Tag Archives: ownership

Government 'doesn't understand economics' over relaxing ownership rules – media economist

On Wednesday I spoke at the thoroughly enjoyable Journalism’s Next Top Model conference at Westminster University. Highlight of the day was keynote speaker Robert Picard, a media economist able to separate publishers’ sense of entitlement from the hard realities of economics and business (mis)management.

Journalism will survive, he said, because there will always be a demand for it. But most print publishers will die because over the past few decades they quite simply haven’t managed their accounts responsibly. While a typical business should have a debt-to-equity ratio of around 1:1, some publishers have racked up ratios ranging from 6:1 to 66:1.

“If you haven’t managed your balance sheet you get in trouble in a recession. Do I feel bad for them? No. They made stupid mistakes.”

One particular mistake highlighted by Picard was the switch in the 1990s from making acquisitions with stock to making acquisitions with debt.

“All the newspapers were making profits when they went bankrupt,” he pointed out. It was their handling of debt that killed them.

I asked Robert about the government’s plans to relax (and consider removing) local media ownership rules – and whether that would indeed create the environment for entrepreneurialism they want to encourage. His response was simple: “You don’t encourage competition by relaxing ownership rules.

“They don’t understand economics,” if they thought that would happen, he continued. “We need people to start more media organisations, not merge into fewer organisations.”

Picard seemed to feel that the Dutch government’s moves to provide funds to help news organisations restructure, or to re-skill journalists, were more intelligent responses.

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Newspaper bias: just another social network

Profit maximising slant

There’s a fascinating study on newspaper bias by University of Chicago professors Matthew Gentzkow and Jesse Shapiro which identifies the political bias of particular newspapers based on the frequency with which certain phrases appear.

The professors then correlate that placement with the political leanings of the newspaper’s own markets, and find

“That the most important variable is the political orientation of people living within the paper’s market. For example, the higher the vote share received by Bush in 2004 in the newspaper’s market (horizontal axis below), the higher the Gentzkow-Shapiro measure of conservative slant (vertical axis).”

Interestingly, ownership is found to be statistically insignificant once those other factors are accounted for.

James Hamilton, blogging about the study, asks:

“How slant gets implemented at the ground level by individual reporters. My guess is that most reporters know that they are introducing some slant in the way they’ve chosen to frame and report a story, but are unaware of the full extent to which they do so because they are underestimating the degree to which the other sources from which they get their information and beliefs have all been doing a similar filtering. The result is social networks that don’t recognize that they have developed a groupthink that is not centered on the truth.” [my emphasis]

In other words, the ‘echo chamber’ argument (academics would call it a discourse) that we’ve heard made so many times about the internet.

It’s nice to be reminded that social networks are not an invention of the web, but rather the other way around.

h/t Azeem Azhar