Continued Collapse of the Information System: Two More Dead Canaries

Two significant pieces of news: Google’s earnings (and stock price) are down, and Newsweek has given up on a paper edition.The Newsweek story is only the latest step down a path to oblivion, as the digital edition cannot survive financially either and will close down in turn.

This is happening because the business models for providing content have collapsed. Newsweek is one dying gasp of a hybrid system whereby content could be denied to anyone who didn’t pay for a physical object, and the attention of readers therefore sold to advertisers who could be assured that (i) anyone reading the story on left-hand page 32 would see the nice big ad on page 33 and (ii) cared enough to plunk down 50c or so for the magazine. Google is a different animal, that sells ads with the promise that people seeing the ad had shown some interest in the type of product on offer. What made Newsweek worth buying was the expensive expertise of its authors and editors and the expense accounts on which the former could get stories; what makes Google run is the utility of its search engine, maps, and other cool stuff, that we pay for by tolerating the crappy little ads that appear on tiny patches of a screen about the size of a two-page Newsweek spread, but cluttered with a bunch of other stuff. Or the infuriating big ads that pop up all over what you’re trying to read, infinitely more intrusive than advertising in old print media. That these ads aren’t a substitute for what print ads used to do is evidenced by how long ago it was that you clicked on one, and that the whole deal manifestly isn’t working out for Google.

Dead-tree media were a kludge, but a kludge that worked reasonably well: we had a lot of high-quality news, political analysis, features, and fiction, made by experts with time to spend at their craft. Now we have whatever dying corpse phase Newsweek will pass through, and online/paper newspapers whose content is a fraction of what it used to be and whose numbers are sinking like a stone (remember the Seattle Post-Intelligencer?). Top-line newspapers used to have foreign bureaus all over the world; now the Washington Post, a decaying zombie of a great (flawed, but great) newspaper trying to cling to status as a national journal, has the shamelessness to run a little map showing its overseas news offices that reveals one for all of South America, in Bogotá. One? And, where? Brazil has a population of almost 200m who speak Portuguese, not Spanish, and is about as big as the USA with a per capita income above $10,000. Probably no important news from a backwater like that, right? And it’s 2700 miles from Bogotá to Sao Paulo.

Now we also have pretty exciting new stuff. For example, here – I mean here, right in front of you _ is a medium that almost anyone can publish in and anyone else can access for free. I love it, but if you think what you are reading now is a substitute for real news or commentary from a professional full-time journalist on the scene (any scene) you are daft or radiantly ignorant. This content is an incidental spinoff from a paid job doing something related, but different: real journalism is done by people paid and trained to do that. Paywalls have not made it possible for content providers to pay creators what their work really costs, and never will, for several reasons, only one of which is the readiness of a kid in Bulgaria or Finland to crack any DRM scheme.

We used to have physical books that were awkward to carry around but pleasant to read and easy to lend to a friend: to get one you had to pay enough to cover the physical embodiment and the time and effort of author, editor, and publisher. Now my phone has lots of books on it, lots more in the cloud on demand, and reading on a phone or tablet or screen is not bad. Having a library in my pocket is truly awesome; the only important limit on my reading now, almost anywhere, is my time. No more rationing travel reading by backpack weight. Same for music, sports, and movies. Watching a movie on a phone is, um, not so great, but I can easily get a tablet or computer screen to occupy the same visual angle as a theater movie screen and a lot more than a live opera stage from where I can afford to sit, or a baseball battery. All good, but not good enough. Not good enough, because the publishing business is a wreck, that can’t support enough good authors, or musicians – or Newsweek, or the New Orleans Times-Picayune, or even the New York Times. We are like Wile E. Coyote running in the air and not realizing what’s already ordained: he hasn’t accumulated much velocity yet but he’s accelerating downward at 32 ft/sec2. Nor how important it is: looking forward to the 2016 or 2020 elections with no real print content other than what the odd blogger wants to put out for you? Happy with the lame analytic political content this round is already suffering from?

The big problem here is the divergence between the cost of quality content and the price it should be sold for. The former is as high as its ever been, maybe even a little higher because of Baumol disease, but the instant content moved to the web the right price became zero. Trying to sell it for a price that covers average cost means enormous waste, and may not even be possible, even though the total value it would create is vastly greater than its cost.

Nonprofits giving grants, underpaid writers doing their work for love, and the rags we still call newspapers give the illusion that we’re just going through an awkward adjustment period, but it’s an illusion. We are in big trouble. Content is the most important thing in the world; if we don’t figure out how to pay properly for it, we won’t have it. Think climate stabilization is more important than art and political discourse? OK, but what’s your scheme for getting any without news media? Technology has given us lots more words than we used to have, but less and less that is worth reading and thinking about, and that can support public deliberation in a free society.

The rap on early cable TV used to be “99 channels and nothing on”; now we have hundreds of channels, nearly all crap, disappearing real, quality media, and hundreds and thousands of blogs that are mostly worthless especially if you don’t start with a real news source. Valuable content is priced way above marginal cost, so millions of consumers who would benefit from it on net won’t get at it: my cable company proposes to charge me $20 a month to listen to the Globo TV channel from Brazil, probably about a dollar an hour of use!. I’m willing to pay for a subscription to one or two newspapers (even though that’s much higher than the efficient price), but the real payoff from the web should be that I can read two newspapers’ worth of content from a dozen newspapers, and to do that as paywalls spread I face ridiculous, absurd per-article prices. Or I have to buy a dozen subscriptions, which will never happen, so the newspapers will fail economically and die. I don’t get content that would create net value for me, and the providers and creators don’t see a real price signal of what their stuff is worth.

We have solved this problem before: outside my house is a sidewalk that cost something to make and that I don’t pay to walk on. Information is a little more complicated, because while the city does well enough deciding what to make the sidewalk out of and how wide it should be, I don’t want it choosing my content (or keeping track of what I’m reading). But whining about how content is property, or yelling “socialism” at a public goods scheme for distributing content free and paying for it according to how much it’s used, is infantile behavior and profoundly dangerous for everything – everything – that makes life worth living.

[Cross-posted at The Reality=based Community]

Michael O’Hare

Michael O'Hare is a Professor of Public Policy at the University of California, Berkeley.