Sunday, 11 December 2016

Funding Hard News

The previous post defined hard news (someone wants to kill it off) and argued that it is a public good so we should consider public funding to top-up what the providers might get from other sources.

Before we get into the details of how this might be achieved, let's start with a bit more background. Firstly, "we, the NZ public" do already provide public funds for some kinds of broadcast (not print) media, through NZOnAir which does a great job of promoting local content in that middle space between hard news and PR fluff. To get an idea of the numbers involved, the following chart shows public funding of NZOnAir over the last 15 years (in $NZm): steady on almost $130m since 2009.

This is not a solution to the problem of funding hard news: it helps to build local culture and support local artists, but there is nothing in NZOnAir's strategic framework that even hints at funding hard news. Moreover, international researchers looking at how to fund democracy-supporting journalism tend to cite New Zealand as a serious laggard. For example, this 2011 report from Free Press (pdf) opens it's NZ section with the following statement
New Zealand’s recent history in some ways offers a cautionary tale of how not to structure and fund public media. 
Media researchers NiemanLab also called out New Zealand in their reporting of the Free Press work, sounding a tad incredulous:
In New Zealand, in 1989, the public broadcaster TVNZ lost all its funding and was actually required to produce dividends to pay back to the national treasury.
So we're international laggards on hard news at a time when all journalism worldwide (but particularly hard journalism) is really struggling to be funded. That's the problem, and its a public policy problem.

There are all manner of ways that journalism can seek funding, but if we want to bake in a reliable counterweight to the PR spin of governments and firms, for example because we think it's essential for democracy to function properly, then this activity needs public funding.


There are three parts to the how question: we need to consider the source and destination of the funds, and how much cash to allocate. My initial thoughts on these topics follow - feel free to add/criticise in the comments section!

The default option for sourcing funds is general taxation, but that might not be the best option. We may be able to do better by raising new taxes on particular activities. For example, it is often argued that we should seek ways of un-doing the international tax manipulations of  Google & Facebook. This would help to restore credibility to our tax system, and is worth doing anyway, but then we'd be back to looking for some way of funding hard journalism from (a slightly larger pot of) general taxation revenue.

Given that we have come to this point by massive productivity gains in advertising, an obvious alternative is to raise a specific excise tax on the $2bn spent annually on advertising in Aoteoroa.
Advertisers would hate this of course, and standard economic analysis would predict that there would be less advertising as a result. However there are also sound economic reasons to believe that some industries have far too much advertising, and we could allow tax exemptions for adverts that were obviously in the public interest (e.g. promotion of voting in elections and public health messages).

There could also be a case for other ways to provide fiscal support. For example, in France, everyone with an official press card gets a discount off their tax bill.

I have no strong views on these options but others will have.

In allocating funds to hard news providers there are two objectives. One is to design a system that promotes good coverage across all of the fields in which hard news is valued. The other is to keep the hard news providers on their toes.

To support both of these objectives, I'd favour using competitive processes to allocate funding, monitoring of outputs, and some kind of feedback loop should be developed so that providers can build a reputation for being effective users of public funding.

Structurally, there would be a case for splitting the funds between the longer term (3 - 5yrs) support of one or two dedicated teams and specific grants for individuals. Ideally, this would allow the incumbent team(s) to build strength, cultivate a competitive fringe and provide performance benchmarking data to keep everyone on their toes.

How much should we spend on this? The NZOnAir funding is my only real benchmark here, so my starting point is that we should spend at least as much on supporting hard news as we do on the culture-building outputs funded by NZOnAir. That's about $130m/year. Oh, and both funds (NZOnAir and HardNews) should increase at the relevant rate of cost inflation instead of being fixed in nominal terms as has been the case for NZOnAir recently.


I think we need this for the same reason we need the Reserve Bank Act and the Ombudsmen Act and Public Finance Act. We should require that all governments submit to external scrutiny in ways that ordinary people can understand. Just having these laws helps "keep the bastards honest" but we also need an empowered fourth estate to support our democracy by publicly holding their feet to the fire.

And if that doesn't convince you, spare a couple of minutes for this. Scroll through to 1:35 and then listen to Guyon...

Saturday, 10 December 2016

Hard Journalism as a Public Good

Earlier this week the Commerce Commission held a conference on the proposed merger between Fairfax and NZME. Most of the discussion involved the applicants responding to questions from the Commission. The transcripts will be available here. This post is not about the proposed merger but was provoked by the discussion at the hearings.

