Monday, 27 April 2020

Media funding

The third column in our Insights newsletter is usually a little tongue-in-cheek.

I'm not entirely kidding about this proposal for supporting the media though. But first, a bit of back-story. 

The basic problem, as I see it, is that there is very little real demand for actual news. That by itself wouldn't be a problem, but there are reasonable social benefits from a better informed public. For one thing, a better informed public will do a better job in voting. And when an investigative journalist finds things like, say, a town councillor used a tip-off about a zoning decision to make some land investments - well, that stuff getting found out and published encourages better behaviour.

For a long period, we were in the happy spot where people were very happy to pay for classified advertising, and newspapers and news magazines could provide a profitable bundle. Subscribers would receive a paper for less than the overall production cost; those willing to pay for access to readers covered the rest of the cost. The papers were the most effective way of getting ads in front of people. 

That's all unwound where there are far more effective ways of running classified ads and of getting other advertising in front of people. Newsmedia have spent much of their lobbying effort on taxing the new and better alternatives for ad delivery - mostly focused on Google and Facebook rather than on Ebay and TradeMe. 

But the case for taxing them to cover the costs of media is, bluntly, ludicrous. The snippets that Google will serve up as teaser do not violate copyright and drive traffic to the news outlets' sites, where people could see ads hosted by the newspaper. If that weren't the case, every news outlet has a simple solution: block the search robots from accessing their sites. It is easy to not have your content linked by Google. 

Newspapers just aren't the best way for advertisers to find people any more. The bundling of advertising with news worked for decades and made sense in that period, but that world is gone.  

I worry that bailouts or, worse, taxes on tech companies to directly fund media will prevent entrepreneurial discovery of better models for funding the news. 

If the underlying problem is private demand for news on current events being less than the socially optimal amount, then interventions should be aimed at boosting that demand rather than directly subsidising existing providers. There is no policy interest in that any particular provider continue to exist; there is a policy interest in that there is a well-informed public. 

The Stigler Centre's recent report on digital media suggested a form of voucher funding. Everyone would get a small amount of money as a voucher that they could use toward news subscriptions; unused vouchers would see their funds distributed across outlets proportionately to how used vouchers were allocated. 

That still has a problem in deciding which kinds of outlets are eligible for vouchers (the report suggests a fairly broad range should be eligible). 

It seems less bad than some other options for government funding of media. It at least doesn't have political appointees deciding which news outlets are worthy of support; it isn't hard to imagine how a Trump appointee would handle that. 

Anyway, all that said, I proposed something a little different, somewhat tongue-in-cheek, in our Insights newsletter. 

Some commercial radio stations encouraged people to listen by running regular lotteries. They’d dial up a random phone number and if the person answering could name the last song played by the station, the lucky listener would get a hundred dollars.

Perhaps the government could set up a $36.5 million budget line for prizes. Every day, one lucky Kiwi gets the call. If they answer that day’s question about the key events of the week – with the different news editors supplying the questions – they win that day’s $100,000 prize.

It’s a lot cheaper than other kinds of bailouts. And it could encourage people to start paying attention.
It wouldn't be all that expensive in the grand scheme of things. If you wanted to splurge, you could just keep calling until somebody won that day's prize. Then the budget line would be the full $36.5m rather than 'up to $36.5m in prizes'. Folks would have stronger incentive to become informed, and would figure out what news option was best for them in doing that. 

Sure, it isn't perfect. But it seems less obviously bad than trying to force Google to fund the newspapers. 

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