Saving the Media Capitalism, Crowdfunding, and Democracy · 2015-12-13 · Saving the Media Capitalism, Crowdfunding, and Democracy Julia Cag e December 14th, 2015 EPOG seminar Julia

Saving the MediaCapitalism, Crowdfunding, and Democracy

Julia Cage

December 14th, 2015EPOG seminar

Julia Cage (Sciences Po) Saving the Media EPOG seminar 1 / 41

A new corporate model for the media

Saving the Media

CapitaliSM, Crowdfunding, and deMoCraCy

J u l i a Cag é

translated by arthur goldhammer

A new corporate model for the media

A new type of entity: the nonprofit media organization (NMO).

Intermediate in status between a foundation and a corporation.

Crisis of the media

Economic crisis.

Trust in the media is very low.

Decrease in the quality of the media.

Media crisis

1 Media crisisThe need for journalistsA long-term decrease in advertising revenues

2 The new “press barons”One dollar one vote?Money in politics... and in the media

3 Government intervention and nonprofit mediaGovernment interventionNonprofit media

4 Saving the media


Media crisis




4 Saving the media


Media crisis The need for journalists

The need for journalists

To produce information, and in particular hard news, a media needs...a newsroom. ⇒ There is no information without journalists.

How did the number of journalists evolve over time?



Evolution of the number of journalists: France

0.0

2.0

4.0

6.0

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.14

Num

ber o

f jou

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ists

(% o

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1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010

Number of journalists

Number of journalists (% of working population)

Evolution of the number of journalists

France, 1880-2013



Evolution of the number of journalists

Recent decrease in the number of journalists (beginning in the 2000’s;due to the “media crisis”? – we will come back to this point later)but trend: overall increase in the total number of journalists.

Around .14% of the working population.

Does it mean that we are better informed today?

Normalization: working population.

But may just reflect increasing importance of knowledge workers.

Normalize number of journalists by senior executives and knowledgeworkers.



Evolution of the number of journalists: France

.7.8

.91

1.1

1.2

1.3

Num

ber o

f jou

rnal

ists

(% s

enio

r exe

cutiv

es a

nd k

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ledg

e w

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rs)

1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Evolution of the number of journalistsas a share (%) of the number of senior executives and knowledge workers

France, 1955-2013



A revolution of the journalist profession

Not only decrease in the total number of journalists as a share ofsenior executives and knowledge workers, but also decrease in theabsolute number of journalists working in general informationnewspapers.

Even taking into account journalists working for the website of thesenewspapers.



Evolution of the number of daily newspaper journalists:United States

.025

.03

.035

.04

.045

.05

Num

ber o

f dai

ly n

ewsp

aper

jour

nalis

ts(%

of w

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55,0

0060

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Num

ber o

f dai

ly n

ewsp

aper

jour

nalis

ts

1980 1990 2000 2010

Number of daily newspaper journalists

Number of daily newspaper journalists (% of working population)

Evolution of the number of daily newspaper journalists

United States, 1978-2013



International comparaison (2013)

0.0

05.0

1.0

15.0

2.0

25.0

3.0

35

Num

ber o

f dai

ly n

ewsp

aper

jour

nalis

ts(%

of w

orki

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opul

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n)

France Germany Italy Japan United States

Number of daily newspaper journalists (% of working population)

International comparaison, 2013



A decrease in the size of the newsrooms

How to interpret this decrease in the number of journalists?

Decrease in the number of media outlets...

... or decrease in the number of journalists by media outlet?

Decrease in the size of the newsrooms.

E.g. average number of journalists by newspaper in 2001 in the US: 39.In 2013: 27.



A decrease in the size of the newsrooms:Why do we care?

Production function of the media industry: increasing returns toscale.

The cost of producing the first newspaper is high and increasing inquality – it depends on the number of journalists on staff –, but oncethis fixed cost has been borne, the variable cost of selling additionalnewspapers is limited to the cost of paper, printing and distribution,which is relatively low.

Important consequences for understanding of impact of mediacompetition on production of information.


How to explain this crisis?

