Let’s talk about the economics of great journalism

Let’s talk about the economics of great journalism

Summary: Responding to various recent postings about journalism, including Ethan Zuckerman, Seth Godin, Dan Gillmor, Amy Gahran and Lisa Williams. I think the economics of journalism and ethics are deeply related and we tend to talk about them separately, emphasizing the dying channels for distribution at the expense of understanding the net loss of reporting.

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TOPICS: IT Employment, CXO
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Responding to various recent postings about journalism, including Ethan Zuckerman, Seth Godin, Dan Gillmor, Amy Gahran and Lisa Williams. I think the economics of journalism and ethics are deeply related and we tend to talk about them separately, emphasizing the dying channels for distribution at the expense of understanding the net loss of reporting.

When I worked with the team that built the ON24 iFinancial Network, a personalized financial news network that delivered hundreds of long- and short-form investment news each day, we tried to grow on advertising. Even though we had several million viewers who spent an hour or more a day getting much deeper reports than other sources provided—complete coverage of conference calls, analyst reports, company statements and executive speeches—advertisers were slow to adopt the idea.

ON24's news team operated on approximately $1.8 million a year at its peak, when it was producing 28 hours, and more, of programming a day, far below the cost at competitors like CNBC, which paid just one of their anchors almost as much as ON24's news staff of 85 full-time employees. Such radical changes in the economics of news are always possible, especially now.

Media innovation cannot be dependent on advertisers, they will not take the risk. Innovation must find a foothold with people who demand that great news be available. The users of news have to support it to get it going. In the past, rich men made this investment and we got what they paid for. Are we going to pay for better news in the coming century? Are we going to pay for it now, when media is down and change can overwhelm the old controlled media that delivers more pabulum than hard news?

Having been in and around journalism, citizen journalism and publishing for a long time, let me suggest we stop talking about the ethics of providing complete and useful information to citizens of a democracy, which are barely changed by the requirements of social media and cloud computing technology, in isolation from the economics of journalism. If someone delivers great journalism on a regular basis, what does it cost to do it? What is it worth to you to get better news coverage of an important issue?

Let's posit that if the journalism is "great" or even "good," it will be ethical, and face the problem of paying for the change we want. Unethical reporting is not journalism.

Forget about advertising and the like as a means of support. What's a solid source of useful reliable information worth to you? A dollar a month? Twenty dollars a year? I'd bet you'd pay more for great local coverage, whether your locality is geographic, including your own home town, or topical but global, such as global warming or eliminating pandemic disease.

For example, if you could count on someone to examine federal elections reporting for you and deliver all the articles you need to be fully informed about your reprsentatives' potential conflicts of interest, as well as alerts via Twitter, Friendfeed or SMS, what would you pay? Or comprehensive coverage of your favorite baseball team in the context of the whole of Major League Baseball? Perhaps you'd like extensive research into the activity of the World Bank or the Department of Interior. How about your state legislature? Maybe you'd like grass-roots coverage of USAService.org projects in your region that included financial analysis of the use of funds—that costs money.

The cost of any of these specialties is a good living for someone doing the work, whether that is doled out in parts to members of a team or to a single individual. We can talk in terms of voluntary effort, but even that needs financial support and some organization and analysis that ties together all the bits and pieces, whomever might provide it. If the reporter makes their living some other way, the work of reporting becomes secondary and conditional—they can't commit to deliver news no matter the time or cost if they have to work a day job.

The obvious potential bias of a "press" that can only work voluntarily, making it the playground of the wealthy, makes the benefits of a self-supporting independent media self-evident. The media that people complain about is the product of wealth investing in messages they would support. Any replacement of an egalitarian grass-roots funding with one rich man doling out largesse or investments will get you the same media we have today.

Let's assume that a competent reporter delivering original reporting, not simply reworking other sources, is worth the same as a senior mid-level manager in a corporation, such as Microsoft or Google—they may make between $90,000 to $130,000 a year. We're talking about a good source of information, someone that people find reliable and responsive to the community's ideas. Remember, that could be $10,000 to nine to 13 people sharing the task of coverage or more to participants in a smaller team.

