The Future of News

This article appeared in The New Zealand Listener  11 October 2014

“Bring out your dead!” cry the shrouded figures pushing their corpse-laden carts through the corridors of news organisations across the English-speaking world.

Giant press halls that pulsed with the rotating rhythm of mechanical behemoths stand silent and crumbling. Abandoned broadcast transmission towers slowly succumb to nature, smothered by rising threads of vegetation.

This is a typical pandemic scenario, played out with increasing regularity by academics and media observers who predict the future of the news industry in an environment that is as fluid as Kevin Costner’s Waterworld.

Of course, ‘news’ will not die. It is not a product or commodity. Put simply, news happens. Nor will journalism die. The ability to observe, gather and disseminate news is a role that will continue to satisfy a natural human curiosity.

What are in danger are the traditional structures associated with the news media organisations that grew during the 20th century to become influential players in society but which now face a growing array of digital challengers. To these competitive challenges has been added distrust – some justified, some unjust – of mainstream media.

Why should we be worried? History is littered with artefacts and organisations that were discarded by societies when they no longer served a useful purpose. We are none the worse for the disappearance of bloodletting bowls and the chain-forgers’ guild. Aren’t there more attractive high-speed digital alternatives to traditional media?

We should be worried. At risk is serious professional journalism – that section of mainstream media that reports, analyses and commentates on events and ideas that contribute to citizens’ ability to function productively in a civil society. Its members accept formal accountability for their actions. It is at risk because the mass audience institutions that house serious professional journalism are increasingly financially challenged and digital start-ups are failing to offer sustainable alternatives.

Since 2007 a dozen United States metropolitan daily newspapers have closed with a further dozen cutting publication days (New Orleans is the largest city without a daily newspaper) and weekday circulation has declined by five million copies a day. In Britain, the Press Gazette reported that 242 local newspapers closed between 2007 and 2011 and national daily circulation has declined from about 12 million in 2007 to about eight million in 2013.

Few authors express much sympathy for the employers and employees of ‘sunset’ news media. Only a handful concerns itself with the institutional implications of the sun setting on newspaper publishers or free-to-air broadcasters. Yet, as I was conducting the research for my new book Trust Ownership and the Future of News: Media moguls and white knights, I became acutely aware of two facts: the business model that had sustained news media for a century was broken; and those in power would be held to public account only by structures that amass and inform large numbers of voters and consumers.

The business model stated that news attracted audiences who attracted advertisers. In the decades either side of the millennium revenue declined and the model was amended: Highly geared acquisitions, which added their revenue to the business, were equated with growth and cost cutting could compensate for drops in sales. The result was debt mountains and newsroom anaemia.

The onset of the Global Financial Crisis in 2007 made loans increasingly difficult to service. The Canadian-based multinational (and former TV3 owner) CanWest collapsed with debts of $US3.6 billion and others went into bankruptcy protection. Newspaper advertising in the United Kingdom, North America and Australasia dropped by an average of 28 per cent in the following five years.

Newspaper company shares were stripped of much of their value by investors who reconciled themselves to the fact that past levels of profit and dividend were unlikely to return. Internally, companies reduced their news budgets and operations and the overall ranks of professional journalists were drastically reduced. An example that is mirrored elsewhere: Total newspaper industry employment in the United States has dropped by half from a 1990 high of 455,000 and is now at its lowest level since the Second World War.

Commercial broadcasters unburdened by print assets have yet to feel the full force of the digital destruction that took away large amounts of newspaper business but the barbarians, astride ultra-fast broadband steeds with names like Netflix and Spotify, are at the gate. And there have been warning signs: Television New Zealand’s revenue, which stood at $NZ492 million in 2003, was down to $NZ344 million last year.

Private enterprises, and listed companies in particular, have only one purpose – to provide a return to investors. Beyond state-funded broadcasters, the vast majority of news media companies are bound by that ethos and face one of a number of onerous futures if profits are insufficient to provide a reasonable return to those investors.

  • The business might be transformed in ways that minimise or remove the role of news dissemination. Rupert Murdoch placed the News Corporation newspapers in a spinoff company separated from the lucrative 21st Century Fox entertainment group and three of America’s largest newspaper-owning groups have followed that example. Diversification strategies include Fairfax Media launching into events management.
  • The business could be sold into private hands, perhaps to individuals who have little or no regard for its civic functions. Private equity companies have been at the forefront of acquiring sick media companies in the hope of making money by stripping costs and assets, often walking away from the wreckage.
  • The business could be wound up after its viable operations – usually specialised digital advertising – have been separated off and sold.

