The End of the golden Era
I have some ancient roots in your country, on my father’s side. In 1855, my great grandfather, Ernst Steiger, when he was about 23 years old, emigrated to New York from Saxony, from a town near Leipzig. He had apprenticed to a publisher and bookseller, and he began importing and selling books in German for the growing immigrant community in New York. Before long, he was publishing books in German and later also in English. He lived to be 85 and handed the company to his son. But the son and HIS son, my father, had other interests; my dad’s, for example, was accounting and finance. So the books business faded away, and it fell to me to revive the family passion for the published word.
In my case, it truly is a passion. And I believe it is for many of you as well. I suspect we share the view that democracies thrive on knowledge and truth, and suffer when much of what people read, hear, or watch is colored and spun.
The 41 years that I spent working in print, 15 at the „Los Angeles Times“ and 26 at the „Wall Street Journal„, came during a golden era for newspapers, and for journalism, in my country. We had the protection of the First Amendment to the U.S. Constitution, which among other things forbids Congress from enacting any law abridging freedom of speech or of the press. We also benefited from a strong, stable, and highly profitable business model, and the increasingly accepted belief among at least some powerful people that it was better to tell their story to reporters than to try to stonewall or intimidate them.
Destroyed business models
The rise of the internet destroyed this business model, at least in the United States. I can explain how and why, in as much detail as you’d like, in the question-and-answer period, but for the moment, trust me: The internet destroyed the business model, particularly at large and medium-sized metropolitan newspapers. Profit margins narrowed dramatically, leaving publishers less willing to take risks on potentially important but hard-to-prove stories, and scrambling to cut costs, in large part by shrinking staffs.
The changes brought by the internet were, taken altogether, not entirely negative. In fact, many would argue that they were more good than bad. The public got access to more news and information and data than ever before, faster and at a cheaper price – often free. This cornucopia flowed from a combination of traditional platforms churning out information for their new web sites and from new voices seeking to find profits, or at least a following, on the internet. People with opinions who could not get a hearing under the old system could become their own publishers within minutes of buying a computer and getting connected to the web. Thus, debate became broader and in some cases richer than it had been for generations, perhaps as long ago as the late 18th Century, during the passionate arguments over the original shape of the American Constitution.
The negatives, however, were important. Newspapers and broadcasters who once sent correspondents around the globe cut way back, in some cases to zero, leaving their American audiences to rely on more random, less schooled, and often unedited sources. More importantly, the infrastructure of investigative or, as it’s sometimes called, accountability reporting, shrank dramatically. Concerns mounted that misbehaviors that once would not so much have been discussed – much less carried out – for fear of being exposed in the media were now being executed with abandon in state capitals, executive suites, and other citadels of power.
Two examples
What to do to replace some of the lost investigative reporting? The early proposals involved forced reinstatement of the old model, and were non-starters. Two examples will give you the flavor:
One was a call for large government subsidies for newspapers and perhaps also tv news. In Europe there is a tradition of government support, but in the U.S., it is very limited. Major new direct government support for journalism is not going to happen – not now, probably not ever. In an era of budget-deficit phobia, American taxpayers are not going to approve sending big bucks to journalists, especially since we aren’t very popular these days.
A second idea was to turn the „NY Times“ and some other high quality newspapers and magazines into non-profit organizations, and endow them. That idea faded once people realized just how much money would be required. The endowment would have to be $4 billion just to cover the cost of the „NY Times“ newsroom alone. Not even in America are there very many people with that much free cash.
A single new model
Now those of you who follow the news from the United States may be saying to yourselves, what about Jeff Bezos? What about Pierre Omidyar? Indeed, those two multi-billionaires have stepped up recently with major investments on the order of a quarter of a billion dollars each, to get involved in serious journalism. Bezos has acquired the Washington Post newspaper, and Omidyar has signed up, among others, Guardian columnist Glenn Greenwald and documentary film maker Laura Poitras, both leading figures in reporting the leaks by Edward Snowden of information about American and British communications surveillance and spying. Omidyar plans to use them as the cutting edge recruits in an as-yet-not-fully-defined news organization.
Big as they are, however, these moves are not nearly of the scale wistfully imagined by advocates of restoring the old order in U.S. journalism. There is not going to be a one-stroke solution, a single new model, let alone a return to the old one.