Of course, a smaller beat, such as a town or city's government, might be less expensive to cover. These reporters working directly for the community could price the service any way they like. A kid covering Lakewood, Wash., where I live, might build a living that gives them a platform for covering the Washington State Legislature, a local industry or other "bigger," more lucrative topic.

Good reporters have costs you might not envision when thinking of someone sitting at a desk, using the Internet to do research. For example, subscriptions to various publications and source of background information costs, at minimum, a few hundred dollars a month. Should the reporter need to travel to do any research, conduct interviews or collect information that is not available electronically, that's a minimum of $1,500 per trip for airfare, plus a week's food and lodging.

But, hold on, let's say the reporter needs to file a Freedom of Information Act request? The last time I did it for a story on the National Security Agency, in the 1990s, it cost $7,500 to get the filing shepherded through the process and pushed to success by an attorney. A good reporter might also find themselves the subject to legal attacks or, if they cover a war, captured by insurgents—do you expect them to just languish unaided if they can't deliver the news?

What isn't necessary for the news to flow effortlessly these days is a big company to distribute articles and programming. They might be good at selling advertising, but that need not be part of the business of news, if we begin with the assumption that funding sources also have some influence over coverage—people reading and viewing may be carrying the freight.

The fully loaded cost of a great reporter doing great work, then, falls somewhere in the $180,000 range:

$130,000 salary and benefits
$4,800 a year in subscriptions and other information sources
$2,500 a month in travel
$1,250 a month in legal and insurance coverage
$179,800 total, and that's before the cost of IT, telecom and office space

After salary and benefits, the average cost of supporting a reporter will range between $20,000 and $50,000 a year. This assumes they have no bonuses for great work or world-changing stories. Yes, they might write a book about that story to supplement their income, but this takes away from time that can be dedicated to uncovering the next story and contributes to the phenomenon of the celebrity journalist in sharp contrast to the beat writer. In short, if every other sector of the economy works best when people can compete for success and compensation, this one is going to take some incentives from readers/viewers and, even, collaborators and amplifiers who reblog, rewrite and extend the hard work of original research. It's a system that the Creative Commons licenses could handily support.

How could we make this work? Obviously, legal, benefits and other general and administrative features of this process (such as getting bulk rates on travel and subscriptions), can be lowered by a distributed non-profit or cooperative organization. That entity could also handle distribution of compensation, handling the splitting of payments. This is critical, since it is most likely that supporters of reporting will want a collection of sources, not just one source. So, there might be a "Collective Press" feed on U.S. government, on the state of California, the auto industry, green energy, and so forth, the fees for which are split between many contributors.

Let's also assume that the news should not be behind any kind of pay wall, that it should be freely accessible so that people can use and decide if they want to support the work. Added convenience or increased interaction would be the best way to reward supporting. My thought is to give supporters enhanced commenting, Twitter access to the reporter, and other benefits, such as forwarding with private discussion links.

In the simplest scenario, then, what does an independent journalism supported by the users of information, as compared to being designed to support the producer-of-information's advertisers, look like?

How about this? Pay $1 a month or $12 a year to a reporter who has offered an online "contract" to deliver thorough coverage of a topic. They might ask for more, but they'd have to sell the idea, just as they do in editorial meetings today. In exchange, you'll get alerts about new articles and comments by the writer through email, Twitter, Facebook, Friendfeed or SMS. Another feature would be a social page of your own, where your input to the feed is available, delivered to the reporter for their thoughts, and your own feeds to share with friends. The reporter benefits from these re-feeds by supporters as a form of marketing for their work.

Since this would likely be an entrepreneurial effort, reporters would have to start off building their communities, with the help of early supporters. We could rally around a reporter and get them started with commitments of $1 a month ($0.03 a day). A reporter offering to cover a major federal program that has significant impact on 500 companies and 5,000,000 people should be able to recruit 5,000 supporters after a few months.

Using the costs described above, the break-even point for a $130,000-salaried reporter would be 15,000 readers. That's well within the realm of possibility for a reporter supported by a non-profit that lists their offerings and ensures payments will be fulfilled. Assuming that reporters will be subscribing to other reporters, some of this needs to be kick-started by the members of the "new press" finding one another.

I'll commit right now to support 40 such reporters who will give me a unique, comprehensive and informed feed of information and analysis on subjects about which I want to keep apprised. The kind of quality and coverage I want is of higher quality than the momentary mentions of television and deeper than beat coverage in newspapers or magazines. And I want to discuss the topics I care about with informed reporters and other readers/viewers.

