! Economics of Textual News Outlets


->''"There's no news like bad news."''
-->-- '''Elliot Carver''', ''Film/TomorrowNeverDies''



Although heralds, journals and chronicles, in various shape and form, were used right since writing was discovered, the modern era of textual news outlets began in the 19th century, primarily across Western Europe. Increasing availability of the elementary education (including reading) to general folk, combined with the Industrial Revolution and progress that had lowered the price of paper and mass printing, created supply and demand, and thus ― a market.


This is not to say that newspapers did not exist before, but until the early 1800s they were mostly confined to specific purposes and specific readers. However, from that point onward the concept became commercially viable for newspapers aiming at the general population ― both its interests and its purchasing power.


Therefore, newspaper began as a standard market product, just like any other product purchased off the shelf, and had to abide by the same market rules. The buyer came to the shop, took his papers, paid some amount in return, and thus the entire chain of their production and delivery was expected to be covered by that income.


As soon as newspapers reached wide audience, a natural idea occurred to the businessmen running the publishing companies: let some other businesses place their advertisements in the newspaper, but have them pay more for it than what the actual price of the increased volume (the paper, ink, weight, etc.) was. The extra money would be distributed among the publishers and the audience, albeit indirectly. In other words, all three sides would get something: the businesses would have an opportunity to advertise themselves to a wide audience, publishing companies would get some more income, and if it helps reduce the newspaper price (thus gathering more readers), even better.


Purely theoretically, this meant that, should a publisher manage to gather enough advertisers to finance its entire operation, their newspapers could be distributed for free. However, the harsh market reality disproved this idea for a large majority of publishers. Any such magazine financed only by the advertisers would have an unviably large share of advertisements: either it would be huge (thus reducing each advertisement's individual value), or contain embarrassingly little or poor actual content.


As a consequence, most newspapers and magazines typically had to find an equilibrium that works best for them, balancing the share of advertisements, production costs and quality, overall size, price, and several other secondary factors. Those that failed to find it went extinct, as is the rule in any other business competing in the market. Although the economics and influence of these individual factors changed throughout wars, tough economic crises and subsequent recoveries, technological progress, new readers bringing new culture, and market fluctuations, the overall recipe remained essentially unchanged for nearly two centuries.


!! Internet's Claws


The newcomer that started changing the rules of the game was, quite obviously, the Internet. Not from the start, as its presentation capabilities were rather limited and cumbersome, but by the second half of the Nineties the new possibilities and approaches were quickly becoming obvious. Most importantly, the "printing" costs were negligible, avoiding all the disadvantages of real, physical newspaper. Having a million individual readers incurs only minimal cost, compared to the horrors of printing a million physical newspapers, distributing them, and dealing with the unsold copies. Besides, one could reach the neighboring house as easily as the antipode.


With upfront and impression costs lower by orders of magnitude than for traditional printed publications, the previously unrealistic idea of a textual news outlet financed only by the advertisers quickly made its way into the realm of feasibility. This was partially driven by the already early Internet users' habit (and thus the unwritten overall expectation) to get everything for free.


Such news portals' business model became solely concentrated on gathering advertisers, hopefully following principles similar to those stated earlier: more advertisers will bring more income, which allows for better content creation, therefore attracting more readers, and in turn bringing even more advertisers. In theory, a cycle that lets everybody win.


But such a scheme could not work in real life, for the negligible upfront costs of an Internet news portal allowed them to spawn to enormous numbers already by the Noughties. Although the novelty and modernness of the medium at the time made many companies interested in advertising on it, their cumulative budgets and interest, although considerable, were not infinite and could not finance every single aspiring new website. As per usual market rules, this necessarily sank the advertising prices ― although they were never too high to begin with.


Facing the income becoming ever harder to get and profitability to stabilize, the news portals (which had, by the aforementioned Noughties, largely separated from the traditional newspaper industry) turned by necessity to the only two strategies keeping them afloat: decreasing their production cost, or increasing their audience which would allow them to show more advertisements.


While either alone is troublesome enough, unfortunately many had to opt for both. Having been forced into a corner where hiring basic editorial personnel was difficult, let alone financing a proper research with questionable results, many portals turned towards copying each others' content, focusing on increasingly inane topics requiring little professional journalistic skill to write, comment or analyze. This went hand in hand with various audience-growing tactics previously frowned upon by the serious printed media, such as sensationalism, topical demagogy, misinterpreting news in an overly negative way, as well as some newer ones like clickbait and quietly encouraging controversial discussion in the comments section.


!! Make More, Cheaper, Earlier


The market enforced its unrelenting equilibrium once again, and it became clear by the early 2010's that a profitable and free-to-read independent Internet news portal usually had to rely on the content delivering most income per invested effort (proverbial "most bang for buck"). Which, in turn, bred the inflation of sites with articles designed to draw attention, yet requiring very little time and skill to create. Titles like "New Zealand's 10 favorite shoestring manufacturers, number 9 will AMAZE you!" or "Having approached his girlfriend, this guy had a bad surprise!" are an indirect result of such economics at work.


Of course, the situation was not helped by the average readers' dwindling overall spectrum of interest, as well as their attention span and the willingness to dive into complex topics. One could phrase the effect the other way around: the portals just delivered what they saw demand for.