Instead, the Bezos and Omidyar gambits are particularly flashy forays in what I call the new ecosystem of news, an environment of small, medium, and large efforts to take advantage of all the web offers. They include legacy platforms like newspapers, magazines, and the television and cable networks; new enterprises, such as „Huffington Post“, „Gawker“, „Politico“, „Salon and Slate“; social media, including Facebook, Twitter, Tumblr, Reddit and many others; and public television and radio. Some are for-profit, some philanthropic. Some will succeed, some will fail, some will fail after succeeding spectacularly for a while, and some of the failures will contain the seeds of somebody else’s future success. The common element is going to be an environment of explosive change, driven heavily by technology.
Lose or earn money?
I should note that neither Jeff nor Pierre views his move as charity. Both will be profit-seeking. They expect to lose money for a while, but they will be pursuing learnings that they hope ultimately will allow their enterprises to bring in more than they cost. Omidyar, who has helped support non-profit news, once told me he’s much more interested in the for-profit side, not because he needs more money, but because profits lure competition and emulation. That way, he believes, a critical mass of socially useful new news activity would emerge much faster.
When I was last in Germany three years ago this month, many of the journalists and publishers I encountered here seemed to feel that they were somewhat sheltered from the problems that U.S. media now suffer. Your strong publishing houses with dynamic leadership, and your innovative editors and reporters, would save the day. After all, they had early embraced the value of the web for story-telling and communicating, while managing to sustain advertising dollars in print. Why couldn’t that continue?
What I’m now hearing is a bit less sanguine. German news platforms are fearing and in some cases experiencing leakage of advertising revenues. Cost pressures are leading to staff cutbacks, which in turn threaten the quality of the news product.
I don’t pretend to have my arms around the economic and business model for German media and how it is trending. When I was an American college student I could read Goethe and Schiller, admittedly with a German-English dictionary close by. Today I’m hard pressed to read a German newspaper. So I’m not likely to give you a blueprint for re-constituting German media.
Things that have been tried
What I can do is talk about things that have been tried or are being tried in the U.S. and suggest positives and negatives of the American experience with them, in hopes that this may be helpful to your calculations. Here they are, in no particular order:
Pay walls and metering: As advertising revenue has flattened or shrunk, newspapers and other news organizations have sought to get more money directly from readers. This has come from both driving subscription prices higher in print, ironically for the most loyal readers, and from prodding users of web editions to register and pay, either up front or after they click on a certain number of articles per month.
This works better for high-quality publications with unique content than it does for web sites that offer mainly aggregated coverage available on the wire services. „The Wall Street Journal“, the „New York Times“, and the“ Los Angeles Times“ have had success with this approach, and the „New York Times“ in particular is making a big bet on its ability to sell a variety of packages both internationally and at home. The Times’s new chief executive, Mark Thompson, fresh from his role heading Britain’s BBC, has launched an effort to find multiple new sources of revenue from readers. These range from capturing high-end audiences outside the home country, as the Guardian has done, to designing a lower-priced, slimmed down version of the Times’s full web news package that already, even before it has been created, some cynics are labeling „Times Lite“.
Blocking readers
By no means all of the efforts to get readers paying more for what they read are having success. Some, such as „The Dallas Morning News„, have stumbled as the pay walls reduce too much the audience inventory supporting advertising sales. The trick is to maneuver between garnering enough eyeballs to maximize advertising clicks while blocking readers if they don’t subscribe after reading a specified number of items in a given month.
So-called metering is useful here. When ad demand is high, for example, news sites with sufficiently sophisticated technology can quietly allow readers to go beyond the number of stories they ostensibly are allowed to read free per month. In months when ad demand shrinks, readers are strictly barred from reading past the story limit unless they sign-up for a paying plan.
„Native advertising“: This is a term that I admit I had never heard until a few months ago, although the concept is familiar. For decades at American newspapers and magazines it was known as „advertorial“ – a made-up word combining advertising and editorial. Under either name, „native advertising“ or „advertorial“, the idea is to present content that at first glance looks like a news story or an apparent news headline that actually leads the user to an advertisement or a „sponsored“ item.