Topics: IT Employment, CXO

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29 comments
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  • and then let's talk about ZDNet and others

    The real problem with ZDNet is payment based on the number of replies. This is obviously tied to advertiser revenue, since advertisers want some proof that readers actually looked at the page - probably didn't see their ad, but advertisers are desperate for some justification for their budget.

    So what does this give you? A lot of trolling by bloggers trashing Windows especially in relation to Linux or some Apple bait for those sick to death of that company. Sure it generates lots of posts and presumably money for the blogger, but journalism - I don't think so.

    You've suggested a subscription model which certainly works for MMOs, but that, in the end, is entertainment. I'm sure there is a small circle of people interested in quality journalism, but I really don't think they're going to employ many journalists. The problem with the subscription model is it too can become like ZDNet, just providing controversies for your audience.

    Given the constant corruption of journalism by money, owners, journalists, editors etc, I'm beginning to think journalists need to be employed and paid by the state and have similar working conditions to judges - that is they cannot be arbitrarily dismissed or be subject to undue influence and have some kind of overlook committee.

    The purpose of journalism is not money, profit or selling the film rights of your best scoop, it's to uncover and disseminate the truth. Unless their source of revenue is separate from their actual work, it will corrupt them eventually.
    tonymcs@...
    • There's a big difference

      I completely agree with your critique of popularity-driven
      compensation. ZD pays by page views, including TalkBack
      and image galleries, not just comments.

      The important difference between what I propose and the
      ad model is that, if you don't like the popularity-driven
      articles, advertisers do and will support their continued
      existence. If you could stop paying me, I'd get your
      message, which a reporter at a commercial publication
      seldom hears.

      I would not want a government-supported press under any
      circumstances, no matter how ideal, because governments
      can exert even more pressure because they have direct
      funding and gatekeeping relationships with the
      information.

      Ultimately, it's about the journalist's ethics. We have to
      confirm the value of independent investigation and
      thinking.

      Consider I.F. Stone's Weekly as a model. When he took a
      position his readers disliked, he paid in lost subscribers.
      But enough subscribers continued to support *his
      independence* that he was able to break some of the most
      important stories of his day despite severe public,
      commercial and political pressure.
      Mitch Ratcliffe
      • Agreed in full

        What you didn't mention, though, is that giving tenure to journalists is a particularly bad idea because it encourages mediocrity and makes it hard for editors to be responsible for the final product.
        John L. Ries
        • Let's not give tenure!

          Journalists should continue to earn their living based on
          service delivered, not years of service.
          Mitch Ratcliffe
  • RE: Let???s talk about the economics of great journalism

    Hi, Mitch:

    Love this entry; in particular, love the verve and drive I sense behind it, and the fact that you bestirred yourself do to do some math, which rarely happens in the discussion surrounding the deflation of the journalism bubble.

    I do have to say that $179k sounds high to me. I certainly don't pay myself that to run Placeblogger, and I never expect to. Unless I'm really misinformed, journalists don't get paid anywhere near what people at Google do, and I'm not sure that will change, given the relative levels of education required.

    IMO, a big part of the problem is that some people in the delivery chain expect to be paid that and much more (see <a href ="http://medianation.blogspot.com/2009/01/good-jobs-at-good-wages.html">Dan Kennedy's post on exec salaries</A>.) Secondly, if you don't rely on advertising and bootstrapping, you'll have a ramp-up period to that 15k subscriber mark that will require investors, who expect big payoffs for investments that will mark up the cost of providing that information even further. (See my companion piece to the one you linked to, <a href ="http://www.placeblogger.com/blog/lisa/the-journalism-bubble">The Journalism Bubble</a>).
    lisa.williams
    • Thanks, Lisa

      Yeah, that's the fully-loaded cost for someone doing high-
      end work, including all the support and travel expenses.
      And, frankly, I think the reason there aren't as many great
      journalists now is that they get paid as though it was
      supposed to be only a public service. Government gets
      better people with higher salaries, now that they try to
      compete with the private sector for top talent. Google
      certainly produces a lot more bad information than the
      typical journalist, so why not compete with them?

