IN THE EARLY 17th century the best place to gather news in London was the old cathedral of St Paul’s, a place that buzzed with gossip on politics and was described—unusually for a house of worship—as “the ear’s brothel”. Some of the informants were entrepreneurs; they had recently started writing “letters of news” which they sold to subscribers at a hefty price. Some 400 years later, the original newspaper business model is finally making a comeback.
The reason it has taken so long to resurface is that, for almost two centuries, newspapers have been on a journey into the mass market which gave them scale, prestige and profit but which has now reached its end. They mostly abandoned dependence on subscriptions and instead sold below what they cost to produce as a way to attract legions of readers to sell to advertisers. The aphorism today applied to users of technology platforms—“If you are not paying, you are the product”—rang almost as true of newspaper readers in the heyday of print advertising.
No longer. Since the internet took off, the print media’s advertising-supported business model has floundered. In the past 20 years newspapers’ ad revenues in America have fallen by about 80% (to Depression-era levels), while circulation has roughly fallen by half. Though online traffic has surged, revenue from digital advertising has failed to offset the profit draining out of print. Platforms such as Google and Facebook have become the new moguls of the media landscape. In Britain, for instance, Google accounts for more than 90% of search-advertising revenues and Facebook for half the value of all display ads, says the Competition and Markets Authority (CMA), a regulator. In the past two years they have between them disgorged 40% of online traffic going to national papers. The CMA warned in July that ad-fuelled online platforms could hasten the decline of reliable news media.
This power shift has led newspapers in many countries to plead with politicians that they need help in the face of big tech. Partly because they have, by their very nature, a loud voice, they have generated sympathy. How much they deserve it is another matter.
The world is strewn with businesses, from books and music to travel and taxis, that have been torn apart by the digital revolution without anyone rushing to the rescue. Why are newspapers different? One argument is that a thriving press supports grass-roots journalism which, though often loss-making, supports democracy. That is reasonable. Yet it is muddled up with other motivations, such as the desire to throttle the tech giants. The result is an array of government interventions in recent months aimed at putting the squeeze on Google and Facebook. In Australia and France trustbusters are striving to force the duo to pay for news they link to on their platforms. In America a congressional subcommittee this month recommended a “safe harbour” for newspapers to negotiate collectively with online platforms.
Mindful of the hue and cry, Google is offering a handout. This month it pledged $1bn over three years to newspapers to curate news content for its site. Some publishers saw it as a precedent—and a tacit admission that Google should pay for news. Even News Corp, a media behemoth controlled by Rupert Murdoch, which has led the crusade against the tech giants, welcomed the move. Last year Facebook agreed to pay News Corp a licensing fee for displaying some articles in its news tab.
If anything, the gratitude for big tech’s largesse shows how desperate newspapers are for payment of any kind. Yet set against revenues of $162bn last year at Google’s parent, Alphabet, $1bn is a pittance. More to the point, it will not change the underlying economics of the global newspaper industry, which had about $140bn of revenues last year. That is because the ad-funded business model was living on fumes even before the internet ate the world this century. Data from Benedict Evans, who writes a technology newsletter, show that newspapers in America have been losing share of ad dollars to TV since the 1950s—long before the web. Circulation has also fallen relative to population, suggesting that profits were bolstered by economic and demographic growth, not because the industry was producing a more popular product.
Claims that the tech giants are plundering newspapers for profit sound far-fetched, too. The real failure is that papers have lost control of distribution to Google and Facebook, making it harder to monetise the traffic. This is a mistake some content industries, such as video-streaming and music, have avoided. Moreover, some of the advertising dollars made by big tech came from bringing new firms, particularly microbusinesses, into the market, rather than poaching online advertisers from newspapers.
The (slightly) better news
So ignore the moaning of old-media moguls in distress and look instead at how some newspapers have already adapted to the digital onslaught. Revenues at the New York Times, for instance, are still far short of their ad-funded halcyon days. Yet the number of subscriptions exceeded 6.5m this year, a number that should give the paper enough clout to bypass the tech giants. Tabloids find it harder to turn readers into subscribers, especially with so much clickbait around. But some digital publications with a newsworthy focus such as Axios, which produces sponsored newsletters, are thriving. Axios even plans to enter local markets, where newspapers are in particular trouble.
The question of who pays for public-interest journalism remains unanswered. But few think it ought to be Google and Facebook. That would “undermine the principles of an independent press”, says Alice Pickthall of Enders Analysis, a research company. Curbing the power of big tech is a matter for the world’s trustbusters, which must not be conflated with bailing out press barons. The survival of newspapers should depend on business, not regulation. Like the gossip merchants of St Paul’s, they need to produce a product that readers are happy to pay a fair price for.
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