How to Save the Media (and Democracy)

by Hans Rollman

2 May 2016

The system of media and journalism on which our democracy relies is under threat. French economist Julia Cage surveys the scale of the crisis and proposes a unique solution.
 
cover art

Saving the Media: Capitalism, Crowdfunding, and Democracy

Julia Cage

(Belknap)
US: Apr 2016

The media is in crisis and so, by extension, is our democratic society.

The observation is not a new one. Newspapers and traditional media outlets are shutting down right and left; those which are left are shrinking in size and scale. Web media appears to be growing, but appearances are deceiving, and the web comes with unique problems of its own. Meanwhile, quality journalism is under threat. Where media competition is not destroying quality, media concentration is threatening the integrity of the news. And where media goes, public attitudes—and democracy itself—inevitably follow.

The crisis is undeniably real, as a growing chorus of critics warns. But few have made the point as vociferously and creatively as Julia Cage, a French economics professor who not only lays out the scale of the problem but proposes an intriguing new media model as a possible solution. Her study Saving the Media: Capitalism, Crowdfunding, and Democracy offers a thought-provoking, meticulously researched and persuasively argued intervention into the heart of the contemporary media crisis.

The problems facing the media, Cage argues, are similar to the problems facing other knowledge-producing and cultural sectors of society: how to avoid the flaws of the free market while also avoiding control by the state. What the media produces is the same basic good that is produced by universities, cultural industries, museums, and so forth: knowledge and information. But what is unique about the media is the impact that it has on our society: “A small number of organizations, accounting for a relatively small proportion of the economy and employing an even smaller proportion of the work force, reach a very large portion of the public and are in a position to influence decisions crucial to the proper working of our democracies.”

Web to the Rescue? Not Really.

Cage dispenses with many of the inaccurate stereotypes about how people consume the news, and puts the importance of the media in perspective. In her native France, fewer than 60 percent of those over the age of 15 go to the movies even once a year; only a fifth attend the theater; and yet two-thirds regularly read a daily newspaper. Media matters.

The notion that print newspapers are the natural casualty of a drift to the Internet as preferred news provider of choice is incorrect: web and print audiences are about the same. What is often ignored when comparing readership numbers is that web numbers are based on unique visitors, whereas print newspapers are often read by several individuals (six readers per copy for Le Monde in France; 6.5 readers per copy for The New York Times). What’s more, print readers devote considerably more time to the news than web audiences: web readers of the New York Times average 4.6 minutes on the site per day, while print readers spend 25-35 minutes reading copy.

This is part of the reason web advertising hasn’t taken off: print readers, Cage notes, generate 20 times as much ad revenue as online readers. Consequently, newspaper ad strategies often concentrate on convincing web readers to pick up a print copy. Giving away free print copies with online subscriptions is not a desperate effort to preserve the print medium; it’s a reflection of the fact that the print medium is still far more lucrative and attractive than the web.

Facts such as these are interesting; other statistics are more troubling. Around the world, newspapers have been shedding journalists with growing intensity. Indeed, much of what appeared to be profits in the newspaper business in the second half of the 20th century did not represent revenue growth but rather cost-cutting as investors purchased papers and then cut costs by streamlining journalistic staff. The result, naturally, was a reduction in quality: fewer staff competing to cover the same stories, resulting in shrinking coverage overall.

Moreover, the shift to the web has resulted in a shift in staffing from journalists proficient in writing, investigating and reporting, to journalists with the technical skills to produce news for the web: “Print journalists have been replaced by computer specialists and Java experts who are given no opportunity to leave their screens to do shoe-leather reporting. The high cost of creating websites compatible with a range of different devices has frequently been met by cutting the resources allocated to investigative reporting.”

This last point is critical: in an era of cost-cutting it is investigative journalism that suffers. Investigative journalism requires immense resources of time and money. While investigative journalism has played a tremendous role in transforming society and upholding democracy, it produces very little return on investment from a financial perspective. For example, the Boston Globe’s investigation into sexual abuse charges against Catholic clergy took eight months, cost over $1 million, and led to tens of thousands of dollars in subsequent legal costs.

Other types of journalism have also been sacrificed to profits. In the US, there’s been a 24 percent drop in the number of foreign correspondents at newspapers between 2003 and 2010, and since 1990 foreign news coverage on nightly newscasts has declined by half. Domestic coverage has taken a hit, too: in the US “it has become harder and harder to find news about politics at the state level, where corruption is rampant, and local newspapers used to serve as a much-needed countervailing power.”

Cage identifies other ways in which cost-cutting has undermined quality in journalism. White space in print newspapers has increased, font size has increased, photographs have increasingly supplanted text, and page sizes have shrunk as well. In the past 20-30 years page counts have also begun to shrink, after decades of growth. Newspapers and media outlets accompany these changes with the claim that they are ‘doing more with less’, but what this really means, she reminds us, is “that newspapers are cutting costs at the expense of quality.

Some say that this is a natural consequence of an emerging Internet-driven society where people have abandoned traditional media outlets for “the web” where they can find whatever information they want for free. This is inaccurate, notes Cage: most online news originates, in some form or another, with a real journalist working for a real newspaper or media outlet somewhere.

Journalism and Capitalism

One of the key problems facing the media landscape, warns Cage, is that journalism in many ways is incompatible with capitalism. Traditional free market rules do not apply. As a product, “no matter how many copies a newspaper sells, the number of journalists needed to produce it remains more or less the same.”