      As for start-up costs, I think the onus falls on the
      "movement" for this kind of journalism to shorten the
      ramp-up. We don't need investors seeking big returns, but
      we could use investors who pool resources to accelerate
      discovery and subscriptions to independent journalism.
      They could take a share of the rewards for a limited period
      of time and their risk would be in getting revenue to the
      "success" level as quickly as possible.
      Mitch Ratcliffe
      • The price for a journalist's work

        Great post! My only reservation is that you're starting from what the price of a journalist's work "should" be; as Lisa points out, the reality is often much lower. Looking at it from the other end, I'd ask this question: For how little would a journalist be willing to work in this fashion, particularly at a time with so many media layoffs? "Some" income is a lot better than no income, particularly when it just might lead to a lot more. In general, in deflationary periods like the one we're in now, prices drop toward and often even below cost.
        Rohan Jayasekera
        • It's high, but it is competitive

          I agree that the price I focused on is high, but with so
          many journalists simply quitting the business entirely
          because there are lucrative jobs that they can take as an
          alternative to reporting, we ought to focus on keeping the
          best people in journalism (whether they are "pros" or not).

          As I noted in other comments, the idea is to put a bogey
          out there and it could certainly be used as a pivot point on
          a sliding scale, with lower-value beats earning less. In this
          period of crisis, I can easily see a single reporter putting
          together several beats to earn a living.

          Nevertheless, in the long term, it is necessary to consider
          what a good job would pay in the face of competition from
          other industries willing to hire great writers, researchers
          and editors to do marketing, PR, and other functions using
          the same skills.
          Mitch Ratcliffe
    • Levels of education?

      Mitch's post was interesting, though I do have a few reservations about his co-op style news room, but I found an off-hand comment by the above poster even more worrisome.

      lisa.williams wrote:
      "Unless I'm really misinformed, journalists don't get paid anywhere near what people at Google do, and I'm not sure that will change, given the relative levels of education required"

      I could be taking this out of context, but I can assure Lisa Williams that as a journalist I have completed a Masters program from an accredited college, as have many of my colleagues. Some have even done doctoral work. Level of education does directly translate into the size of the paycheck. In fact, the highest paid people in corporate America is the CEO and I think we all know that nobody is worth $1 million+ in bonuses and perqs. Journalism has always been a job that has been low-paying.That's why members of the field give in and switch careers to public relations, the money is always much better. But the career doesn't not pay lower because we are less educated than someone with a computer science degree, and certainly not someone with a business degree.

      As I have said, this seemed to be an off-hand comment by the poster and I'm sorry if I've read too much into it, but the fact I was able to read condescension into your post perhaps means the words were chosen poorly.

      Thank you
      fluffytuft
  • The solution is simple

    If you make news that people want to read, they'll pay for it. Period. The fact that people won't pay for it, means your news sucks. Deal with it and quit whining about it.

    Here's the real issue. People are getting tired of reading leftist propaganda masquerading as news. I mean, for crying out loud, you can't even read a story about the bird strike on that plane without some propagandist pretending to be a journalist tying it to global warming. And then we sit here and watch the press pile on Palin because here daughter is pregnant out of wedlock and totally bury the Obama's ties to Blago and his corruption.

    Even the tech site fall prey to this nonsense. One of your most prolific bloggers is an environmentalist wacko spewing the most ridiculous propaganda without a shred of journalistic integrity.
    frgough
    • Comment by frgough

      One more angry male spewing nonsense. Please keep your moronic commentary to yourself...Your generous use of buzz-words like "leftist" and "propagandist" and "wacko" brands you as someone who has already come to his conclusions and isn't budging, even in the face of evidence. Your mind is closed...and I wish your mouth were as well.
      bodhi88@...
      • bodhi88 your key words angry male shows what your are to. give it a rest

        bodhi88 your key words angry male shows what your are to. give it a rest. it's a fact 90% of so called journalist are liberals. who skew the storys they report to further their liberal agenda. I think it was 70% in the last poll thinks they are anyways. The only ones denying it is the reporters there self?s and the liberals who's ideas they Espouse. that?s why the so called old media is dyeing people do not trust them any more.
        SO.CAL Guy
    • Works both ways

      Been quite a while (20 years or more) since there's been much in the way of objective political commentary on commercial radio.

