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
Julia Cage (Sciences Po) Saving the Media EPOG seminar 4 / 41
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
Julia Cage (Sciences Po) Saving the Media EPOG seminar 4 / 41
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?
Julia Cage (Sciences Po) Saving the Media EPOG seminar 5 / 41
Media crisis The need for journalists
Evolution of the number of journalists: France
0.0
2.0
4.0
6.0
8.1
.12
.14
Num
ber o
f jou
rnal
ists
(% o
f wor
king
pop
ulat
ion)
010
,000
20,0
0030
,000
40,0
00N
umbe
r of j
ourn
alis
ts
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
Julia Cage (Sciences Po) Saving the Media EPOG seminar 6 / 41
Media crisis The need for journalists
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.
Julia Cage (Sciences Po) Saving the Media EPOG seminar 7 / 41
Media crisis The need for journalists
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
now
ledg
e w
orke
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
Julia Cage (Sciences Po) Saving the Media EPOG seminar 8 / 41
Media crisis The need for journalists
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.
Julia Cage (Sciences Po) Saving the Media EPOG seminar 9 / 41
Media crisis The need for journalists
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
orki
ng p
opul
atio
n)
35,0
0040
,000
45,0
0050
,000
55,0
0060
,000
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
Julia Cage (Sciences Po) Saving the Media EPOG seminar 10 / 41
Media crisis The need for journalists
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
ng p
opul
atio
n)
France Germany Italy Japan United States
Number of daily newspaper journalists (% of working population)
International comparaison, 2013
Julia Cage (Sciences Po) Saving the Media EPOG seminar 11 / 41
Media crisis The need for journalists
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.
Julia Cage (Sciences Po) Saving the Media EPOG seminar 12 / 41
Media crisis The need for journalists
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.
Julia Cage (Sciences Po) Saving the Media EPOG seminar 13 / 41
How to explain this crisis?
Media crisis A long-term decrease in advertising revenues
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
Julia Cage (Sciences Po) Saving the Media EPOG seminar 14 / 41
Media crisis A long-term decrease in advertising revenues
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
Julia Cage (Sciences Po) Saving the Media EPOG seminar 15 / 41
Media crisis A long-term decrease in advertising revenues
Newspaper advertising revenues (US)
0.2
.4.6
.8%
1950 1960 1970 1980 1990 2000 2010
Evolution of newspaper advertising revenues (% GDP)
United States, 1950-2013
dollars
Julia Cage (Sciences Po) Saving the Media EPOG seminar 16 / 41
Media crisis A long-term decrease in advertising revenues
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
Julia Cage (Sciences Po) Saving the Media EPOG seminar 17 / 41
Media crisis A long-term decrease in advertising revenues
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).
Julia Cage (Sciences Po) Saving the Media EPOG seminar 18 / 41
Media crisis A long-term decrease in advertising revenues
Newspaper total revenues (United States)0
.2.4
.6.8
11.
2%
1960 1970 1980 1990 2000 2010
Evolution of newspaper total revenues (% GDP)
United States, 1956-2013
Julia Cage (Sciences Po) Saving the Media EPOG seminar 19 / 41
Media crisis A long-term decrease in advertising revenues
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.
Julia Cage (Sciences Po) Saving the Media EPOG seminar 20 / 41
What could be done?
The new “press barons”
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
Julia Cage (Sciences Po) Saving the Media EPOG seminar 21 / 41
The new “press barons”
Julia Cage (Sciences Po) Saving the Media EPOG seminar 22 / 41
The new “press barons”
Julia Cage (Sciences Po) Saving the Media EPOG seminar 23 / 41
The new “press barons”
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?
Julia Cage (Sciences Po) Saving the Media EPOG seminar 24 / 41
The new “press barons” One dollar one vote?
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
Julia Cage (Sciences Po) Saving the Media EPOG seminar 24 / 41
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.
Julia Cage (Sciences Po) Saving the Media EPOG seminar 25 / 41
Total outside spending
020
040
060
080
01,
000
1,20
0M
illion
s of
$
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
e (i
n %
) of
inco
me/
cont
ribu
tions
Campaign contributionsIncome
Consequences?
$0.0
$1.2
$2.4
$3.6
$4.8
$6.0
$7.2
$8.4
$9.6
$10.8
$12.0
0 €
1 €
2 €
3 €
4 €
5 €
6 €
7 €
8 €
9 €
10 €
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Hou
rly m
inim
um w
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
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
Julia Cage (Sciences Po) Saving the Media EPOG seminar 28 / 41
The new “press barons” Money in politics... and in 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.
Julia Cage (Sciences Po) Saving the Media EPOG seminar 29 / 41
The new “press barons” Money in politics... and in the media
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.
Julia Cage (Sciences Po) Saving the Media EPOG seminar 30 / 41
Government intervention and nonprofit media
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
Julia Cage (Sciences Po) Saving the Media EPOG seminar 30 / 41
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.
Julia Cage (Sciences Po) Saving the Media EPOG seminar 31 / 41
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.
Julia Cage (Sciences Po) Saving the Media EPOG seminar 32 / 41
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.
Julia Cage (Sciences Po) Saving the Media EPOG seminar 33 / 41
Government intervention and nonprofit media Nonprofit media
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
Julia Cage (Sciences Po) Saving the Media EPOG seminar 33 / 41
Government intervention and nonprofit media Nonprofit 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.
Julia Cage (Sciences Po) Saving the Media EPOG seminar 34 / 41
Government intervention and nonprofit media Nonprofit media
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.
Julia Cage (Sciences Po) Saving the Media EPOG seminar 35 / 41
Government intervention and nonprofit media Nonprofit media
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”).
Julia Cage (Sciences Po) Saving the Media EPOG seminar 36 / 41
Saving the media
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
Julia Cage (Sciences Po) Saving the Media EPOG seminar 37 / 41
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.
Julia Cage (Sciences Po) Saving the Media EPOG seminar 38 / 41
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.
Julia Cage (Sciences Po) Saving the Media EPOG seminar 39 / 41
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%).
Julia Cage (Sciences Po) Saving the Media EPOG seminar 40 / 41
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%).
Julia Cage (Sciences Po) Saving the Media EPOG seminar 40 / 41
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%).
Julia Cage (Sciences Po) Saving the Media EPOG seminar 40 / 41
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.
Julia Cage (Sciences Po) Saving the Media EPOG seminar 41 / 41
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