None of these scenarios bodes well for mainstream news media. The New York Times’ media analyst, David Carr, writing in August about the spinoff silos, invited readers to “play a bit of sad trombone for the loss of reporting horsepower that will accompany the spinoffs”. He had a similar lament for the widely employed strategy of turning readers toward digital revenue while denuding print products of much of their value.

Yet these tumble-down castles contain the core of professional journalism that feeds the news platforms – print, broadcast and digital – that collectively continue to command the large aggregated audiences that influence public opinion and demand political attention. Online-only outlets, bloggers and tweeters – even the Cameron Slaters, David Farrars, Martin Bradburys and Russell Browns of this world – achieve critical mass when their postings are picked up by mainstream media. The impact of Nicky Hager’s Dirty Politics was not due to the number of books sold but to its news media treatment. It is this critical mass to which politicians pay attention and which holds the powerful to account.

What will provide the means to draw that critical mass when newspapers go the way of the bloodletting bowl and the ‘push’ technology that characterises broadcast radio and television ultimately faces a similar fate? Where will we house the journalistic resources that can routinely hold power to account and keep citizens informed?

Legacy media organisations and digital wannabes that survive by making the news a subsidiary activity cannot be relied upon to fully serve these functions. And, although they have an undoubted future role, it would be hazardous to rely on government-funded public service media because the hand that feeds soon tires of being bitten. We need to add a new entity to the media mix, one that is sufficiently commercial to sustain itself but which has an entrenched commitment to journalistic responsibilities ahead of commitments to investors.

Is it unthinkable, in a capitalist society, for news media owners to act in the public interest and forego their entitlements to protect and sustain serious journalism? Yes, for the vast majority of shareholders, it is unthinkable.

However, the concept should not be written off. The complexions of news media organisations have changed from plump and rosy to a hollow pallor. David Carr’s New York Times analysis of the “denuding” of newspapers contained a useful analogy: “It’s a little like trashing a house by burning all the furniture to stay warm and then inviting people in to see if they want to buy the joint”. Current strategies may produce a bargain or two if the circumstances are right. And circumstance is everything.

Trust Ownership and the Future of News follows the fortunes of media organisations where trusteeship plays a part in their ownership. For example, family trusts that protect special voting rights have, through their patriarchs, protected the editorial positions of the New York Times, London’s Daily Mail and Rupert Murdoch’s stable. However, three newspapers were placed in what might be called protective custody by owners who surrendered their property rights. Each, through unique circumstances, was placed in the hands of trustees.

The Guardian, one of Britain’s foremost newspapers, has been in the hands of the Scott Trust since the 1930s, when three members of the Scott family died in rapid succession. Death duties threatened to ruin the newspaper but it was placed in the hands of trustees who are still bound by articles of association to maintain it “on the same lines and in the same spirit as heretofore”. The phrase is code for maintaining the traditions of principled liberal journalism established by C.P. Scott who edited the newspaper for 56 years. Trustees are further bound to “maintain The Guardian in perpetuity”.

The Tampa Bay Times, described as one of the finest newspapers in the United States, was bequeathed by its majority owner, Nelson Poynter, to the educational institute that now bears his name. He was determined that, on his death (in 1978), the Florida newspaper (then called the St Petersburg Times) would not fall to into chain ownership and he was uncertain that his family would preserve the liberal journalism he had championed. “I have not met my great-grandchildren,” he famously said, “and I might not like them.” He described publishing a newspaper as “a sacred trust” and enshrined his views in what became the Poynter Principles that continue to guide the way the Tampa Bay Times is operated.

Magnanimous gifts and bequests are not, however, prerequisites to this form of guardianship. The Irish Times, which has been in trust ownership since 1973, was not the object of “a remarkable act of public benefaction”, as the gifting of The Guardian was described. The Dublin daily was sold – at a profit – to a trust company by owners who wanted to cash-up, but who did not wish to see Ireland’s most prestigious title lost in a takeover bid. The trustees are bound “to publish the Irish Times as an independent newspaper primarily concerned with serious issues for the benefit of the community throughout the whole of Ireland free from any form of personal or party political, commercial, religious or other sectional controls.”

Few newspapers in the English-speaking world have the entrenched principles that guide these three publications. These binding edicts have contributed significantly to a commitment to socio-political journalism that has been diminished in commercially-driven alternatives, certainly since the financial crisis. The Irish Times editor, Kevin O’Sullivan says the newspaper has “if anything, increased its firepower in this area”. It continues to publish a daily page devoted to parliamentary debate. In 2012 the Tampa Bay Times increased its resources in long-form investigative journalism and is described by the Pew Centre as one of only a small number of metropolitan newspapers that “produce a strong daily report and find the resources for high impact special projects”. The Guardian has become synonymous with holding power (both political and commercial) to account with enquiries into issues such as parliamentary expenses, state surveillance and phone hacking. In the past three years it has established the digital Guardian US with a 35-strong newsroom and Guardian Australia, with 21 journalists.