      The proper attitude for all journalists (regardless of their political persuasion) to take is that their job is to inform, rather than to persuade, and that open propaganda is a poor remedy for alleged bias. It may be that there are too many liberals and not enough conservatives in journalism, but the way you fix that is to worry more about reporting the news, and offering informed commentary from a wide variety of viewpoints, and less about how either will influence people's votes.

      For starters, "advocacy journalism" is a contradiction in terms and should be a firing offense. For seconds, conservative (or liberal) media that only conservatives (or liberals) pay any attention to are of little value, except as a feel-good mechanism. Third, just maybe, talk show hosts and bloggers would have more real influence if they spent more time reasoning with those who disagree, rather than reviling them.

      Maybe everyone to the left of Herbert Hoover is utterly deluded, but you can't persuade the deluded majority of it, unless they voluntarily decide to listen to you. That means you have to be civil to people, even if you think they're flat-out wrong.
      John L. Ries
  • RE: Let's talk about the economics of great journalism

    First of all, the analysis only covers the reporter. Great journalism also requires great editors, fact-checkers, photographers, etc. The cost of these adds at least 50% to the cost. You're not going to get the level of ethics and transparency required without these.

    Second, Ratcliffe commits to supporting 40 reporters. I can't imagine 40 reporters being enough to present me the breadth of journalism I'm used to receiving. And at that point I'm spending $500/year. I currently pay $26/year for Thursday-Sunday LA Times delivery. I doubt 40 journalists can match the breadth or quality of this. And I pay less than that for my subscription to "The Week." My total expenditure on journalism, even if you count an appropriate fraction of my cable bill and internet connection, probably doesn't reach $500/year. Ratcliffe's background is an area where people need journalism to do their job, but that won't provide many readers for USAService.org analysis. I might pay $10/month for a comprehensive source of great journalism, but I'd want to receive many more than 40 sources. I'd spend $1/month for "great local news," but I'm not going to get great local news from the equivalent 1 full-time journalist, even in my medium-size town of 100,000.

    Third, How do you get the next generation of great journalists with this model? You probably have to give 10 rookie journalists an opportunity in order to get one great journalist.

    So at Ratcliffe's proposed subscription rate, we're really talking about something like 50,000 readers. To achieve a price that might be appealing to someone who isn't in a profession that requires information, we're in the 200,000-reader range. That's clearly acheivable. The world's newspapers of record do so. But of course at a circulation of 200,000, a publication can be advertiser-supported, or close.

    The issue is of course the transition. Ratcliffe's probably correct in saying a great source can recruit 5,000 paying subscribers in a few months. Achieving 50,000 paying subscribers takes significantly longer. Neither a subscription model nor an advertising model has much hope.

    Nor is there much hope for "great local news," outside of large metropolitan areas. Of course that's true of traditional media as well.
    rjplummer
    • So, let's not start at all?

      Yes, the analysis covers only reporters, because we have to
      start somewhere. Editors and fact-checkers can be
      integrated into the organization I described as providing
      general and administrative services, which will increase the
      cost. It could, however, be passed along from the market
      through the reporter, who would pay for those services if
      they chose.

      That lets the reporter increase the perceived value of their
      reporting in a more flexible way. One could also choose to
      have community editors and fact-checking. I'd argue that
      photographers are not essential to this business in the age
      of Flickr, rather they add quality (and cost) that should be
      up to the reporter doing the work.

      While you may think you do not pay as much as $400 a
      year for "journalism," I assume that you have, between
      newspapers, share of cable payments, magazines and
      newsletters you might take, you come close. But, those
      forms of news delivery are subsidized by advertising and, if
      we are going to face these costs realistically, we have to
      look at the unsubsidized costs.

      There is no need to get 10 rookie journalists to end up
      with one great one. Plenty of reporters are out of work.

      So, what if we get realistic in this way -- if 5,000 people
      want coverage of a specialty topic, they may decide to pay
      $10/mo. apiece. As the support community grows, the
      per-supporter cost could fall. Maybe if we want this, it's
      just a matter of deciding to invest in it.

      I picked 40 journalists as a number, because I'm willing to
      layout $40 a month for news I can really put to use as a
      citizen. Try suggesting what you'd pay and we can discuss
      the gap between willingness to pay and cost.

