Journalism monopoly was also a market failure

Eroding newspaper business models represent markets that are working, not just failing


Dan Gillmor
June 16, 2010 1:25AM (UTC)

More than one speaker at today's Federal Trade Commission workshop on the future of journalism has used the expression "market failure" to describe the eroding business model of local newspapers. Perhaps they've picked up on the FTC's Federal Register Notice describing the purpose for this months-long initiative, in which economists say that "public affairs reporting may indeed be particularly subject to market failure."

There's some truth in this, even though it's far too early to assume that current trends will lead over the long term to less trustworthy information in the public affairs realm. (I believe the opposite, but the jury's definitely out on this.) Framing the issue this way also buys into the mythology that we had a Golden Age of Journalism with ample public affairs reporting; even the biggest daily newspapers rarely covered governments outside several core jurisdictions in their markets.

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For the privileged few journalists who lived in that era's once-warm embrace, and especially for their employers, professional life was almost perfect -- because that was an era of fabulously profitable monopolies and oligopolies. The public affairs journalism was real, and sometimes brilliant work that made a huge difference in local and national affairs. But relatively speaking to the available financial resources, it was a typically a modest spinoff of near-absolute market power the journalism companies boasted in the communities they claimed to (and sometimes did) serve.

But there's another way to look at the media marketplace of those days. And from several other perspectives it's safe to say that current trends amount to the overdue correction: that the pined-after Golden Age was in key ways itself the era of market failure.

If you were a local business that wanted broad reach into the community, you essentially had to pay the extortionate and always-rising display advertisement prices newspapers charged or the equally extortionate broadcast rates local TV affiliates could command. If you were an individual trying to sell a car or household item or rent out a spare room, you paid absurdly high prices for classified ads.

If your neighborhood or community or issue didn't interest the newspaper, it might as well have been banned from the community agenda. And if you had something to say, and wanted the community to hear or read it, your options were to pray you could get a letter to the editor published, or an even-rarer Op-Ed piece, or put out fliers around town. If you tried starting a competing newspaper, you'd often find yourself at the untender mercies of Big Media companies that would squash you like a bug. Forget about starting a competing TV or radio station; the local frequencies were owned by people who never lost their licenses no matter what they did.

That was market failure, too. For everyone but the monopolists and oligopolists, the market was grossly inefficient and nearly impossible to change. 

Impossible, that is, until the barriers to entry dropped. In print, desktop publishing was the first crack in the dam, but it didn't fully open the market. That only happened when the Internet came along -- when eBay and Craigslist and Monster and Google and a host of other nimble companies created Internet advertising alternatives that monopolists couldn't begin to match; and when a zillion content-based start-ups started finding better ways to tell people the things they needed or wanted to know.

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The FTC is the principal federal government agency charged with promoting competition in American commerce. I don't recall that it paid much attention to the inefficient, uncompetitive markets we had during the dominant days of newspaper monopolies and cozy, government-protected broadcasting.

So why, when the market finally opens up to competition at a variety of levels, is it suddenly time to fret so urgently about a market failure in journalism?

As I said yesterday, I'd like to see the nation invest in powerful, open broadband infrastructure for every home and business in America -- to give our 21st century communications and commerce a leg up in world competition. Even if that doesn't happen,  but assuming the telecom duopoly doesn't get to decide in a granular way what we can do online, the explosion of creation and innovation should tell us that we're far too early to pronounce the death of journalism.

It could all go wrong. But at the moment, it seems to me, these markets are starting to look more like successes than failures.

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A longtime participant in the tech and media worlds, Dan Gillmor is director of the Knight Center for Digital Media Entrepreneurship at Arizona State University's Walter Cronkite School of Journalism & Mass Communication. Follow Dan on Twitter. More about Dan here.


Dan Gillmor

A longtime participant in the tech and media worlds, Dan Gillmor is director of the Knight Center for Digital Media Entrepreneurship at Arizona State University's Walter Cronkite School of Journalism & Mass Communication. Follow Dan on Twitter: @dangillmor. More about Dan here.

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