The Newspaper’s Financing Predicament

Critical Exchange in the Ad-Revenue-Only Age

With a decreasing circulation of offline newspapers and the advent of online-only publications, the basis of the public’s critical exchange is in danger.

As of a study conducted by “Pew Research Center” in 2016, 38 percent of Americans are obtaining their news online, through social media, websites or their corresponding apps. Only 20 percent of americans are getting their news from print publications. This represents a seven percent decrease in consumers of print newspapers, compared to 2013. (Mitchell 2016, p.4–6)

Traditionally, print publication’s profit is made up of two revenue streams: revenue through circulation (number of daily distributed copies) and revenue through advertisements. The willingness of advertisers to spend a certain amount of money on print advertisement is directly tied to the publication’s circulation. Because people are abandoning print mediums in favor of online news sources, the offline circulation decreases, cutting into both of the revenue streams.

Online, the traditional revenue source for publishers has been advertisement. “Fifty-six of the top 100 websites based on pageviews in February 2008 presented advertising; these 56 accounted for 86 percent of the total page views for these 100 sites. Twenty-six of these 56 sites, accounting for 77 percent of all page views for the top 100 sites, likely earn most of their revenue from selling advertising.” (Evans 2009, p.37)

While the overall revenue through print advertising is going down, revenue through digital advertising is steadily rising, from a total of $23.4 billion (PricewaterhouseCoopers 2008, p.5) in 2008 to $59.6 billion (PricewaterhouseCoopers 2015, p.5) in 2015. As a result, publishers become strongly dependent on advertisers.

In the United States of America, only eleven percent of people stated that they paid for an online news service within the last year.

In an effort to introduce new (or old) revenue streams to decrease the dependency on advertisers, several online publications have been experimenting with so-called paywalls, that are limiting the user’s free consumption of a sites’ online content. A successful implementation of such a paywall would bring back revenue through circulation but publishers are struggling with the user’s unwillingness to pay for online news. In the United States of America, only eleven percent of people stated that they paid for an online news service within the last year and not more than five percent would be open to paying five Dollars per month for online news in the future. (Newman 2015, p.65)

The purpose of news is to keep us informed about the world and its’ issues. Even though it might be interesting or even entertaining at times, the most important function of news is to empower people through information. In June 2013, The Washington Post caused an international outrage when it published slides, leaked by Edward Snowden, describing the PRISM data-collection program. An investigative piece published by The Chicago Tribune in 1996, pushed American Airlines to provide a defibrillator on every airplane, which reportedly saved 80 lives within ten years. (Wikipedia Contributors 2016, Examples) Coverage of the 2016 Dakota Access Pipeline pushed the public to engage, which led the U.S. Army Corps of Engineers to temporarily halt the project to conduct additional research. Between 1996 and 2000, after its entry into cable markets, Fox News persuaded 3 to 8 percent of their viewers to vote Republican. (The Fox News Effect 2006, Abstract)

By shying away from critical stories or altering their coverage, in favor of creating an advertising-friendly environment, publishers lose the value they are holding for enabling and encouraging critical public conversation.

Advertisers are tired of having their images displayed next to images of human tragedy.

“It’s more difficult to get publications to focus on issues that are more critical. It’s never been easy and I think in the last few years it’s gotten more and more difficult. As society becomes more obsessed with entertainment and celebrities and fashion. Advertisers are tired of having their images displayed next to images of human tragedy. They feel that it somehow detracts from the saleability of their products.” (The War Photographer 2014, 01:13:42), says James Nachtwey, an American photojournalist, and winner of two World Press Photo Awards.

Operating in a competitive environment, publishers are subject to pressure from the advertisers. The Advertisers are looking for an environment in which their advertising efforts are met with a similar viewpoint and supporting ideas. Unfavorable articles can worsen publishers negotiation standpoint when compared to competing publications.