Legacy publications have developed over the years firm rules about what they must do to assure that users know instantly when content is sponsored and are not fooled into thinking they are consuming material that is designed by editors solely to inform them. This includes carefully marking sponsored content, using such phrases as „Paid Advertising Section,“ or simply, „Advertisement.“ The web, however, offers virgin territory. Such U.S. websites as the hugely successful „BuzzFeed“ are expert at walking this line – and possibly stretching it.
Small budgets
Philanthropy: This, of course, is where ProPublica, my own organization, fits in the news ecosystem. We are one of the biggest in this space, but still rank as a boutique among the full range of American newsrooms, with an annual budget of $10 million and about 40 journalists. At the „Wall Street Journal“, by contrast, I had a news budget of $100 million and a staff exceeding 700.
No matter how successful we at ProPublica are, we are not intended ever to be profitable.
The first reason is that we are tightly focused on the most expensive kind of reporting – work that is designed to find and expose abuse of power and failure to uphold the public interest. The high cost flows from the fact that this sort of work requires huge commitments of reporting time, often including substantial travel and data research.
Our two Pulitzer Prize-winning projects each cost more than $400,000, for example. The most I have heard of a U.S. publication paying a freelancer for a story is far, far less, in the neighborhood of $30,000. The benefits to the public are well worth the cost. ProPublica’s stories on fraud in the market for mortgage-linked financial derivatives has generated hundreds of millions of dollars in fines paid to the U.S. Treasury and has thus far at least prevented the industry from dodging tighter regulation aimed at reducing the likelihood that it will repeat the 2008 financial disaster.
Published for free
The second reason we will never seek to be profitable is that our paramount goal is impact. We hope our reporting, by exposing corruption anywhere – government, business, unions, medical care, education, the courts – will give the public the tools to create change. Therefore, we publish all our work free on our web site, and we offer it free to partner platforms that can help us get each story to the best possible audience. For us, the best path to impact is not a path to profit.
The non-profit journalism field is growing. Some, like the highly successful „Texas Tribune“ in Austin, help people keep far better track of political, economic, and social developments in their neighborhoods and regions, and spend less time on accountability reporting. But there are now dozens of charity-supported national, regional, or local news organizations in the United States with a significant investigative focus.
We’re finding that more foundations and individual philanthropists are willing to consider giving to such enterprises, far more than when we started nearly six years ago. In our first couple of years, more than 90% of our funding came from our launch supporters, the Sandler family foundation. This year, we expect their share to be down around 30%. This isn’t because the Sandlers love us less, or we them. They are still by far our most important donors. We count on them, and especially Herbert Sandler, our board chairman, for wise counsel. We all agree that diversifying our sources of support is important to creating a sustainable organization.
Increasing boost from universities
The non-profit news field is also getting an increasing boost from university-based reporting efforts. Universities, particularly those with a journalism school or department or an interested law school, already have most of the infrastructure needed to produce valuable reporting. They have the infrastructure, including high-quality computer networks and in some cases substantial video capability. They have professionally experienced professors who can guide the work and students who can help carry it out, as well as lawyers who can help reduce the risk of libel and advise on more mundane topics.
This brings me back to a fundamental disjunction between the for-profit and non-profit approaches to restoring a healthy supply of investigative journalism. Many of those on the profit-seeking side seek to invigorate broad-based news organizations by building new sources of revenue and increasing efficiency. That way, they believe, these newsrooms will establish enough economic strength so that they can in effect subsidize expensive investigative reporting and integrate it into their newsgathering.
Those on the non-profit side argue that the gap developing in in-depth investigative reporting is so large, that we need donation-supported organizations like ProPublica and your own Investigate! program of special grants for reporters here in Germany to start filling in that gap immediately. We can’t wait, this argument goes, for the benefits of new, electronic versions of broad-based news organizations to start trickling down to the investigative domain.
So what is the answer, profit-seeking or non-profit? The answer, I believe, is that we need to try both approaches and hope both work. The stakes are that great. If democracies are to thrive, they need to be sustained by healthy servings of deep, accurate information. Without that, the risks are too large that they will be subverted by the brute power or subtle cunning of their factions. To me, that is not acceptable.
This is a speach, Paul E. Steiger made the 21, October 2013 at a joint event of „Stern“, investigate! e.V. und VOCER.
You can read the german version here.