Free Content Undermines Democracy?

from the people-pay-you-for-this? dept

Wed, Dec 2nd 2009 7:50am — Mike Masnick

A journalism professor by the name of Tim Luckhurst is claiming that newspaper paywalls are needed to preserve democracy, and that free content online undermines democracy. We've heard this argument before, and it makes no more sense now than when it was first raised. The basic argument is that free content online isn't bringing in enough revenue to pay reporters, thus newspapers are going under and firing reporters. Thus, with fewer reporters, there are fewer people to watch the government and therefore corruption runs rampant. Or something like that.

Of course, there are so many fallacies wrapped up in this argument, it's difficult to even know where to start (though, one would have hoped that a journalism professor would have done the decent thing and checked into these things a bit more carefully before writing a silly opinion piece based on a variety of myths):

Newspapers need readers to pay to survive. Not true. Not even close to true. First, newspapers have almost never made money from subscription fees or newsstand purchases. Those fees rarely even covered the cost of the newsprint and delivery. Newspapers have always made their money on advertising and classifieds (a form of advertising).
Free content online is why newspapers are in trouble. Again, not true. In most cases, the publications that are in trouble are in that position because they took out tremendous amounts of debt. Most newspapers are actually still profitable on an operational basis, but aren't making enough to repay the debt. The problem was poor management thinking in believing that leveraging their futures to ridiculous levels made sense.
Without old school newspapers, government corruption is not well covered. This one remains to be seen, but there is growing evidence that it, too, is not true. The power of the internet has made it such that many more people can hold our governments accountable by gaining a voice and speaking out against corruption or corruptive influences. It's not fixing the problem entirely, but then again, neither did newspapers. The fact is that it's much easier now to call attention to corruption, and there are more and more forums to help with that -- such as Wikileaks, combined with the ability to self publish or more easily contact those with a larger audience.
Putting up a paywall will somehow fund more journalism. Again, remains to be seen, but there's little evidence to support this claim. There are numerous competing offerings providing news in the marketplace today. There is little indication that enough people are interested in paying directly for news to the level it would take to support news operations. Combine that with the decrease in ad revenue (the real source of revenue for most news organizations) from cutting off a large chunk of an audience, and it seems likely that these paywalls will actually serve to decrease overall revenue over the long term rather than increase it. It's not clear how that helps anyone.

On the whole, if one were to grade this professor's analysis, you'd have to give him a failing grade for basing an argument on outright falsehoods and unsupported statements.

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Filed Under: democracy, free, free content, journalism, paywalls, tim luckhurst

34 Comments

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senshikaze (profile), 2 Dec 2009 @ 8:00am

so when the revolution comes, can we remember all these people who attacked free?
I'm keeping a list.
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Ima Fish (profile), 2 Dec 2009 @ 8:21am

"Tim Luckhurst is claiming that newspaper paywalls are needed to preserve democracy"

If we look at Luckhurst's argument from a different angle, this is what we get:

Democracy is dependent on our news (news about our cities, our governments, our lives) being locked up by and filtered through corporations.

Does that many any fricken sense?! That might be true of capitalism, but it is certainly the opposite of what democracy needs to survive.
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Anonymous Coward, 2 Dec 2009 @ 8:31am

Let's start with the best one:

Not even close to true. First, newspapers have almost never made money from subscription fees or newsstand purchases. Those fees rarely even covered the cost of the newsprint and delivery. Newspapers have always made their money on advertising and classifieds (a form of advertising).

Mike, call Chris Anderson and ask him to explain why subscription counts are so important to his magazine (and why his magazine keeps getting thinner each month). Subscriptions are "assured sales", which significantly support the ad rates. What the subscriber pays isn't just the money of his or her subscription, but their vote that they would be a regular reader and thus a target for advertisers. Assured eyeballs help greatly to support the ads rates.

We'll get to the rest of your points later.
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senshikaze (profile), 2 Dec 2009 @ 8:44am

Re:
so i have to pay someone to get ads?
Argument fail.
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Ima Fish (profile), 2 Dec 2009 @ 8:49am

Re:
"Subscriptions are "assured sales", which significantly support the ad rates."