Media crisis A long-term decrease in advertising revenues




4 Saving the media



Total advertising spending (all media)

.3.5

.7.9

1.1

1.3

1.5

Tota

l adv

ertis

ing

spen

ding

(% G

DP)

1980 1985 1990 1995 2000 2005 2010

France

Germany

United States

Evolution of advertising spending

Germany, United States and France, 1980-2013



Newspaper advertising revenues (US)

0.2

.4.6

.8%

1950 1960 1970 1980 1990 2000 2010

Evolution of newspaper advertising revenues (% GDP)


dollars



Reliance on advertising revenues (US)50

5560

6570

7580

85%

1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Share of print advertising (% total revenues)

Share of total advertising (print and digital) (% total revenues)

Evolution of the share of advertising in newspaper total revenuesUnited States, 1956-2013



How to explain such a decrease?

Increase in media competition (with an increasing number of outletsplus social networks – e.g. Twitter and Facebook) → decrease inadvertising price.

Decrease in advertising revenues despite increase in space media devoteto advertising.

Moreover, Google and Facebook capture more than half of theadvertising market (in the future also Amazon).

Digital advertising market in the US: $43 billion.

But news properties lay claim to only roughly $5 billion (12% of thetotal digital ad market).



Newspaper total revenues (United States)0

.2.4

.6.8

11.

2%

1960 1970 1980 1990 2000 2010

Evolution of newspaper total revenues (% GDP)




One good news

Media outlets can survive without advertising (e.g. Mediapart inFrance; New York Times).

Advertising revenues represent less than half of total revenues of theNew York Times since 2000.

Revenues from both circulation and digital subscriptions are increasing,however.


What could be done?

The new “press barons”




4 Saving the media







Welcome to a new era of corruption?

For the first time in a long while, people with money are excitedabout the news business.

Jeff Bezos (Amazon founder) bought The Washington Post for $250million.

Pierre Omidyar (eBay founder) pledged $250 million to his new FirstLook Media.

John Henry (Red Sox owner) has acquired The Boston Globe for $70million.

⇒ Good news or bad news?


The new “press barons” One dollar one vote?




4 Saving the media


The new “press barons” One dollar one vote?

Related issue: money in politics

There are legislations in the majority of developed countries to controland limit the amount both firms and individuals can give topoliticians / political parties.

Why?

Because “money corrupts congress” (Lessig, 2011).

The rich are able to use their resources to influence electoral, legislative,and regulatory processes through campaign contributions, lobbying,and revolving door employment of politicians and bureaucrats.

In the US, all these legislations have been removed during the lastdecades.


Total outside spending

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1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Why hasn’t democracy slowed rising inequality ?Bonica et al. (JEP, 2013)

112 Journal of Economic Perspectives

Buckley v. Valeo (424 US 1 [1976]). Rather, it refl ects the rising wealth of the super-(424 US 1 [1976]). Rather, it refl ects the rising wealth of the super-rich and an increased willingness to spend large sums on elections.rich and an increased willingness to spend large sums on elections.

One stark indication of increased willingness to spend comes from a compar-One stark indication of increased willingness to spend comes from a compar-ison of the largest individual contributors in federal elections over time. In 1980, ison of the largest individual contributors in federal elections over time. In 1980, the top contributor was Cecil R. Haden, owner of the tugboat operator Bay-Houston the top contributor was Cecil R. Haden, owner of the tugboat operator Bay-Houston Towing, who gave $1.72 million (in 2012 dollars), nearly six times the amount given Towing, who gave $1.72 million (in 2012 dollars), nearly six times the amount given by the next largest contributor. In 2012, the two largest donors were Sheldon and by the next largest contributor. In 2012, the two largest donors were Sheldon and Miriam Adelson, who gave $56.8 million and $46.6 million, respectively. Other Miriam Adelson, who gave $56.8 million and $46.6 million, respectively. Other members of the Forbes 400 accompany the Adelsons; 388 current members are members of the Forbes 400 accompany the Adelsons; 388 current members are on record as having made political contributions. They account for 40 of the on record as having made political contributions. They account for 40 of the

Figure 5Concentration of Income and Campaign Contributions in the Top 0.01 Percent of Households and Voting Age Population