There is no doubt that journalism as a profession is facing serious economic challenges. Advertising revenue is moving away from printed newspapers as readership declines, and the online versions of newspapers aren't gaining as much revenue as their hard copy versions are losing. Google & Facebook (G&F) are scooping up the rest of the cash because they have better ways of matching adverts to eyeballs.

But G&F are distributors of content, not creators, which is why they haven't really cared whether news is real or fake. And by scooping the advertising revenue, G&F are revealing the weakness that was always inside the traditional business model for news media: hard news has been cross-subsidised by soft news. The light, quirky stuff has sold papers day-to-day while journos dug into important but deeper stories that headline less frequently.

Think of the hard-soft distinction as a spectrum that runs from serious investigative journalism through to PR puff pieces. Any story that someone has a strong interest in killing off is likely to be hard journalism. Innocuous human interest stories are neutral - no-one is promoting them or trying to kill them off. And at the other end of the spectrum are PR stories deliberately planted by someone with a position or product to promote. In the traditional model, a bundle of stories is sold in a newspaper and readership of the latter two categories helped to pay for the more important stuff.

Cross-subsidies are not sustainable under competition though. In the modern online world G&F unpick the traditional bundles, allowing readers to focus on the cat-up-tree stories if they so desire. Worse, they also take advertising revenue from the harder investigative pieces.

So how do we ensure that enough hard news is reported?

The first step is to acknowledge that it meets both criteria of a public good. Once created, hard news can be consumed by an infinite number of people, so there is no rivalry for consumption as there is for a sandwich. It is also difficult and inefficient to exclude those who have not paid from the consumption of hard news. Under these conditions, commercial operators will under-provide hard news because it is difficult to monetise.

This under-provision is a serious problem because hard news is the feedback loop by which the general public are sufficiently informed to insist on changes in policy. It is crucial to the sustainable development of our society, environment and economy.

So the question is not whether we should support hard journalism, but how to do so in today's context. Apart from the rapidly evaporating cross-subsidies, there are three main options.

Crowd-funding can work but it has some obvious weaknesses. It is best suited to particular projects rather than the maintenance of an ongoing effort by a dedicated crew. It also risks tipping off the target(s) of the investigation.

Option two is for newspapers to take on G&F at their own game by using a combination of paywalls and permission-based marketing to reclaim advertising revenue. This strategy might possibly succeed, but it would still require internal cross-subsidies and it is not obvious that those seeking cat stories would subscribe in sufficient volumes to support hard news.

Public funding is the third option and more consistent with the way we ensure the provision of other public goods. The main difficulties with public funding are ensuring we get plenty of high quality outputs and finding the dosh to pay for it.

I'll have a crack at these difficulties in another post.

Friday, 9 December 2016

Radicalism is Winning

The brexit referendum and the USA presidency election have two things in common: both were unexpected (neither was predicted by the polls) and in both cases the establishment lost to radically new ideas.

The radicals won by tapping into deep seated resentment against the status quo, offering clear and simple alternatives, and refusing to get into the nitty gritty of exactly how these alternatives would be achieved. Credible subterfuge was also important: in both cases there were talented bullshitters leading the charge.

We might well weep for the quality of discourse on matters of great public interest, but that's the modern world and it has been for some time. Here in Aoteoroa we're very familiar with the set-up, having spent the last eight years with the PM (including his office) controlling the news agenda including through the use of very dirty tactics.

Many of our ministers are old established incrementalists though, so we are potentially vulnerable to the same kind of radical upheavals as have occurred in the UK and USA this year.

The situation is a bit like working in an industry that is vulnerable to disruption through digital technology. If you can see disruption coming, the best strategy is often to disrupt yourself rather than have it done to you.

All the more so on political matters where there are very different radical new directions available.

So in the spirit of the times, here are a few themes where radical initiatives are worth considering.
  1. Protect the Environment. Taken seriously, this would disrupt agriculture and transport at least. We'd be investing in electric & hydrogen vehicles and the associated infrastructure. Agricultural science funding would be re-directed towards much more benign methods and farmers would face direct taxes(pdf) & subsidies(pdf) designed to price the spillover effects of their activities.
  2. Promote the Young. Our tax & welfare system favours the old & the established over the young and precarious, partly because our political leaders tend to be old & established themselves. There are some positive signs here, notably the the tax policy just announced by TOP and the recruitment by the Greens of Chloe Swarbrick and Hayley Holt as candidates for next year's election.
  3. Provide Public Goods. I suspect there are more examples of un-recognised (and hence under-provided) public goods, but the one on my mind this week is the gathering and reporting of hard news. We have largely left this to the market, but hard news does not meet the economic standards for doing so. I will have more to say on this shortly.