Note that these economics have mainly been applying to the independent news portals, whereas these reinforced by the traditional physical paper publishing could afford to use their websites mainly as lightweight versions of their printed editions, using them as a self-advertising tool.


Yet the separation is not strictly so black-and-white; there are somewhat successful cases in between. Independent websites which were not content with publishing endless gossip, clickbait and baby pandas, attempted to present themselves as a more serious media by introducing lots of columns on serious subjects. Largely unable to meet financial demands of the established columnists, they often put new, hitherto mostly unknown people forward (which is in itself not a bad thing), and let them comment on the politics, international affairs, business, and other serious matter, hoping they could distinguish themselves among the sea of kittens. And then, use the fact to attract more serious advertisers, as well as increase their advertising space price.


When organized well, the economics of media allow such a model to grow and survive, but one should not oversee the key corollary: it is still a "cheap site in disguise". Although columns are more expensive to produce than mass copy-pasted clickbait, even if written by newcomers to the field, they are ''orders of magnitude'' cheaper than the full-fledged research journalism, especially if it includes international travel. In other words, these are still news portals that can provide valid opinion on news and various matters, but are hardly able to come up with original news on their own.


Ascending to that level, of being able to regularly produce originally researched news, requires money and resources quite simply far out of reach of free-to-read news portals financed purely by advertising. (Why it is within reach of television news channels, is another matter entirely.)


!! Back to the Roots (or Not?)


A share of established portals tried, and is still trying, to bridge that considerable gap by introducing various forms of paid subscriptions which would, in sufficient numbers, let them finance proper journalistic research and end their overdependence on advertising. And thus, make a step back closer to the classic pay-to-read physical newspaper economics described above.


Although the price they charge is typically moderate, they nevertheless keep facing many uphill struggles, most important among which is the audience's resistance to paying for something they used to get for free (even though at inferior quality), or having the feeling of being able to access same information for free via other means (on Internet or not).


Whether such approach will gather sufficient loyal audience to establish itself as viable remains to be seen in the long run. But one should keep in mind that the basic rules of economics apply nevertheless: the best way to assure a product's (or a product class's) survival on the market is to create demand for it.


Having recognized the problem that the population must be informed well to make correct decisions, yet willingness to pay for it is low, many countries' governments have established state-funded media, not dependent on advertisers or the size of their audience. This includes textual news sources, as well as the more commonly known TV channels, radio stations, etc.


While they could, and still can, afford quality journalism and deliver it to their audience for free regularly, such media has, especially in the Internet battlefield, gathered only limited success. Many explanations have been put forward, including distrust in the state, corruption suspicion, etc., but the most practical and shrewd one simply says that, given a thorough and properly comprehensive interpretation of a subject, and an oversimplified summarized version requiring less mental strain, typical audience opts for the latter. Partly because of the vastness of choices and news available nowadays, the time and effort audience is ready to devote to individual topics dwindled.


This is where the matter returns to the realm of economics: the very tendency to oversimplify problems, done indirectly through trying to attract audience while reducing news production expenses, has rendered many media proponents of populism and its kin ― sometimes awarely, sometimes as a side effect. Many populist movements of the 2010s and onward around the world have thus supported such media financially and by other means, effectively encouraging them to continue their oversimplifying practices. Which was often already done on top of the aforementioned notorious strategies involving sensationalism, misleading headlines, etc.


!! The Breakaway Paradox


Not everyone would be happy with the three-millionth Generic Irrelevant Enumerated Lists Article, or an attempt to explain the health care reform in 140 characters. The presence of such audience still interested in comprehensive content (sometimes sparked anew by the pure resistence against populism) spawned a moderate number of blog-style websites with deep, complex content, however published at lower frequency, or devoted to fact-checking others.


Strictly speaking, most of these do not abide by the market rules, because they have not been set up to make money in the first place. Its writers are typically writing driven by their beliefs and enthusiasm, rather than financial benefits ― in fact, not uncommonly, they write for free. Such cases can, however, become "pseudo-commercial" by receiving external funding from non-governmental organizations, various activists, sympathizing institutions, even usual companies that see it as a way to advertise themselves as progressive, welfare-oriented, aware of social issues, etc. Yet such funding is often insufficient to maintain a full editorial team, were it not for the large volunteering share. Furthermore, many organizations running such sites are non-profit in the first place.


!! Borrow it. Lend it. Repeat.


The future of Internet news media may be headed for some more drama. Although there will still be many, many opportunities for it to change its mind, the European Union has agreed in principle on the direction future copyright laws should take. One of its main goals should be to discourage or outright prevent copying content across websites. (The first of its many steps has already been done, by claiming the website owners themselves are responsible for the illegal content hosted on their sites.)


While the overall initiative is not bad as such, since it will reward the original researchers and creators while punishing blatant copying, it will drastically alter their economics if introduced to its fullest extent. Essentially, if news sites will have to purchase content or invest into their own infrastructure and personnel to produce content legally, it will raise both their upfront and running costs, probably pushing untold numbers of copy-pasting sites, hardly making their ends meet via advertising, into bankruptcy.


From a purely consumerist view, it would be a good thing, effectively increasing the relative share of original content, as well as letting advertisers pick among a dozen strong sites, rather than a hundred mediocre ones.


Yet the question whether the only way to make Internet media manageable and reliable is to try forcing them to adopt principles from the classic newspaper publishing, remains open.