Source: For income data, Piketty and Saez (2013).Notes: The dark line tracks the share of campaign contributions in all federal elections donated by the top 0.01 percent of the voting age population. The number of donors included in the 0.01 percent share of voting age population grew from 16,444 in 1980 to 24,092 in 2012. During the same period, the minimum amount given to be included in the top 0.01 percent grew in real terms from $5,616 to $25,000 (in 2012 dollars). The shaded line tracks the share of total income (including capital gains) received by the top 0.01 percent of households. The fi gure includes individual contributions to Super PACs and 527 organizations but excludes contributions to nondisclosing 501c(4) organizations, which are recorded to have spent approximately $143 million in 2010 and $318 million in 2012, much of which was raised from wealthy individuals. Were it possible to include contributions to nondisclosing 501c(4)’s, the trend line would likely be 1–2 percentage points higher in 2010 and 2012.

0%

10%

20%

30%

40%

19801982

19841986

19881990

19921994

19961998

20002002

20042006

20082010

2012

Year/Election cycle

Shar

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n %

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tions

Campaign contributionsIncome

Consequences?

$0.0

$1.2

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1 €

2 €

3 €

4 €

5 €

6 €

7 €

8 €

9 €

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1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Hou

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age

Expressed in 2013 purchasing power, the hourly minimum wage rose from $3.8 to $7.3 between 1950 and 2013 in the U.S., and from €2.1 to €9.4 in France. Sources and series: see piketty.pse.ens.fr/capital21c.

Figure 9.1. Minimum wage in France and the U.S., 1950-2013

France (2013 euros, left hand scale)

United States (2013 dollars, right hand scale)

,

The new “press barons” Money in politics... and in the media




4 Saving the media



Dimensions of influence on public policy

Which sets of actors have how much influence on public policy?

3 dimensions:

Political donations.

Foundations, think-tanks, “opinion-shaping apparatus”.

Financing of the media.

Very often, same individuals using different tools.

E.g. Murdoch, but far from being the only one.

Koch brothers.



What can be done?

Seems feasible (even if not easy) to regulate money in politics:campaign-finance regulation.

But what can be done to regulate money in the media?

Anti-trust regulation is one side of the story.

Nonprofit media can be another solution.


Government intervention and nonprofit media




4 Saving the media


Government intervention and nonprofit media

Information is a public good

Media matters because it provides information to voters.

Information from the media makes votes more responsive to the qualityof policy outcomes.

This improves political selection and incentives, political accountabilityand the quality of policy.

But if information is a public good... this public good cannot bedelivered efficiently by the market.

Need for government intervention.


Government intervention and nonprofit media Government intervention

Government intervention

Governments implement policies and subsidies to support the mediain a lot of developed countries.

This takes a variety of forms depending on the countries but also onthe media.

Special tax and legal status for newspapers.

Tax relief.

Postal subsidies.

Direct subsidies.

Financing of public broadcasting: by far the biggest part.


Government intervention and nonprofit media Government intervention

16

Figure 3.1. Total public support for the media (2008)

Source: as for Table 1.1.

It is clear from Figure 3.1 that support for public service media organisations (ho

wever incorporated) is the single largest factor in all these countries except the

United States. The second largest type of subsidy in five countries (and the largest in

the United States) is indirect support for print publishers, mostly through VAT

exemptions or reductions.4 Direct support for the press follows in third place in two

of the three countries where it is provided (Finland and France). In Italy, both the

private press and private sector local broadcasters benefit from direct subsidies, in

both industries to the tune of around €3 per capita per annum. Only one country –

France – provides direct public support for online-only “pure player” operations,

and the sums involved are negligible compared to the total scale of public

intervention. (The 2008 figure of €0.01 per capita is too small to be visible in the

figure above and has hence been excluded. This form of support was in 2009

increased to €0.3 per capita annually.)