In many countries, like the United States, policies have been implemented to encourage competition in the media and to avoid media concentration. This is driven by a sensible philosophy—a plurality and diversity of information and opinions is healthy for democracy. Yet Cage’s own research has revealed something startling: jurisdictions with greater newspaper competition appeared to experience a decrease in democratic participation. She suggests this can be explained as follows: greater newspaper competition leads to reduction in newspaper staff (due in part to cost-cutting, and because a finite number of journalists wound up being spread among a growing number of newspapers) which in turn leads to reduction in newspaper quality. “Citizens were therefore less well informed, and some chose to stay away from the polls as a consequence.”

Are state subsidies the answer? Not really, says Cage, at least not in their present form. While some countries subsidize their press more than others (subsidies have always existed in the US, but have also been much smaller than in many other developed countries), media subsidies are usually quite small compared to public subsidies to other knowledge producers, like universities. Media outlets usually pay back much of this to the state in the form of taxes.

Other newspapers have turned to paywalls as the answer. But these haven’t worked either. Moreover, they exacerbate the fundamental media crisis: news becomes biased toward the interests of a shrinking audience (in this case, higher-income subscribers) while disenfranchising the broader society from the news, which is crucial to democratic vitality. The failure of paywalls reflects the folly of treating news as a commodity; an alternative approach is necessary.

Although Cage draws heavily on French data in her work, she supplements it with comparative data from around the world. The problem is a global one: the quality, and presence, of the media and particularly of quality journalism is in serious decline. The impact this has on democracy is even more serious.

What Is To Be Done?

How do we develop a model that balances the need for investment with the need for non-profit-oriented democratic control? When it comes to media organizations, large-scale investment tends to come at the expense of both quality and democratic governance. Cost-cutting measures imposed in order to ensure profit undermines quality journalism, as ample evidence demonstrates. Corporate control leads inevitably to bias and slant in reporting (and when journalism becomes concentrated within a shrinking number of media empires, the diversity in slant and bias that is necessary to democratic society also disappears, with dominant media reflecting only the interests and perspectives of those few at the top).

Yet media models based on democratic governance—cooperatives and other worker-owned schemes—have never proven successful at raising the sort of funds needed to sustain themselves. At best, they produce small-scale niche journalism. Media outlets that are supported by foundations—of which several successful models exist—offer an enticing possibility, but they too tend to remain small-scale in comparison with the sort of large media empires that bring us the bulk of our news today. Both of these models offer valuable contributions to the media landscape, but a more holistic solution is needed to counter the broader crisis.

The solution, suggests Cage, is to build a hybrid model, what she refers to as a Nonprofit Media Organization (NMO), designed to combine the best elements of a foundation and a joint-stock company. The crux of the model is as follows. Donations to the organization are generously tax deductible (as with a foundation), but also come with voting rights (as with a corporation). However, voting power shrinks in proportion to the size of the donation (or investment). For example, there might be a threshold of ten percent of the organization’s capital: those who donate below that level receive proportionally larger voting rights than those who donate in excess of that level. Why would anyone donate higher than the threshold? Either as an altruistic gesture in the public good, or (more pragmatically) in return for hefty tax breaks.

The goal here is to balance political power between large-scale donors and small-scale investors (and encourage the growing field of crowdfunding). Indeed, small-scale investors can include online supporters through crowd-funding campaigns, community groups, and employee associations as well; small investors would also be encouraged to form organizations representing their particular shared interest. Donations (investments) would be permanent in the style of gifts to a foundation, and hence not used to exercise political control.

Cage’s basic hope is that the combination of limited voting power in the organization, coupled with extremely generous tax breaks, would encourage both large-scale donations (investment) and small-scale support (crowdfunding campaigns, cooperative-style worker associations, community support groups). Indeed, the fact that small-scale investors would share political power with large-scale investors would hopefully lead to greater success in public fundraising campaigns.

The goal, of course, is to generate the sort of significant financial capital necessary to fund the type of media that our world needs in order to stay informed and generate public dialogue, without undermining either quality or democratic governance. By treating donations (investment) as irrevocable, a large donor or group of donors couldn’t withdraw their investment at will, thus ensuring greater long-term stability for the organization; something which is necessary for quality journalism and sorely lacking in today’s media environment.

In essence, Cage’s solution is based on building a system that entices large donors (investors) to give up power (voting shares) in exchange for generous tax breaks. It offers the added incentive of encouraging small donors to band together into medium-sized organizations of donors (investors), in order both to enjoy tax breaks as well as exercise some (limited) control over the direction of the media organization.

Only time and test will tell whether the sort of financial arrangement Cage proposes would prove any more successful than other models which have been tried.

The broader point that Cage makes is a critical one regardless of what fiscal model is applied to it: media and journalism ought not to be treated as commodities in the capitalist economy, but as critical elements of the knowledge economy and as a public good, much in the same fashion as universities. While they are undeniably different in style and operation from universities, they share much in common: success is achieved through investigative research, through producing new knowledge, through informing society and through generating public discourse, and the quality and success of these undertakings is undermined when they become subject to profit-generating schemes.

Cage acknowledges her scheme may not be the perfect solution, but emphasizes that the crisis facing the media is one that needs to be addressed, and urgently; it’s time for creative and radical proposals. While a better model may take time to emerge, there’s plenty that can be done in the meantime: more media subsidies (especially in North America), and other measures designed to make it easier for the media to operate as non-profits or foundations. Existing subsidies should be simplified and expanded.

Ultimately, the cost of the media crisis is not borne solely by the media outlets that are under strain, but by our entire society, which suffers a democratic crisis in direct proportion to the media crisis. As Cage warns ominously in conclusion: “One can bemoan this fact, bury one’s head in the sand, and wait to see what happens. One can quietly wait to die, or one can squarely face the future, take risks, and loudly and clearly proclaim that the media can and must be saved.”

Saving the Media: Capitalism, Crowdfunding, and Democracy

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