Media funding, prizes and public goods

The government's paid $50m to help shore up newsmedia companies' finances during Covid.

But the overall media funding problem is bigger than the current Covid mess.

I went through things in a bit more detail in Newsroom last week (ungated here). Too many news types want to find ways to have the government strongarm tech companies into rebuilding the old advertising-based funding model that worked until the 2000s - it's basically nostalgia for an era that just won't come back.

But where we wouldn't see any need to support buggywhip manufacturers against the rise of the car, there are reasons to expect the optimal amount of journalism is higher than we might wind up with where the personal benefits of being informed aren't all that high. 


But you can get the nut of it from this snip from the piece at Newsroom.
That would not be a problem on its own. But there are reasonable ‘public good’ aspects to a thriving news sector. If an investigative journalist exposes a city councillor’s corruption, the benefits extend far beyond that newspaper’s subscribers being better informed. Worse, the benefits of being better informed have always been just a little ephemeral.

Sure, there is prestige in being able to hold one’s own in conversations about current events, but most of us really could ignore almost everything that’s going on in politics, and in policy, and in sport, without really noticing the loss.

It is then no surprise that the most typical findings of the academic literature on voter knowledge are that voters know very little.

This is hardly a new phenomenon. Even in the heyday of journalism, in 1964, well before the great decoupling of newspapers from classifieds and other advertising, only 38 percent of surveyed Americans knew that the Soviet Union was not a member of NATO – despite that the Cuban Missile Crisis had almost brought the powers to nuclear war only two years earlier.

And so we get to the nub of the problem. For most people, there is little personal benefit in getting the kind of information provided by serious journalists. So there is less effective demand for news than would be ideal, both because serious journalism directly provides benefits in democratic accountability, and because a better-informed voter base is likely to yield better outcomes at the ballot box.

There are two basic ways of trying to solve the problem. News producers could be directly subsidised, whether by philanthropists or by taxpayers. Or the rewards for being better informed could be strengthened. Let’s take each in turn.

Last year, the Stigler Center for the Study of the Economy and the State’s Final Report on Digital Platforms suggested taxpayer-funded vouchers could help fund news. Under this scheme, each adult would receive a $50 voucher to be used as a donation to their favourite news outlet. The proposal has a lot of advantages over other forms of state-funding. Rather than the Government or a panel of anointed experts doling out the money, individuals would reward outlets they most wish to support.

The proposal is interesting. The authors have thought through most of the obvious objections. But while the scheme would help reward the investigative journalism so important for democratic accountability, it would not do as much to encourage people to read the stories.

There is another way of encouraging people to pay a bit more attention to the world around them.

Growing up in Canada, radio stations often ran contests where they would phone someone at random and give them a prize if they could name the song the station had just played. It encouraged people to pay a bit more attention.

Imagine if the Government allocated $36.5 million to a prize pool. Every day, the editors of the various news outlets overseen by the Media Council would submit skill-testing questions drawn from the more important stories they had recently produced. Every day, some lucky Kiwi would get the phone call promising a $100,000 prize for successfully answering one of the questions of the day – with calls continuing until someone got the prize.

Suddenly, knowing what’s going on would matter for more than just water cooler kudos. Even if the odds of getting the call were low, the pain of getting the call and not knowing the answer would encourage paying attention to current events. That would help to drive subscriptions to the news outlets providing the news and build a better-informed electorate.

That seems more promising than letting the Government adopt mafia-style standover tactics to force tech companies to fund journalism.
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Media funding, prizes and public goods