The total scale of state intervention measured in euros per capita is by far the

largest in Finland, which has the highest household licence fee and exempts a

comparatively large and vibrant newspaper industry from the standard 23% VAT

rate on subscription sales, advertising, newsprint, composition, and plant. This scale

of support is not surprising. Finland is a small media market with little more than 5

million native speakers of a rather distinct language. A commitment to

comprehensive and cross-platform public service plus a desire to see at least one and

preferably several private sector media organisations compete in every local media

market in a geographically large but sparsely populated country therefore requires

4 Private sector media organisations are of course far from the only companies to benefit from various

forms of tax relief. The German Federal Government provided an estimated total of €25 billion in tax

exemptions and reductions in 2008, and the United States Federal Government $120 billion (€82

billion) in tax relief for corporations.

Source: Nielsen (2011), “Public Support for the Media: A Six-Country Overview of Directand Indirect Subsidies” (Report, Reuters Institute for the Study of Journalism).

Unit: euros by capita.


Government intervention and nonprofit media Nonprofit media




4 Saving the media



News organizations and the nonprofit form

An increasing number of people are advocating in favor of thedevelopment of the nonprofit form for the media.

Advantage: the government does not choose how much funding toallocate to each news organization; it just provides a subsidy throughthe charitable deduction.

The charitable deduction allows the government to piggyback on thejudgments of private donors about which nonprofits to support.

In addition, this subsidy is feasible politically since it already can beused, to a significant extent, under current law.



Nonprofit media: examples

There are several forms of noncommercial ownership:

Direct government ownership (e.g. Voice of America).

Indirect control by lower levels of government (e.g. broadcast stationlicensed to a state university);

Nonprofit public TV stations;...

In the UK, The Guardian is part of the GMG Guardian Media Groupof newspapers, radio stations, and print media, which is owned byThe Scott Trust.

The Scott Trust: charitable foundation which aimed to ensure thepaper’s editorial independence in perpetuity, maintaining its financialhealth to ensure it did not become vulnerable to take overs by for-profitmedia groups.



The limits of the nonprofit model

Germany’s largest media firm – and Europe’s largest media company–, Bertelsmann, is owned by the Bertelsmann Foundation, anon-profit entity.

But limit: no voting rights for small donors.

And concentration of power in a couple of hands (on top of taxdeductions...) (e.g. the Bertelsmann Foundation is controlled by theMohn family).

Solution: the Nonprofit Media Organization (“la societe de medias abut non lucratif”).


Saving the media




4 Saving the media


Saving the media

The Nonprofit Media Organization

⇒ New model intermediate in statuts between public companies and(nonprofit) foundations.

Hybrid model inspired in part by the model of the great internationaluniversities, which combine commercial and noncommercial activities.

But there is more to it than that:

One goal is to secure permanent financing for the media by freezingtheir capital.

A second goal is to limit the decision-making power of outsideshareholders with constraining bylaws.


Saving the media

The Nonprofit Media Organization

Nonprofit company:

Must invest any surplus revenue back into the organization.

Shareholders not allowed to withdraw.

Tax-deductible contributions.

As in a public company, a lot of stockholders, each of them withvoting rights.

But voting rights do not increase proportionally with shares in thecompany.


Saving the media

Capital and power

Below a certain threshold (e.g. 1%), “stockholders” are allowed togather to form an association (e.g. editors’ association or readers’association).

Compared to existing model of crowdfunding, they obtained votingrights: they are no longer considered as crowdfunders/donors but asstockholders.

Above a certain threshold (e.g. 10%), voting rights increase less thanproportionally with capital shares.

E.g. above this threshold, investments might yield only 1/3 of a voteper share.

Tax-deductions offset this loss of power.

Below this threshold (for small stockholders), investors would receivea proportionate boost in their voting rights (so that the total isalways 100%).


Saving the media

Capital and power








Saving the media

Capital and power








Saving the media

Capital and power

More democratic power sharing.

New place for societies of readers and employees.

⇒ Democratic reappropriation of the media by those who produceand consume the news rather than by those who seek to shape publicopinion or to use their money to influence our votes and our decisions.


Documents

Saving the Media Capitalism, Crowdfunding, and Democracy · 2015-12-13 · Saving the Media Capitalism, Crowdfunding, and Democracy Julia Cag e December 14th, 2015 EPOG seminar Julia