The View From the Ramparts: No such thing as clean money

The search for a pure way to fund journalism is a search for a chimera

The always insightful Ted Gioia has an interesting piece on his Substack about the possibilities of subscriber-based journalism.

He makes a strong case for the subscription-based model, which I won’t repeat here.

What I find interesting, though, is the view of so many journalists (not Gioia necessarily) who think the traditional business model of selling advertising is somehow corrupt, and that a subscriber-based system would be less prone to outside influences. Even worse, some are agitating for a model whereby the government would underwrite the cost of publishing newspapers or websites.

Most newspapers in the United States began life as little more than a cheering section for the local chamber of commerce. Particularly as the United States kept pushing West, white settlers from the East would pack up a manual screw press, some ink, and supply of paper, and head West looking for a settlement that did not yet have a paper. When they arrived, they’d rent a storefront, and begin printing a paper — often only a single broadsheet, folded into four pages.

Depending on the size of the settlement, they’d publish once a week or maybe a couple times a week.

Some of these new papers shipped copies to big cities back East — so that potential settlers could be exposed to the real estate advertisements in their pages. Much of the Los Angeles basin was developed in this manner — local business leaders would finance a newspaper with cheery “news” about the new town, and then feature tons of ads about all the land parcels available for purchase, and ship bundles of these to newsstands back east on the railroad.

As these new towns — or, in the case of the L.A. Basin, suburbs — began filling up and out, the papers began more traditional coverage: crime, politics, culture, sports.

And as new businesses began opening in these towns, they would invariably buy advertising in the local paper or papers.

By the 1920s, most mid-size cities had at least two daily papers competing for reader — and advertiser — loyalty. In many towns, this competition took the form of a morning paper and an afternoon paper, or an a.m. paper and a p.m. paper in the parlance of the folks in the business.

While towns with multiple newspapers usually had a liberal and a conservative paper as well as the morning-afternoon split, in the early part of the 20th century a push came from among journalists to “professionalize” the industry.

As the big city papers began to be owned by a couple of families, with the Hearsts and the Pulitzers each owning dozens of papers in cities across the nation, the publishers would push their own political agenda through their newspapers. The most infamous example was the Spanish-American War, with both those chains reporting that the U.S. Navy ship, the U.S.S. Maine, had been blown up in Havana Harbor by the Spanish.

There were never many in the Navy — or even among newspaper reporters — who actually believed that, but it was reported as fact, and readers of these papers flooded their local representatives with demands that the United States do something about this provocation.

And so we went to war over something that never happened — but was reported as factual.

That led to a growing movement among editors and reporters to get the owners’ political views out of the news coverage, and segregate it on the opinion pages.

While the owners saw no great need to stop dictating the news content, they were persuaded by the business argument that if you let your news room deliver politically neutral articles, you could sell newspapers to readers who didn’t share your political views.

And since the amount of money you could charge advertisers was based on how many readers you had, the publishers liked the idea of increasing their readership.

The prevailing business model when I came up in the late 1970s was that a newspaper rested on three income legs: Subscriptions, display advertising, and classified advertising — each providing about one-third of the paper’s overall income stream.

While radio news and, then, television news, slowly eroded the value of the afternoon newspaper — which had to go to press before noon to hit the streets before dinner (while the TV and radio stations could report on national and world events in real time) — the morning daily remained the most authoritative source of news in nearly every market. While the local TV station might cover 10 or 12 stories in a 30-minute newscast (leaving time for sports, weather, and, of course, their own advertisements), a newspaper might cover five times as many news stories each day. And nearly every one of those stories would have far more detail than the broadcasters could possibly jam into their programs.

But by the early 1980s, one of the three legs of newspaper income was withering away, and it wasn’t due to radio or TV.

From at least the 1940s on, classified ads had been a staple not only of newspapers, but of local communities as well. These are small, text-only ads where you could announce a garage sale, sell newborn kittens or puppies, list used furniture you were selling, post help-wanted ads, or sell your used car.

In fact, most daily newspapers had at least one full-time sales rep who did nothing but handle used car classified ads, another who handled apartments for rent, and another who took orders for help-wanted ads.

