Way back in the before times, at the dawn of the interwebs, I had some dealings with a small niche publisher. He had a few small newspapers he sold that focused on narrow subjects. Before the internet, there were a lot of these publications. Some were in the magazine format, while others were like a small newspaper. The model was to charge a relatively high subscription fee to a small audience. They could not sell ads, so the only way they could survive was on high subscription rates to loyal fans.
One day, this publisher starts telling me about his plans to abandon the old model and move to the internet. That way he could cut his production and postage costs, which were the biggest part of his operation. I asked him how he was going to handle the revenue side, as this was before firewalls and on-line payment processing, He said he was going to make up the difference with clicks. After some back and forth, I told him banks don’t take clicks, so he better come up with a way to make money, rather than clicks.
The guy thought I was just ignorant about the way the future would work, so he dismissed my skepticism. He was not alone. In the 1990’s, everyone was given a disk and then a CD that allowed them to get on-line and feel like there were on the cutting edge of technology. They were in the new economy, with clicks and traffic, not the old economy with money and expenses. It was a good lesson in human nature. Take people out of their natural environment and you suddenly see their raw cognitive ability.
That story comes to mind whenever there are layoffs in media and the media people start analyzing what went wrong. This story at Wired is better than most, but the fact that it needs to be written at this late date says a lot about the people in the media. By now, everyone should know that the newspaper model was never about the news. It was about the distribution system. The newspaper brought ads and marketing material to the people at a cost and efficiency no one could match. That was always their business.
The news part was the marketing expense. People would buy the paper because of gossip or the sports pages. The news was only interesting when something interesting was happening. Otherwise, the so-called hard news side was a sinkhole. When the internet robbed these operations of their distribution hegemony, the logic of their business went with it. When the internet robbed them of gossip and sports, they were left with hard news, which has a tiny market, but huge expense.
This was obvious by the middle of the Bush years. Yet people in the news business have never noticed. Today, in a world where most everyone knows most news is fake, just made up by desperate losers looking for attention, the point should be impossible to ignore, but here we are anyway. After Vice, Huffington Post and Buzzfeed cut staff in what will be a long journey into insolvency, the media was full of hand wringing about the state of journalism. It suggests the people in the media are not terribly bright.
That still leaves open the question as to why no one can find a model for news that is sustainable, without rigging the market or relying on the charity of billionaires. The on-line advertising model was always a bit of sham and that is becoming increasingly clear as Google and Facebook monopolize the space. Even there, the viewership of the ads is declining, as people employ counter measures. The result is more people are exposed to ads, but fewer people are watching them. At some point, that becomes a problem.
What may be true of the news business is that without monopoly or oligopoly power, it cannot exist beyond some scale. That is, a form of Brook’s Law comes into play. The more journalists that are added to a news enterprise, beyond some optimal number, the faster the enterprise descends into insolvency. A single journalist can create enough content for a theoretical maximum of consumers. Two journalists, however, can produce something less than the sum of those theoretical maximums.
This would explain why local papers somehow manage to bugger on, despite what is happening to city broadsheets and even tabloids. It’s not that the local paper fills a niche, which is certainly true. It’s that it never grows beyond a certain size and that size is well below the failure point. The people working in it don’t see themselves as a secular clerisy and instead take a practical view of their job. As a result, the cultural dynamic inside the organization is like you see inside any small local business.
Another point worth mentioning is that it has always been assumed a new economy would evolve to take advantage of the new efficiency brought on by technology, particularly the free flow of information on-line. What’s going on with mass media suggests maybe there is another option. Technology eliminates large chunks of economic activity, not through automation, but by making it impossible maintain barriers to entry. That is, when the price of something fully reflects all available information, the price drops to zero.