Journalism’s Market Failure Is a Crisis for Democracy

Victor Pickard

Local journalism is failing in the United States. Many of us learn in school that a free society requires a free press, but we rarely reflect on what it actually means to lose the fourth estate. Democracies need independent, fact-based journalism to provide a voice for a diverse range of people, to watchdog the powerful, and to keep members of a society informed. Study after study has found that without access to local news, people are less civically engaged and less likely to vote. The demise of local newspapers – which are still by far the main source of original reporting in their communities – is also linked to a rise in local corruption and an increase in polarization, as news consumers rely more on partisan-inflected national outlets for their information.

This crisis arose because the news media’s commercial imperatives never fully aligned with democratic objectives. The market simply can’t support the levels of journalism – especially local, but also international, policy, and investigative reporting – that a healthy democracy requires. Arguably, this has always been the case, but it’s especially true today, as newspapers are hollowed out or closed down across the country, leaving vast news deserts in their wake. All of us who wish for a democratic future – including the business community – have a stake in ensuring that local news media survives. We must come together to build a media ecosystem that treats journalism as an essential public service.

At this critical moment in our nation’s history, our challenge is to revive and reinvent crucial democratic infrastructures such as the press. It has long been clear that cultural, information, and communication systems have a unique role in society. For a democracy to flourish, it is vitally important to tell stories about key issues from different perspectives – to ensure a diverse people have access to a wide range of voices and views. However, it is equally clear that the market cannot provide for all of our communication and information needs.

Why markets fail journalism

Before considering what a less market-dependent media system might look like, it’s important to understand the political economy of the current crisis. In the U.S., most commercial media organizations rely on revenues from delivering our attention to advertisers. Throughout much of the 20th century, newspapers typically derived 80% of their revenue from advertisers and 20% from readers. For decades this arrangement was tremendously profitable for newspaper publishers, who sometimes were willing to fund more expensive kinds of reporting. However, this economic relationship masked a key reality: Advertisers’ main objective wasn’t to ensure that democratic society had sufficient journalism. They weren’t concerned with whether the local school board was being covered, or if a foreign news bureau operated overseas. Advertisers were after audiences, and newspapers were a convenient vehicle for reaching them. News was, in many ways, a by-product of the main exchange.

This was a partnership of convenience – a happy accident – that camouflaged what was in fact an unnatural union. For this and other reasons, journalism has always been prone to market failure. Overreliance on a single mode of revenue exposed news institutions to enormous risk. That longstanding vulnerability became painfully clear with the advent of the internet.

As consumers and advertisers migrated to the web, where digital ads pay pennies to the dollar of traditional print ads (and most of that money goes to Google and Facebook), the 150-year-old business model for commercial newspapers imploded. Over the past two decades, the newspaper industry is estimated to have lost tens of billions of dollars in advertising revenue. In response, beleaguered papers have continuously cut costs, often in the form of layoffs or buyouts of journalists. (The number of newspaper employees has declined by more than half since the early 2000s.) Newspapers are declaring bankruptcy, reducing home deliveries, or going online-only. This devaluation gives readers fewer incentives to support local news, which accelerates a vicious race to the bottom.

To compensate for the loss of revenue, some news organizations resort to sensationalized “clickbait” or blur the distinction between news and advertising. Less reliable and lower-quality news sows public distrust in the press and, by extension, in democracy. And the degradation will only worsen in the coming years.

Rushing into the vacuum left by our vanishing local news outlets are various forms of disinformation. At the same time, people are increasingly gleaning news from social media, through which misinformation abounds. Without profound structural changes, our media landscape will produce more noise and propaganda and less fact-based reporting – more shouting heads and hot takes and less actual journalism.

What might a new model look like?

We should confront this market failure and abandon the fantasy of discovering a technological fix or a market panacea. No entrepreneurial solution lies just around the corner, and no purely profit-driven media system will ever solve the local journalism crisis. Yes, subscription and membership models might sustain some relatively niche outlets like the Voice of San Diego and large national newspapers like the New York Times. Commercial news organizations that focus primarily on commentary and entertainment will likely persist in some form. But this is insufficient for a healthy democracy.

There are two ways to decommercialize journalism and unhook it from the market. Either we rely on support from private capital (philanthropists, wealthy benefactors, foundations, and small donations) or we work toward creating a publicly subsidized model. In the former approach, struggling commercial newspapers could become local public trusts by transitioning to low- or nonprofit institutions that can take charitable contributions (similar to the Salt Lake Tribune’s recent move). However, while foundations and rich benefactors have successfully supported some organizations – including ProPublica, the Texas Tribune, and the Intercept – a systemic solution is still necessary. The surest way to protect journalism from market failure is a well-funded public media system.

What might this look like? Many democracies around the world maintain strong public media systems. In these countries, news and information are treated as what economists might call a public or merit good – a public service that the private sector is unlikely to provide because it is unprofitable and consumers are unable or unwilling to pay for it. (Other examples include education, health care, defense, and infrastructure.) Since public goods often yield tremendous benefits for all of society, and since healthy democracies depend on them, the state supports what markets can’t.

The U.S., however, tends to treat news and information more like commodities than public goods. And it’s a global outlier among democracies for how little it spends on public media. The U.S. federal government allocates around $1.35 per person per year for public broadcasting, while Japan spends over $40 per citizen, the UK about $100, and Norway over $176.

Why does it matter that the American system is so underfunded? Lack of taxpayer support forces public broadcasting to rely more on wealthy donors and corporate underwriters, making it less responsive to public needs and less likely to take on powerful interests. In addition, without a well-financed public media system, there’s no safety net for when the market fails to support the local news media that democracy requires. We must expand on and repurpose America’s public broadcasting system to serve as a core democratic infrastructure, one that provides news and information as well as cultural and educational fare, to everyone across all platforms and media types.

Public investments in local journalism from state governments are another avenue worth exploring. Last year New Jersey funded a proof-of-concept model with its Civic Information Consortium, which addresses unmet local information needs and helps rehabilitate community journalism. Yet another potential revenue stream could come from taxing platforms like Google and Facebook, to force them to help offset their considerable social harms (proliferating misinformation, violating users’ privacy, and gobbling up digital ad revenue) by funding public media.

For other ideas we can look to international efforts, such as the BBC’s response to the local journalism crisis, as well as to our own history. Works Progress Administration programs from the 1930s, such as the Federal Theatre Project and the Federal Writers’ Project, which helped put unemployed artists back to work, could provide a blueprint for reemploying legions of journalists. Another compelling experiment was Los Angeles’s taxpayer-supported municipal newspaper, described as a “people’s newspaper,” which was established in 1912 to cover gaps in the commercial press’s coverage. Similarly, we could provide communities with an annual subsidy to help fund a local newsroom that they own and control, perhaps housed in public spaces such as post offices, public broadcasting stations, and libraries.

Whatever the form, building such infrastructure will be a long, hard slog. New initiatives may rise and fall, but the experiments will continue. In the meantime, we must see the market as journalism’s destroyer, not its savior. By rescuing journalism from commercial forces, we can build a new media system from the ashes of the old.