You're proving Mike's point. Your argument is essentially that while they don't make a lot of money on subscriptions, subscriptions do lead to higher ad rates. Which is where they make their real money, through ad rates. That's exactly what Mike said.
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Chris (profile), 2 Dec 2009 @ 8:50am

Re:
You misunderstand no one has said that subscriptions weren't important. They just said that subscriptions do not alone generate enough money to support a newspaper. In other words if you took away all the money adds bring in and only look at the cost of the subscription the newspaper would go out business very quickly.
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KevinJ (profile), 2 Dec 2009 @ 8:53am

Re:
You're stretching on this one. You are right that having such "assured sales" would help provide a target for advertisers, but Mike's point is not about that. It is about the money that comes directly from the subscription fees and newsstand purchases. Even if a large number of subscriptions draws in a lot of advertisers, the money drawn in directly from the subscription fees is highly unlikely to cover basic operating costs.

Think of it this way, can newspapers survive on only money from subscriptions and newsstand purchases? What about if they received absolutely no money from advertisers at all? If a newspaper can show consistently high readership even with falling subscriptions, are those not "eyeballs" for advertisers to try and monetize?
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Jon B. (profile), 2 Dec 2009 @ 8:55am

Interestingly enough, those who originally fought for democracy in this country spread their message by spreading free content - scattering paper pamphlets - around as far and as wide as possible with no pay wall. It sounds like free content encourages democracy, based on history.
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Matthew Cruse (profile), 2 Dec 2009 @ 8:55am

Re: AC
Sure, that may be true, that subsriptions and subscription counts represnt "assured sales". But there is a way to count that without having a paywall. Click through rates, e-mail subscriptions, registered commenters (Techdirt Insiders), anonymous comments per story etc. (Full Disclosure: I subscribe to techdirt daily e-mail, click through on appropriate adds (almost none since I'm not in the IT industry) and I am a registered commenter.) All of the comments that Mike made are accurate. He never said that subscription numbers weren't important, he said that the income from the subscriptions were not how newspapers made money. I almost never read a physical newspaper any more. I get almost all of my news online. And it is not because of the cost of a newspaper, it's because of convenience. When I had a subscription, I would find that the newspaper would sit unread on the counter while I read all the same stories online, therefore, why have the dang paper?
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Anonymous Coward, 2 Dec 2009 @ 9:01am

Logic fail. Locking up important information on your own government behind $$ is not democratic. If anything pay for content undermines democracy.
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Kazi, 2 Dec 2009 @ 9:08am

Re: Re: AC
So there are two points:

Subscriptions aren't used for profit (Mike)
Subscriptions are used for measuring what type of readers there are (Anonymous Coward)
There are other ways to measure what type of readers there are reading your newspaper (Matthew Cruse)

My question: Why are newspapers trying to break profit off subscriptions / micropayments when that's not where they make their money? Clearly, it was a loss-leader that indirectly affects profit. By closing yourself up behind a paywall you decrease your market penetration. By decreasing the penetration you're shafing yourself. By shafting yourself you shaft the customer by making "micropayments" not so "mico". By doing that you decrease your market penetration. I'm thinking there's a need for a new business plan.
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Derek Reed, 2 Dec 2009 @ 9:09am

Re:
And subscriptions are the most effective way to measure assured eyeballs?
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Kazi, 2 Dec 2009 @ 9:10am

Re: Re: Re: AC
edit: 3 points.
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Anonymous Coward, 2 Dec 2009 @ 9:10am

Most of these "undermining democracy" claims are irrelevant since most major news outlets spend most their time reporting on irrelevant political back-and-forth scuffles while ignoring the actual problems.
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Anonymous Coward, 2 Dec 2009 @ 9:11am

Re: Re:
Yes, but Mike suggests it is done without subscriptions. The reality is that "free" newspapers have to dramatically increase their distribution to see any increase in ad rates (because advertisers pay for readers, not for copies tossed in the trash). Subscribers are committed readers which signfiicantly increase the value of the ad space.

It's exactly why magazines sell their subscriptions are rates significantly below retail, because they make it back in increased ad rates.

Mike is suggesting that subscribers don't pay the freight, but in reality, they really do. It's just not from the money out of their pockets, but with their eyeballs. If you moved to a "free" system, their eyeballs would lose value, and thus ad rates would drop. It's amazing how that works.
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Anonymous Howard, Cowering, 2 Dec 2009 @ 9:12am

If having readers pay to see content is the only way for a news organization/publisher to survive, how long will it be before they start accepting payments to NOT print a story?
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Anonymous Coward, 2 Dec 2009 @ 9:14am

Re: Re:
In the late 1990s, the rage was magazines selling customer identifiable subscription information to third parties.

