Who pays for the news these days?
News is expensive. Yes, countless fragments of sometimes newsy information can be shared for free on the Internet today. And anyone can report or share an image on social media of something they've just heard or seen—or post it on any of the myriad blogs for which there is no compensation. But trained journalists and the staff and infrastructure of credible news organizations are expensive, regardless of technology. Before the digital revolution, advertising paid for most news in the United States, in print or broadcasting, supplemented in print by the relative pittance that readers paid for their newspapers, which did not even cover the cost of the ink and paper. But advertising, along with news audiences, has been fragmented by digital and cable television alternatives. The nearly 1400 daily newspapers in the United States in particular have lost more than half of their advertising revenue in just a decade—falling from $46 billion in 2003 to an estimated $20.7 billion in 2013, according to the Newspaper Association of America. Classified advertising for everything from cars and jobs to homes for sale and rent made up the largest share of that decline, according to Poynter Institute media business analyst Rick Edmunds, plummeting from just over $15 billion in 2003 to just over $4 billion in 2013, thanks to popular digital alternatives.
As a result, there have been dramatic changes in who pays for the news.
Newspapers, for example, are now charging their less numerous print readers significantly more for individual copies of and subscriptions to their printed papers. A majority of newspapers, including most of the largest in readership, also are charging digital readers for access to their websites and mobile applications. Many set up so-called metered paywalls, which allow visitors to view a certain number of stories—on most newspaper sites five to twelve per month—before they are required to pay to subscribe. Others require a paid subscription for any access. Altogether, newspaper income from print and digital paid subscriptions reached $10.9 billion in 2013, according to the Newspaper Association of America, accounting for nearly 30% of newspapers' total revenue, compared to just 16% in 2007.
Some newspapers and digital news sites also are offering access to journalists and newsmakers at various kinds of special events for premium payments. Others, such as The Wall Street Journal, Chicago Tribune, and Los Angeles Times, have bundled print and digital subscriptions, access to other content, special events, and even entertainment discounts into monthly paid memberships. However, even as audience revenue has been, on balance, increasing in these ways, steadily declining advertising still accounts for two-thirds of the revenue for all of American journalism, including print, broadcast, and digital, according to a 2014 Pew Research Journalism Project study.
Newspapers, although still mostly profitable after severe cost-cutting, are nevertheless seen as relatively unattractive long-term investments in their current forms. Many longtime corporate owners of large groups of newspapers and television stations—including Gannett, Tribune, Scripps, and Rupert Murdoch's News Corp.—have divested their newspaper holdings into separate companies, away from somewhat more profitable television stations and other assets. Still other newspaper owners, including investment companies speculating in media acquisitions, have offered their stripped-down newspapers for sale outright, with their fates unknown.
But, among the recent buyers of selected newspapers at bargain prices are billionaires with agendas. Investor Warren Buffett added twenty-eight papers in small and mediumsized cities in 2011, 2012, and 2013 to the forty-one he already owned. Amazon founder Jeff Bezos purchased The Washington Post in 2013. In the same year, Boston Red Sox (baseball) owner and former hedge fund executive John Henry took The Boston Globe off the hands of The New York Times, and Minnesota Timberwolves (basketball) owner Glen Taylor, bought The Star-Tribune in Minneapolis-St. Paul.
Henry and Taylor said they want to help The Globe and The Star-Tribune survive as vital local newspapers. "I see The Boston Globe and all that it represents as another great Boston institution that is worth fighting for," Henry told the newspaper's readers. Bezos said he wants The Washington Post to prosper as a digitally enhanced local, national, and international multimedia news organization. "For me," he told Post journalists at a newsroom meeting, "it's an exciting opportunity to participate in something that's a pillar of a free society."
"I believe that papers delivering comprehensive and reliable information to tightly-bound communities and having a sensible Internet strategy will remain viable for a long time," financier Buffett wrote about his strategy of buying newspapers that still have relatively substantial local audiences and advertising support. "Wherever there is a pervasive sense of community, a paper that serves the special information needs of that community will remain indispensable to a significant proportion of its residents."
