Disintermediation. Individuated media. Customization. Sharing. Playlists. Bye bye mass, we are well on our way to a world of “iMix” where we build our view of daily events through conversations.
What do we mean when we talk about “the News?” The news is a form of information, says Jay Hamilton, an economist who studies the economics of journalism, and information is any description that can be expressed in binary (0,1) format. Therefore, words as text, images and photos, music and audio, slideshows and videos, data streams, and databases, and combinations of these, can all be sold and distributed as news.
The media ecosystem today includes traditional media and electronic media and social networking tools. It is evolving as our technologies and understanding of new media forms evolves. For our purposes in this exploration, we’ll zero in on hard news, not soft news. Hard news is a subset of all the information products offered in the marketplace. It is news about politics, government, and public affairs that citizens need in a democracy. This is the watchdog function of the media. It isn’t celebrity news, gossip, advertising or entertainment news, for example. But, “news is principally produced by market forces and shaped by the particular economies of information goods,” is the way Jay Hamilton describes the economics of news.
News isn’t the same type of good as a sandwich or a shirt. When you eat a sandwich, or wear a shirt, no one else eat that sandwich nor wear that shirt. When you read the news, you don’t use it up or prevent others from using it. News is experiential — you don’t “own” the news until you read or look at it. News is used by experiencing it, which doesn’t stop others from experiencing it, but can lead to information cascades, where a story “goes viral,” because users can be experiencing the news simultaneously. The ease with which news can go viral also explains why people will pay for trusted filters or agents, whether these are editors or algorithms, as they use the news.
The news that journalists create is also a differentiated good that varies in length, style, accuracy, and so on. This will be important in explaining the difference between amateurs and professionals, and how businesses charge for news. News is what economists refer to an “information good” and a public good, because of this experiential quality.
The old five W’s of reporting were: who, what, when, where, and what. For the journalist, publisher, blogger, editor, and advertising professional today, that is a naïve view. News is a product. Economics can track what news get covered and what doesn’t, but it can’t evaluate whether that is good or bad. That should be part of the responsibilities of the press, and certainly should be part of any 5th estate.
The five W’s of news today are: Who cares about this information? What will they pay (or what will someone pay to reach them?) Where can they be reached? When is it profitable to reach these people? Why is this profitable? If you want to work as professional and be paid for your work, you need to keep your eye on the bottom line. Being aware of these factors as you work as journalist should not affect your ethics about good journalism, but to ignore these is to make yourself unmarketable.
What does news cost?
Quality news has high “fixed costs” of production. Reporting, writing, and editing takes time and care. It takes editors. For traditional broadcast news, there are crews, producers, and studios that have to be paid for. In pre-Internet days, news had to be produced in newsrooms, adding the cost of real estate, utilities, and related costs. Economies of scale, favored big operations so the large fixed cost items, including salaries, the cost of the newsrooms,
Once the news is created, it has a low “variable cost” for distribution. If we don’t include print or traditional broadcast, the cost of distribution for news can become nearly zero.
Before the Internet, news organizations could increase profits by growing a wider audience. Once you’ve got the news story (the expensive part) distributing it to a bigger and bigger audience let’s you take advantage of economies of scale and make more moneyh. The price of producing the story remained the same, but more copies of the paper meant more profit. When newspapers do this to grow their readership, they must become less differentiated, and go for more middle of the road appeal. To appeal widely, news organizations dropped very localized stories, stories on niche topics, and often controversial stories were dropped out of newspapers in the process of pleasing a bigger and bigger audience.
Journalists are being “deskilled” because of the falling costs of the journalist enterprise brought about by technology. They no longer have exclusivity of source and face competition from citizen journalists and user-generated content. The commodity value of professional journalism is tied to the standardization of news gathering and reporting processes. The value decreases as journalists no longer possess unique skills or knowledge and have no specialization. As they become interchangeable, the value of their work decreases.
The value of news today depends on opportunity costs of gathering and filtering information and data. Technology alone won’t increase the value of journalism because the people most interested in news are the most knowledgeable about how to find and harvest the news for themselves. There’s wide access to news sources on the Internet and many types of information exist in competitive markets, there are lots of alternatives to any given take on breaking news. Competition drives down price and on the Internet the cost of one more page view, is zero. Consumers will only pay for highly differentiated products and data, which is the reverse of the way things operate in a print environment, where people pay for news that isn’t too finely differentiated — reading sports for Chicago, for example, but not for every suburb nearby –and you need to attract large number of readers.
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