Each of the three case studies in Trust Ownership and the Future of News showed a commitment by their boards to editorial independence and a deference to the editorial elements of the newspaper that echoed C.P. Scott’s observation that “editor and business manager should march hand in hand, the first, be it well understood, just an inch or two in advance”.

All three were hit hard by the financial crisis and general downturn in traditional media fortunes but, to protect the core elements of their journalism, editorial departments were spared the swingeing cuts made by bottom line-driven media companies. Both The Guardian and the Irish Times placed their foreign correspondents beyond the scope of any cuts. The Tampa Bay Times was hard hit by a recession that reduced the Tampa Bay area to one of the economically weakest metropolitan areas in the United States. Its chief executive, Paul Tash, told me at the height of the recession that he stopped short of deeper short-term budget cuts rather than risk long-term damage to the relationship with readers and advertisers. He added that he had no doubt that, if the Times company had been publicly listed, the cuts would have been significantly deeper.

The Guardian has long been subsidised by other parts of the Guardian Media Group. The trustees’ commitment to maintain it in perpetuity is backed by an investment fund that stands at more than £250 million ($NZ490 million), which makes it unique among ‘trustee’ newspapers. Both the Irish Times and Tampa Bay Times are expected to trade profitably. The Tampa Bay Times has, in the past, been profitable enough to pay a sizeable dividend to the Poynter Institute. The institute was forced to seek alternative funding to allow the newspaper to concentrate on self-sustainability in the recession but an upswing in the Florida is likely to be reflected in the company’s revenue. Ireland’s stuttering recovery nonetheless promises a return to profitability for the Irish Times after four years of steadily reducing losses.

Could another newspaper or broadcaster be placed in trustee ownership? The prospect of that happening to a mass audience press or broadcasting entity may be remote, but the steep decline in the value of such properties (Fairfax wrote down the value of its New Zealand mastheads by 80 per cent in 2012) means sale or gifting into a trust is not impossible.

A far more likely prospect, however, is the creation of a digital start-up dedicated to news coverage and investigative reporting. The Pew Research Centre last year identified 172 not-for-profit journalism organisations in the United States, many supported by philanthropic funding. The majority operate under trustee-like stewardship and range from sole operators to large organisations like ProPublica investigative centre in New York, which employs 37 journalists, and the Center for Investigative Reporting with 49 newsroom staff. Britain and Australia have similar organisations but on a smaller scale and a Centre for Investigative Journalism was launched in Wellington in January.

At present, however, these organisations usually rely on partnerships with mainstream media to reach a critical mass audience. They are outgunned for online audiences by companies such as Buzzfeed and Vox, which began as viral content providers before expanding into content creators. The commitment to ‘serious’ news by these companies is tempered by an equal dedication to edgy entertainment-oriented content. Buzzfeed’s acceptance last month of an additional $US50 million in venture capital funding may, for example, make it hostage to profit imperatives that push it further to the fun side. Example: the site’s coverage of protests in Fergusson, Missouri, shared space with gems like “29 Secrets Sorority Girls Won’t Tell You”.

An alternative may be the creation of trust structures around ventures that allow challenged news media to co-operate with one another. For example, Victoria University researcher, Alex Clark, has conducted research that indicates an increasing willingness by people in the crucial 18-30 age group to pay for services that offer a range of news sources and entertainment. He has developed a prototype that would allow various New Zealand and foreign media to co-exist on a common subscriber platform from which they would share royalties. He envisages the platform being run by trustees bound to protect freedom of information and to prevent the growing levels of manipulation practiced by search and aggregation services.

Circumstances – the condition that put The Guardian and its counterparts into trusteeship – may force mainstream media together in order that their journalism survives. Co-operation is a difficult concept for groups brainwashed by competition but it is nothing new in news media. The New Zealand Press Association operated as a cooperative news agency until members’ self-interest tore it apart in 2011. A freestanding trust may have seen it survive.

Trust Ownership and the Future of News ends with the following prediction: “…in time, this [serious] journalism will recover when citizens realise the democratic deficit that results from its loss. New structures will evolve where the old forms of ownership and governance are found to be inadequate or inappropriate. Trusteeship will be seen as a natural expression of the public interest, in a segment of the news media that will regard income as the key to editorial sustainability rather than shareholder satisfaction. It will be regarded not as quixotic but as a white knight.”

  • Trust Ownership and the Future of News: Media moguls and white knights is published by Palgrave Macmillan and is available from online bookstores.

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