In another sign of the changing times, Alice Rogoff, daughter of a wealthy digital innovator and wife of Carlyle Group billionaire investor David Rubenstein, bought the Alaska Dispatch digital news site in 2009, and then the Anchorage Daily News newspaper in 2014. She created the print and digital
Alaska Dispatch News, now by far the state's dominant news organization.
Local newspaper ownership by wealthy individuals is an old American tradition. Their patronage can protect news organizations somewhat from the whims of the marketplace, but it can also raise news coverage and conflict of interest questions. All the wealthy new newspaper owners have pledged not to interfere with newsgathering. But it's likely that people will be watching to see how The Post covers Bezos and Amazon, how the Star-Tribune and the Globe cover the Timberwolves and the Red Sox and their owners' other holdings, and how the Alaska Dispatch News covers the Carlyle Group's extensive investments in Alaska.
The ownership of television stations that broadcast local news is mostly concentrated in large corporations, including the major networks and companies like Sinclair Broadcast Group, which owns and operates more than 160 television stations reaching almost 40% of the US population. Some of their owner relationships also raise coverage questions. Local station owners ABC (The Walt Disney Company), CBS (Sumner Redstone's National Amusements), NBC (Comcast's NBC Universal), and Fox (Rupert Murdoch's 20th Century Fox) are controlled by high-profile entertainment companies with products to be promoted and images to protect, while Sinclair uses its stations to spread its aggressive conservative ideology.
Television station advertising, although not as robust in recent years as in the past, plus the retransmission fees that stations charge cable companies to carry their channels, make them still comparatively profitable. News programs and websites account for almost half the revenue of the average television station, according to the Radio Television Digital News Association, because there is more local advertising time for each station to sell during local newscasts than during network and syndicated shows.
In the digital world, media entrepreneurs have started popular and diverse for-profit websites like BuzzFeed, Gawker,
Vice, Vox, Politico, and TMZ, which are producing digital news in a variety of forms, along with blogs, gossip, pop culture, video programs, and entertainment. They are competing with older digital aggregators of news content like Yahoo News, AOL News, and The Huffington Post, which also have been investing in original journalism. These digital operations, which have been luring experienced journalists away from traditional news organizations, are experimenting with new kinds of visual, explanatory, revelatory, and opinion journalism about everything from politics, national security, and foreign affairs to sports, lifestyles, and entertainment. Their revenue comes from varying combinations of advertising, digital subscriptions, and Internet marketing and consulting services. Some, such as BuzzFeed and Vice, also have attracted significant funding from venture capitalists, which, at least indirectly, injects new money into paying for news.
At the same time, foundations, universities, philanthropists, and other donors are funding a growing number of start-up nonprofit news organizations that are influencing American journalism beyond their still relatively small sizes and numbers. Some of the nonprofits like the Voice of San Diego focus on local news; others like Texas Tribune on state issues and still others like ProPublica on journalism of national interest. Some, such as Arizona State University's Cronkite News, which reports on Arizona for news media throughout the state, are based at universities and staffed by student journalists under professional supervision. Others are the expanded newsrooms of public radio stations like St. Louis Public Radio and New York Public Radio, which have been increasing their local and regional news coverage. Significantly, as we will explore later, many of the nonprofits collaborate with each other and with newspapers and television stations and networks so their journalism can reach wider audiences.
However, the finances of many of these fledgling nonprofit news organization are fragile at best. They depend on unpredictable grants from national and local foundations, private donations, audience memberships, and fundraising events. A few earn revenue from sharing the journalism and data they produce with other news media. Others are supported by universities so their students can do journalism while they are studying it. A fraction of the support for public radio stations that cover news—about 10% or so for most stations—is federal government money that passes through the independent Corporation for Public Broadcasting. Qualifying nonprofits also benefit from federal tax exemptions and tax-deductible donations from supporters, although Internal Revenue Service approval of the needed 501(c) (3) tax code designation for news nonprofits has been unpredictable in recent years.
Altogether, however, the various kinds of new money paying for digital news and innovations in journalism have not come close to filling the gap left by still shrinking advertising support. As the Pew Research Center's State of the News Media 2014 report concluded, "So far, the impact of new money flowing into the (news) industry may be more about fostering new ways of reporting and reaching audiences than about building a new, sustainable revenue structure."