The Sunday paper would often have a full 12-16 page section of nothing but classified ads. Lost and found ads were often popular for the peculiar items that people had lost — or found. And before we had online dating, most daily newspapers in even small cities had a singles section in their classified ads where along with your ad touting your selling points to potential mates, you also got a telephone service where you could call in and check to see if anyone had responded.

But a market that lucrative was bound to attract competition, and it arrived in force in the 1980s.

Specialty advertising circulars like the Pennysaver were offering cheaper classified ads, with each week’s issue mailed directly to every home in a community (whether they wanted it or not!). Soon folks were spreading the word about their garage sale or yard sale via the Pennysaver instead of their local paper. Then apartment rentals began appearing in the Pennysaver. About the same time, The Auto Trader began siphoning away classified ads for used cars.

By the late 1980s, the classified ad section was often just a few full-size pages at the back of the business section.

To make up for the difference, most papers began increasing the cost of a subscription — or even single-copy newsstand price.

Where most papers had cost no more than a dime for decades, soon it rose to a quarter. Then 50 cents.

Of course, if you raise it too high, then nobody would buy it — and that hurt the other income stream, the display ads.

Whereas classified ads charged you by the line of text (you could get about 3-5 words per line), display ads — the larger advertisements with photos or drawings of whatever was being sold — were based on the paper’s circulation, or how many paying subscribers you had.

The more subscribers, the more you could charge.

In order to answer advertisers’ questions about the legitimacy of those circulation numbers, newspapers could themselves subscribe to the ABC — the Audit Bureau of Circulation. In order to gain ABC certification (which allowed you to charge even higher rates to your advertisers), a newspaper had to open its books to ABC auditors, who would come in a couple times a year and make sure that that daily claiming 125,000 circulation truly had 125,000 paying customers each day.

This model, advertising at one point providing two-thirds of a newspaper’s revenue, had an ameliorating effect on any bias in the articles — because the owner of the paper had a prevailing financial interest in having as many readers as possible in order to maximize the amount they could charge for ads.

The businesses didn’t care for the most part what was in the paper’s articles — what local business owners cared about was whether customers showed up after their ad ran.

And that was as true for the family having an estate sale listed in the classifieds as it was for the auto dealers who regularly took out multi-page ads. The more readers a paper had, the happier its advertisers were.

---

As to how the Internet impacted newspapers, I think an honest accounting would force most newspaper executives to admit they misread the room.

I should point out that I was an early adopter of computer technology. My dad built a homebrew personal computer in 1976 in our basement, and I’ve been online since at least the mid-1980s, first on dial-up services, and then on the Internet.

And I also built — by hand — the initial website for the North County Times newspaper, then took a job at the San Diego daily to bring breaking news to their website.

I was never a true believer that online was the one and only future. I thought that the San Jose Mercury News had done interesting things even in the 1980s in terms of placing its articles in various online environments as way of extending its reach, and that the World Wide Web offered some new graphical possibilities worth exploring.

What I never foresaw was in their fear of missing out, that newspaper publishers would simply give away their product for free online — and then not understand why their print readership declined.

Look, if you pull into a gas station, and there are two pumps — one you have to pay to get gas from, and there where it is free, which pump are you pulling up to?

At the same time newspapers, and to a lesser extend TV stations, were racing each other to see who could give away their news product for free the fastest, newspapers were regularly running “analysis” pieces that declared newspapers were obsolete!

What other business has ever gone around telling its customers that it no longer is relevant?

And then they acted surprised when advertisers abandoned them?

Of course, the explosion of websites means that the total readership is being divided into ever smaller segments, which is the opposite of what advertisers like: They want a whole bunch of readers in once place so they know exactly where to put their ads.

Google, with its model of paying even small websites an even smaller fee in order to be able put ads on their pages, offers large advertisers the same number of total eyeballs they could have had in the past by buying an ad in a large newspaper chain. And so that is where a lot of ad dollars are being spent these days — on Google, so an ad can be placed on as may websites as possible.

Which leaves newspapers one last leg from which to generate revenue: subscribers.