These companies in-turn market the data to say Direct Mail Companies such as mortgage, investment, credit card, car loan, and other junk mailers such as ValPak.

So yes, you get to pay someone for ads, ads, junkmail, and solicitation calls, but most people don't realize that the main offender is Magazine Subscriptions.
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AC, 2 Dec 2009 @ 9:14am

just a thought
On the point about corruption not being covered without old style newspapers, I agree with Mike. His point is also an excellent case why net neutrality needs to be maintained. If the gov't is ever able to police content (read ACTA), I think it's a short walk to attempts to censor stories about gov't corruption.

On subscriptions and revenue, I again agree with Mike that subscriptions haven't been a significant revenue stream for newspapers for many many years. It is worth noting that subscription statistics is one of the ways they used to (maybe still do) attract advertisers.
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Trails, 2 Dec 2009 @ 9:16am

Case in point
There's an article over at ars technica describing the monopoly on the telegraph.

It describes, in part, how the Associated Press helped rig an election and entrench a new monopoly that reported in a very biased fashion. Is this the "democracy" we're losing?

If so, how do we speed up?

The ars technica article can be found here:
http://arstechnica.com/tech-policy/news/2009/12/how-the-robber-barons-hijacked-the-victorian- internet.ars?utm_source=rss&utm_medium=rss&utm_campaign=rss
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Headbhang, 2 Dec 2009 @ 9:20am

Re: Re: Re:
What matters then with "free" stuff is the traffic, then, not really any subscription per se. There are ways of proving your views/traffic aside from proper subscription sales, you know?
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Mike Logghe (profile), 2 Dec 2009 @ 9:29am

Newspapers and funding investigative reporting
For newspapers now to be complaining about losing their once excellent revenue streams and, hence, not being able to afford good investigative reporting should raise all our hackles. The New York Times and Washington Post once considered the paragons of investigative journalism, both failed abysmaly during the Bush administration, especially with the Iraq war fiasco. They had long since already gone over to a profit based ethos versus a truth in democracy ethos. The logical result of this view has led, to the abysmal likes of Fox "news" and Rush Limbaugh type radio and TV. Truth be damned, there is money to be made from the idiots listening to these idiots. If the Internet can partially succeed in correcting some of this bad behavior without being solely profit driven, it should not bother any of us to see the Posts and Times and Ruperts losing money and buried by digital media.
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KevinJ (profile), 2 Dec 2009 @ 10:24am

Re: Re: Re:
I think you are missing something. One of the basic arguments for a paywall made by people like Tim Luckhurst is often phrased along the lines of "getting people to pay for news is the only way for newspapers to survive." Even if they do not say it in those exact words, their insistence on the urgency of a paywall is being interpreted that way. But you said in your post "that "free" newspapers have to dramatically increase their distribution to see any increase in ad rates." That alone would make their claim that a paywall is the only way to survive false.

"If you moved to a "free" system, their eyeballs would lose value, and thus ad rates would drop."

How would those "eyeballs" lose value? If I see their ad and buy their product/service, does the advertiser really care if I'm a devoted subscriber or a casual reader?
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Anonymous Coward, 2 Dec 2009 @ 12:23pm

Re: Re: Re: Re:
The eyeballs lose value because the eyeballs aren't as "sticky". You just have to look at the massive amounts of garbage in the subway stations near where they hand out "free" newspapers every day. Most of the people who take them barely look at them. So the count of eyeballs in theory goes up, but the quality of those eyeballs goes down. Advertisers pay for people's attention, not just to see their ad in the garbage or dropped on the subway floor.

The reality is that most papers that go to free claim huge increases in readership (by naming it "distribution" instead), but most of them have significantly lower ad rates than pay-to-read papers. Remember, someone who pays even a token amount is more likely to actually want to read the paper.
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Mike Masnick (profile), 2 Dec 2009 @ 1:05pm

Re: Re: Re: Re: Re:
The eyeballs lose value because the eyeballs aren't as "sticky".

Heh. As someone who actually knows something about this, I'll say that's pure bullshit.

