why he sought out the postmaster job.  Ben Franklin was a printer, and a large source of income for him was running a periodical in Philadelphia  (the names changed over time but among them were the Philadelphia Gazette).  At the time, there were no wire services  (and no wires!)  News came via mail.  Franklin actively sought the postmaster job as a way to get special, privileged access to the mail, which he monitized via his publications.   He had fresher news, and he used the mails to deliver his own publication to customers for free  (a right competitors were not granted)  In a strategy that he did not invent (it was fairly common at the time, and in fact he took the Philadelphia job from his main journalistic competitor who had pursued the same strategy) the surest route to success in the newspaper business was to secure an advantaged position via the government, specifically in a postmaster role.

I am perfectly happy not to go back to this model.

** Postscript:  Franklin seldom gets credit in popular literature for the real areas he contributed to science.  Everyone knows the kite in the thunderstorm story, but I always thought this kind of made him look like a goof, rather than a real scientist.  But Franklin did some real theoretical science, for example by describing what was really going on in a Leyden jar, and substantially advancing how scientists thought about electrical charge and capacitance.