      Having started a few media businesses, I can say it is
      possible to create new sources of journalism. The key to
      doing so is a ruthlessly honest discussion of the costs and
      the requirements of meeting those costs.

      If there is "not much hope" for journalism, there is no hope
      for democracy. That's an answer we cannot accept.
      Mitch Ratcliffe
  • Wonderful, except for one thing....

    Do you really think that the truth of reporting will necessarily improve if the masses are paying for it? Let's face it. Many media outlets have a political agenda, and they will not change that agenda regardless of who is footing the bill. I for one refuse to foot the bill for a media agency that has such an agenda, and unfortunately, that is most of them. Until the media learn to be truly unbiased, and there is little likelihood that this will occur since it is the editors and higher who are pushing the agendas, the condition of reporting will not improve.
    jgmsys@...
    • The way you get that...

      ...is competition. The more concentrated the news industry becomes, the less incentive there is to serve the interests of the readers, particularly when advertisers are footing most of the bill (the customers are those who pay, which I think is Mitch's main point).
      John L. Ries
      • Yes -- thanks for putting it simply

        You make my point clear: bringing the economic relationship
        back to the reporter-reader reinstates the obligation to serve
        the community. We can think of all sorts of mixed or
        alternative business models, but the problem comes down to
        connecting reporting to communities.
        Mitch Ratcliffe
  • calibrate the media! don't expect what it can never deliver!

    There is a classic problem with journalism that has been only hinted at in the posts here: Simply by choosing to cover something (always out of several to many alternate possibilities) your "journalist" has already made a statement that must influence any and all readers. Namely, those readers are gaining perspective about Topic A (that is being covered) while simultaneously getting NO INFORMATION AT ALL about Topic B (that is not being covered)!

    Furthermore, this situation can never be resolved as there are always more issues/stories in play than there are reporters available to do them all even perfunctory justice. Thus there is the strongly-held belief that since unbiased journalistic integrity is essentially impossible, you are better off with openly biased reporting whereby readers can then "calibrate" the various news sources available (print/TV/cable/blogs).

    In practical terms this works like movie reviews. Here the columnists are obviously (and without shame) bringing their feelings and taste to the judging of every film they critique. You (the cinema fan) just monitor a few of the prolific reviewers until you find one or two whose opinions closely match yours. Viola! you have now found a good consultant who can probably tell you (most of the time and in advance) if a particular flick is worth seeing.

    In the greater sense, is the New York Times ever disturbed by the growing army of government employees and teachers who live off tax money? Likewise, will the Wall Street Journal ever find anything good to say about labor unions or the minimum wage?
    dmennie
  • Who covers the school board in Hazleton, PA?

    Or Peoria, or Sheboygan?

    Intriguing analysis of the economics of a very high end
    journalism (from my nearly 40 years of newspaper
    experience, your figures are way high).
    But the weakness of your suggested solution--
    subscription based journalism--and most other post-
    cyber solutions, including citizen or mass journalism---
    lies much further down the food chain.
    Do you really think there are enough people in Hazleton,
    PA, or any other small town---or any major metropolis,
    for that matter---to provide a living, or semi-living wage
    to the person who goes to the board meeting, the
    agencies, the snow-removal hearings, the debates over
    whether to buy a $49,000 machine to detect water-main
    breaks, etc.? Even the great and wondrous city of DC is full
    of boringly essential activity.
    The subscription model breaks down because it depends
    on popularity. Consider the example given above of IF
    Stone: If he wrote something the readers didn't like, his
    subscriptions went down--this is a good thing? Lots of
    people didn't like the press' coverage of the Vietnam War
    (or the Iraq War, for that matter). So the reporters get paid
    less? Print reporters get regular calls from Irate Readers
    who cancel their subscriptions. That does not stop them
    from doing their jobs. Good newspapers hear from angry
    advertisers all the time, too. Good publishers are good
    firewalls.
    Further, what happens when a journalist must spend time
    building a subscriber base rather than digging for stories?
    May the best self-promoter win?
    Ad-based journalism has many, many flaws. But its great
    virtue is the provision of capital to support non-revenue-
    producing work. Journalism is a cost center.

    Peter W. Goodman
    pwgoodman