Some of the most valuable traffic is the driveby traffic, because they're the ones who are (a) looking for something and (b) willing to view and click on ads.
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KevinJ (profile), 2 Dec 2009 @ 1:36pm

Re: Re: Re: Re: Re:
You do make a good point about how likely "sticky" and non-"sticky" eyeballs are when it comes to paying attention to an ad, but...

"Advertisers pay for people's attention"

You're right they do. My guess is that if I bought something from an advertiser they would not know and would not care whether I was subscribing to a particular newspaper or just picked it up for free, because from their point of view the ad still worked.

"not just to see their ad in the garbage or dropped on the subway floor."

Do you subscribe to the newspaper just for the ads? I always assumed people subscribed to newspapers because of the quality of the news stories they had.

"Remember, someone who pays even a token amount is more likely to actually want to read the paper."

Don't people have to be willing to pay even that token amount? And wouldn't that willingness come in the form of wanting to read the articles in that paper? Or would you force people to pay so that they magically wanted to read the paper?

Seems to me that it all comes back to making people want to read the newspaper instead of just making them pay for it.
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guess what, 2 Dec 2009 @ 1:42pm

WHO CARES
Its not like the media run news is worth anything and we all can get our news via word a mouth....for now

When its all locked up caped and throttled well we wont have a use for the net will we and WHO Loses jobs then , way i see it if the economy isn't doing well now HEY i got an idea lets destroy and whole industry and put hundreds of thousands world wide out of work
YES YES
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Anonymous Coward, 2 Dec 2009 @ 1:58pm

Re:
Pirates are modern-day pamphleteers, the only difference being that the pirates hand out everyone's pamphlets.
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Anonymous Coward, 2 Dec 2009 @ 2:04pm

Re: just a thought
That's why I believe ACTA, which should be about counterfeiting but apparently is all about copyright, will be used by the political class to stifle free speech.

But that's crazy outrageous, right? As governments are purely benevolent.
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Anonymous Coward, 2 Dec 2009 @ 2:08pm

Re: Newspapers and funding investigative reporting
Newspapers were failing back in the 90s. There was a rush to the bottom because it was cheaper to fire investigative journalists and stuff your paper with AP and Reuters content.
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Anonymous Coward, 2 Dec 2009 @ 2:16pm

let's move on to Mike's last point:

There is little indication that enough people are interested in paying directly for news to the level it would take to support news operations.

Again, you are looking at this with way to narrow a focus on the income from the subscribers, and not the total revenue as a result of subscribers.

A newspaper with 100,000 paid subscribers can charge more for it's ads than a free newpaper with 200,0000 distribution but an unknown readership. It's the nature of the game. The subscription part is often just paying for the distribution costs, and perhaps some of the day to day.

Further, a solid and stable subscriber base allows the paper to budget staff accordingly. A stable business is much easier to manage than one that is entirely based on a walk by whim of someone getting force handed a newspaper at a subway entrance.

There is also considerable proof (hundred plus years) the the public is more than willing to pay for a quality news product. You could drop all the local reporters, go nothing but wire service and reader letters, and that would cost you much less, but it would also not be a quality product that people would want to see. Why do you think that sites like CNN and the WSJ at top picks, and stringer sites (like myway) are not?

In the end, it's a value proposition, one that papers like the WSJ continue to operate from to this day. It is easy to be dismissive of the value of subscribers if you look only at what they are actually paying, but they impart so much more overall value to a news organization, and make it possible for it to operate.
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Lawrence D'Oliveiro, 2 Dec 2009 @ 3:23pm

So Much For The Concept Of A “Free Press”
That is all.
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KevinJ (profile), 2 Dec 2009 @ 3:29pm

"There is also considerable proof (hundred plus years) the the public is more than willing to pay for a quality news product."

On this point I agree with you. People are willing to pay for the things they value. Then wouldn't a decreasing number of subscribers mean that fewer people are seeing the quality in a particular newspaper or see equal or better quality news elsewhere? And shouldn't newspapers try and focus on making people see the quality in their news product that we both agree people are willing to pay for instead of just adding a price tag?
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Lawrence D'Oliveiro, 3 Dec 2009 @ 1:23pm

Oscar Wilde Quote
By giving us the opinions of the uneducated, journalism keeps us in touch with the ignorance of the community.
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Anonymous Coward, 15 Dec 2009 @ 8:22am

"The power of the internet"

Where did you hear that one from, Malcolm in the Middle? ;)
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