When we talk to our people, through media training or whatever, we tell them they need to maintain positive, ongoing relationships with the press, says Jerry Jaros, senior vice president for communications for the 770,000-member National Association of Realtors (NAR). But if Realtors don’t like the content or the tone of newspaper coverage and deem it unfair, Jaros adds, they have a right to put their [advertising] dollars where they want to. That’s a decision made by individual firms. (American Journalism Review 1991, p.1–2)

A recent analysis, published in the “Journal of Marketing”, found that “(1) there is evidence for a strong positive influence of advertising on coverage, […] (3) peer pressures from competing publishers affect coverage decisions, […] and (5) the effects of corporate advertising influence exist in both Europe and the United States.” (Journal of Marketing 2009, p.33)

In 2007, writers of The Journal of Advertising conducted a survey concerning editorial integrity and the willingness to partially sacrifice it, of 119 U.S. print newspapers’ advertisement directors. The directors were asked to assess the acceptability of a newspaper to accept the demands brought up in different scenarios. “The first scenario was about a special section story on summer lawn care. A reporter was about to generate the lead story relying on local sources, and one of the sales people in the advertising department asked the reporter to interview someone from a nursery that is a big local advertiser. […] The fourth scenario, which had the highest severity of ethical questionability, concerned a prominent owner of a car dealership who was arrested and convicted of drunk driving. As a substantial advertiser, the dealer threatened to cancel all ads if the paper ran the story. (Journal of Advertising 2007, p.114)

The first scenario was deemed acceptable by 19.2% of directors employed by newspapers with a circulation size of up to 25,000 and by 6.3% of directors employed by newspapers of a circulations size over 25,000. The fourth scenario was deemed unacceptable by all of the directors working at publications with a circulation size over 25,000 but was still seen as acceptable by 2% of directors working at publications of a circulation of less than 25,000. (Journal of Advertising 2007, p.115/117)

The lawn care scenario […] indicates a practice of ingrained favoritism towards a paper’s own advertisers by interviewing them as experts and excluding other experts who do not advertise in the paper.” (Journal of Advertising 2007, p.118) Even though low, the acceptance rate of 2% at small newspapers, is “indicating a willingness to yield to advertisers pressure.” (Journal of Advertising 2007, p.118) The figures suggest that the pressure exerted by advertisers onto publishers, lessens with increasing circulation size.

What the privileged consumer can do in order to sustain a future of unbiased, high-quality reporting, is to accept that digital news should not be free.

The obvious explanation is the lower dependency on advertising revenue due to a significant second revenue stream resulting from a higher circulation. The second explanation for the higher editorial integrity among publications with a higher circulation could be the increased dependence on upholding a high reputation among a bigger number of readers. Given that the first explanation is at least part of the reason for higher editorial integrity and considering the present situation of stagnating circulation of print newspapers and online-only publications, we can imagine a concerning future.

What the privileged consumer can do in order to sustain a future of unbiased, high-quality reporting, is to accept that digital news should not be free. Through support by the readers who can afford it, digital publications bare the great potential to grant everyone access to information and upkeep the necessary critical discussion.

References and Works Cited

Mitchell, Amy, Jeffrey Gottfried, Michael Barthel, and Elisa Shearer. “The Modern News Consumer.” Pew Research Center (2016): 1–47. Web. 2 Oct. 2016.

Evans, David S. “The Online Advertising Industry: Economics, Evolution, and Privacy.” Journal of Economic Perspectives 23.3 (2009): 37–60. Web.

“IAB Internet Advertising Revenue Report.” PricewaterhouseCoopers / IAB, 2008. Web. 2 Dec. 2016.

“IAB Internet Advertising Revenue Report.” PricewaterhouseCoopers / IAB, 2015. Web. 2 Dec. 2016.

Newman, Nic. Reuters Institute Digital News Report 2015. Rep. University of Oxford. Oxford: Reuters Institute for the Study of Journalism, 2015. Print.

The War Photographer. Dir. Christian Frei. Perf. James Nachtwey. YouTube. N.p., 10 Oct. 2014. Web. 1 Dec. 2016.

Wikipedia contributors. “Investigative journalism.” Wikipedia, The Free Encyclopedia. Wikipedia, The Free Encyclopedia, 13 Nov. 2016. Web. 13 Nov. 2016.

Della Vigna, Stefano, and Ethan Kaplan. The Fox News Effect: Media Bias and Voting. Working paper no. 12169. Cambridge: National Bureau of Economic Research, 2006. Web.

Rinallo, Diego, and Suman Basuroy. “Does Advertising Spending Influence Media Coverage of the Advertiser?” Journal of Marketing Nov. 2009: 33–46. Print.

Lesly, Elizabeth. “Realtors and Builders Demand Happy News…and Often Get It.” American Journalism Review Nov. 1991: 1–5. Print.

An, Soontae, and Lori Bergen. “Pressure on Daily Newspapers: A Survey of Advertising Sales Executives.” Journal of Advertising 36.2 (2007): 111–21. Web. 10 Dec. 2016.