http://www.zerohedge.com/article/real-reason-newspapers-are-losing-money-and-why-bailing-out-failing-newspapers-would-create-
The Real Reason Newspapers Are Losing Money, And Why Bailing Out Failing
Newspapers Would Create Moral Hazard in the Media
Submitted by George Washington on 12/22/2009 16:56 -0500
Conventional wisdom is that the Internet is responsible for destroying the
profits of traditional print media like newspapers.
But Michael Moore and Sean Paul Kelley are blaming the demise of newspapers on
simple greed.
Michael Moore said in September:
It's not the Internet that has killed newspapers ...
Instead, he said, it's corporate greed. "These newspapers have slit their own
throats," he said. "Good riddance."
Moore said that newspapers, bought up by corporations in the last generation,
have pursued profits at the expense of news gathering. By basing their
businesses on advertising over circulation, newspaper owners have neglected
their true economic base and core constituency, he said...
And Moore cited newspapers like those in Baltimore or Detroit, his home town,
with firing reporters that cover subjects that affect the community.
Ultimately, he said, this was self-defeating. It would be like GM deciding to
discourage people from learning how to drive, he said.
"It's their own greed, their own stupidity," he said...
Similarly, Sean Paul Kelley writes:
I don't buy all the hype that the internet is even the primary culprit of the
demise of journalism. The primary culprit is the same as it is all over the
country, in every industry and in government: equity extraction.
Let me explain, in short: when executives expect unrealistic profits of 20%
and higher per annum on businesses something has got to give. It's an unnatural
and unsustainable growth rate. For the first ten or so years of a small to
medium size company's life? Sure. But when you are 3M, or GE? Unrealistic and
ultimately impossible.
So, when such rates cannot be achieved by organic growth in the business,
executives start shaving off perceived fat and before they know it they're
cutting off the muscle and then shaving off bone chips. And when they've gotten
to the bone chips they borrow other people's money to buy new companies, load
up those companies with debt and extract equity form them and then because it
looks like the parent is still growing award themselves huge bonuses. It's a
shell game.
That is what has happened to the news industry in America. The excessive
obsession with unnaturally high profits has led to a vicious circle of cutting
budgets, providing less services, which is then followed by even more drastic
cuts. The local San Antonio paper is a great example of this. Twenty years ago
there were two large dailies in my hometown. Both competed with each other for
real scoops. Both had book reviews by local writers, providing local jobs. Both
covered the local arts and sports scene. Both covered local politics in depth
and local and state news in depth. Both had vigorous investigative teams. Both
had bureaus in Mexico and both had offices and reporters on the ground in DC.
And then corner offices of Gannet and Harte-Hanks were populated with
Kinsey-esque managers and the rout was on ... So, today, San Antonio has one
daily that is as flimsy and tiny as the local alternative ... And 80% of this
happened before ... the internet. All in the name of higher industry
profits--not some overwhelming fear of the world wide inter-tubes. So, who's
profiting? Certainly not the intellectual vigor of the locals? And certainly
not the writers who are all now 'journalism entreprenuers.' The only people who
profited are the executives who obsessed over profits, to lard up their own
bonus pool ...
You can provide a public service with small profits for a long, long time,
but if you demand large ones you will destroy it. Just ask the big banks.
Moral Hazard for Newspapers
There has been talk of bailing out newspapers for months.
But the newspapers have largely driven themselves into the ground with their
never-ending drive for higher profits, which led to a reduction in news
bureaus, investigation and real reporting, and an increase in reliance on
government and corporate press releases.
The newspapers made a speculative gamble that reducing real reporting and
replacing it with puff pieces would increase its profits, just as the giant
banks made speculative gambles on subprime mortgages, derivatives, and other
junk, and largely abandoned the boring, traditional business of depository
banking.
Bailing out these newspapers would be a form of moral hazard equivalent to
bailing out the giant banks. Instead, we should let the bad gamblers lose, and
make room for companies that will actually serve a public need.
The banking industry has become more and more consolidated, which has decreased
financial stability.
Likewise, Dan Rather points out that "roughly 80 percent" of the media is
controlled by no more than six, and possibly as few as four, corporations. As I
wrote in July:
This fact has been documented for years, as shown by the following must-see
charts prepared by:
a.. Media Channel
a.. The Nation
a.. Free Press
***
This image gives a sense of the decline in diversity in media ownership over
the last couple of decades:
If traditional newspaper companies are bailed out, they will be encouraged to
continue their business-as-usual, and new, fresh media voices will face a
handicap to competition (just as the small banks are now unable to compete
fairly against the too big to fails).
We need more real reporting in this country, not less. Bailing out the
traditional media will create more consolidation, just as it has in the banking
industry.
The last thing we need is moral hazard in media.
What Do Readers Want?
As I wrote in September:
President Obama said yesterday:
I am concerned that if the direction of the news is all blogosphere, all
opinions, with no serious fact-checking, no serious attempts to put stories in
context, that what you will end up getting is people shouting at each other
across the void but not a lot of mutual understanding.
But as Dan Rather pointed out in July, the quality of journalism in the
mainstream media has eroded considerably, and news has been corporatized,
politicized, and trivialized...
No wonder trust in the news media is crumbling.
Indeed, people want change - that's why we voted for Obama - but as Newseek's
Evan Thomas admitted:
By definition, establishments believe in propping up the existing order.
Members of the ruling class have a vested interest in keeping things pretty
much the way they are. Safeguarding the status quo, protecting traditional
institutions, can be healthy and useful, stabilizing and reassuring....
"If you are of the establishment persuasion (and I am). . . ."
So traditional newspapers are also losing readers to the extent they are
writing puff pieces instead of writing the kinds of things people want to read:
hard-hitting stories about what is going on in the country and the world.
Finally, as I wrote in March, the whole Internet-versus-traditional-media
discussion misses the deeper truth:
The whole debate about blogs versus mainstream media is nonsense.
In fact, many of the world's top PhD economics professors and financial
advisors have their own blogs...
The same is true in every other field: politics, science, history,
international relations, etc.
So what is "news"? What the largest newspapers choose to cover? Or what
various leading experts are saying - and oftentimes heatedly debating one
against the other?
The popularity of some reliable internet news sources are growing by leaps and
bounds. For example, web news sources which run hard-hitting investigative news
stories on the economy - and do not simply defer to Bernanke, Geithner, Summers
and other people "of the establishment persuasion" - are gaining more and more
readers.
It is not because it is some new, flashy media. It's because people want to
know what is going on ... and some of the best reporting can now be found on
the web.
Subtle, Unintentional Propaganda?
If there are bailouts of the newspaper industry, will the government take
ownership of the media corporations, as it has in AIG and some of the giant
banks?
Will that - in turn - lead to a situation in which the government
representatives subtly and innocently censors anti-government stories? After
all, the object of criticism might be the employer or friend of the government
representatives on the newspaper board.
Indeed, the most cynical view is that this could eventually open the door to
Pravda-style government control of media.