As Ted Gioia points out in his above referenced Substack column, some big outlets like the New York Times have done very well with a subscriber-based business model, with advertising providing only a fraction of the paper’s income stream.

I would point out that there are some hidden dangers in this model.

A few years ago, the New York Times ran an opinion piece from a Republican senator addressing the often-destructive, occasionally violent unrest in many cities following the killing of a black citizen at the hands of a white police officer in Minneapolis.

It turned out that not only did many Times subscribers disagree with the senator’s proposed solution, they did not want to have Republicans being published in the supposed “paper of record” at all. Soon boycotts were being organized on Twitter and other online platforms, and subscriptions were being cancelled left and right.

The Times quickly caved, apologized for running the op-ed, and fired the editor who had approved it.

One Times reporter at the time tweeted approvingly of all this, and encouraged her large Twitter following to make a habit of threatening to quit their subscription whenever the Times published something they didn’t like. She pointed out that the senior editors at the Times were terrified of reader revolt, and regularly altered their news decisions in reaction to it.

---

Whereas a hundred years ago, the reader of a newspaper had to wonder how much of the news coverage was factual and accurate and how much a product of the publisher’s biases, today’s reader has to wonder how much is a product of the overall readership’s biases and the pushback they registered to the outlet’s previous reporting.

Without a large advertising-based income stream, newspapers are less likely to be able to weather a significant subscriber revolt.

Back in the so-called glory years, we’d regularly laugh when a reader would threaten to cancel their subscription over some article they disliked. Studies had shown that most of those threats were empty, and that even those who did cancel usually came back in a matter of weeks or months.

The nonpartisan approach to news had created a real value that made the information in the daily newspaper difficult to replace.

It was trusted as factual, and free from outside interference.

That’s no longer true, as we saw with the efforts by most of the mainstream media to question the veracity of the New York Post’s reporting on Hunter Biden’s abandoned laptop. Rather than pick up on what was clearly an important story about a politician’s son and brother seemingly selling access to said politician, too many papers — including the New York Times — instead ran supposed news articles claiming that the abandoned laptop was instead a work of Russian propaganda.

But after seeing the reader reaction to the Times’ running of an op-ed by a Republican senator, one could only imagine the number of cancelled subscriptions the Times would have endured if they’d reported factually and neutrally on the laptop story.

---

So there was — and, in the many small and mid-sized towns where the model still prevails, is — value in the advertising-based business model for journalism. There is a financial incentive in providing neutral coverage that is trusted by readers of an extremely broad range of political views.

And yet, today many journalists and academics are clamoring for what they euphemistically call “community journalism.”

In many cases, this is government-funded journalism, where any qualifying publication or broadcaster would be eligible for public funds to underwrite their operation.

We’re assured that these qualifications would be transparent, apolitical and fairly applied.

But given how academia and the current administration define “disinformation” in a way that it almost always favors the Democratic Party, it’s not difficult to discern how those qualifiers would work in real life.

And even if Republicans were in charge of the system, that would not represent an improvement — only a momentary changing of the guard.

The truth is that whoever is paying the bills ultimately retains the control as well. It’s an immutable law, and pretending otherwise is crazy.

At one point, the newspaper I worked at was renting a cubicle to a reporter for a local NPR outlet. He wasn’t the quietest talker, and so I occasionally overheard his conversations with his editor, which seemed to revolve around whether his latest reporting met the criteria set by the grants that funded his position. These nonprofit foundations that donated to “public” journalism had some very specific expectations — on the topics to be covered, and the slant of the coverage to be provided.

That’s a far more heavy handed news influence than any car dealer ever exercised.

And while you’d be right to point out that daily newspapers, as well as local television stations, generally shied away from pointed coverage of the business practices of car dealers or real estate agencies (their two biggest advertisers) one also doesn’t see PBS or NPR looking very hard into the practices of the foundations that fund them.

---

There is no “clean” money. All money comes with strings attached. The larger the check, the more entangling the strings.

While the traditional advertising model may not be coming back, I’m not ready to proclaim the subscriber model perfect, either.

Both the subscriber model and the nonprofit grant-seeking model have been shown prone to partisan pressure.

It will be interesting to see how things shake out.

-30-