Twitter  Q&A with David Leonhardt: Learn more about how The Upshot plans to integrate with the newsroom at The New York Times nie.mn/1rldymo  
Nieman Journalism Lab
Pushing to the future of journalism — A project of the Nieman Foundation at Harvard

The newsonomics of U.S. media concentration

Could News Corp.’s U.K. hacking scandal impact the coming wave of news company consolidation in the United States?
Email

The rise and potential fall of Rupert Murdoch is a hell of a story. It is, though, closer to the Guardian’s Simon Jenkins’ description Tuesday, “not a Berlin Wall moment, just daft hysteria.” Facing only the meager competition of the slow-as-molasses debt-ceiling story, the Murdoch story managed to hit during the summer doldrums. Plus it’s great theater.

Is it just imported theater, though? We have to wonder how much the cries of “media monopoly” will cross the Atlantic. Is there much resonance here in the States for the outrage about media power in the U.K.? Will the sins (its newspaper unit now being called to account by a Parliamentary committee for deliberately blocking the hacking investigation) of News International impact its cousin, Fox Television, the one part of its U.S. holdings regulated directly by government — or can it build a firewall between the different parts of News Corp.? (See “New News Corp. Strategy: Become Even More of an American Company.”)

Certainly, the tales of News International’s ability to strike fear in the London political class are chilling. Our issues in the U.S., though, are largely different. Both come down to who owns the media, and what we need in the diversity of news voices.

The question of media concentration here is tricky, complex, and a profoundly local question. Yes, there are national issues — but the forces of cheaper, digital publishing and promise of national and global markets easily reached by the Internet have spawned much more competition on a national level.

As to what kind of local reporting we get, we see powerful forces at work, shaping who owns what and how much. Likely, we’ll see some News Corp. fallout in FCC debates now re-igniting in and around Washington, D.C. — as the fire of regulating media burns more brightly here, even as Ofcom, the British regulator, grapples with similar issues.

That said, the question of media concentration, or what I will call the newsonomics of U.S. media concentration, will be fought out on two battlegrounds in the U.S. One is at the regulatory level, as the FCC looks at cross-ownership and the cap on local broadcast news holdings by a single national company, like News Corp., and may take into account its U.K. misdeeds. (Especially if the 9/11 victim wiretapping claims are borne out.) Second, and probably more important, sheer economic change is rapidly re-shaping who owns the news media on which we depend. The fast-eroding economics of the traditional print newspaper business are changing the face both of competition and of journalistic practice faster than any government policy can affect.

So this is how our time may play out. Smart, digital-first roll-ups align with massive consolidation.

First, let’s look at the print trade, at mid-year. The numbers are awful, and getting no better. We’ve seen the 22nd consecutive quarter of no-ad-growth for U.S. dailies, the last positive sign registered back in 2006. Further staff reductions, albeit with less public announcement, continue at most major news companies. This week, Gannett — still the largest U.S. news company — reported a 7-percent ad revenue decline for the second quarter, typical among its peers. Its digital ad revenues were up 13 percent, a slowing of digital ad growth also being seen around the industry.

We see a strategy of continuing cost-cutting across the board, with a new phenomenon — roll-up (“The newsonomics of roll-up“) — trying to play out.

Hedge funds — which bought into the industry through and after 14 newspaper company bankruptcies — are having their presence felt. Most recently, Alden Global Capital, the quietest major player in the American news industry, bought out its partners and now owns 100 percent of Journal Register Company. Alden, with interests in as many as 10 U.S. newspaper chains, apparently liked the moves of CEO John Paton. Paton’s digital-first strategies have more rapidly cut legacy costs than other publishers’ moves, and moved the needle more quickly in upping digital revenues.

No terms were announced, but Paton says “all its lenders were paid in full.” That would be a qualified success, given the bath everyone involved in the newspaper industry has taken in the last half-decade.

In JRC’s case, we’d have to say the push of hedge funds for faster change has been more positive than negative. Pre-bankruptcy, it was derided for its poor journalism and soul-crushing budgeting. Under Paton, who has brought in innovators like Arturo Duran, Jim Brady, and Steve Buttry, the company is trying to reinvent new, digital-first local, preserving local journalism jobs as much as possible. A work very much in early progress.

You can bet that Alden’s move is just one of its first. Sure, as a hedge fund, it may just be getting JRC ready to sell; hedge funds don’t want to be long-term operators. Before that happens, though, expect the next shoe to drop: consolidation.

JRC owns numerous properties around Philly, and a roll-up with Greg Osberg-led (and Alden part-owned) Philadelphia Media Network, has been talked about. Meld the same kind of synergies, and faster-moving print-to-digital strategies of Paton with Osberg’s new multi-point, Project Liberty plan, and you have a combined strategy. Further combine the operations into a single company — removing more overhead, more administration, more cost — and you have a better business to hold, or sell, or still further combine with still more regional entities.

It’s not just a Philly scenario.

In southern California, the question is how the three once-bankrupt operations — Freedom Communications, MediaNews’ Los Angeles News Group and Tribune’s L.A. Times (still not quite post-bankrupt, but acting like it is) — will mate. Over price, talks broke down about merging Freedom and MediaNews (both substantially owned by Alden; see Rick Edmonds’ Poynter piece for detail). Yet, everyone in the market believes consolidation will come. Now with Platinum Equity, another private equity owner, putting its San Diego Union-Tribune back on the market just two years after buying it for a song, we could see massive consolidation of newspaper companies in southern California.

Media concentration, perhaps in the works: Southern California, between L.A. and San Diego, contains at least 21 million people — or a third of the total population of the U.K. Philly and Southern California may among the first to consolidate, but the trends are the same everywhere.

So this is how our time may play out. Smart, digital-first roll-ups align with massive consolidation. It’s time to get our heads around that. That won’t necessarily mean that Alden, or other hyper-private owners, keep the new franchises. Their goal probably is to sell. But to whom, with what sense of public interest?

Which brings us back to broadcast, to which newspaper people give much too little shrift.

Both those in the old declining newspaper trade and those in the mature and largely flat broadcast trade (as an indication, Gannett’s broadcast division revenues grew to $184.4 million from $184 million in the second quarter) are beginning to figure the future this way: there may only be enough ad revenue in mid-metro markets (and smaller) to maintain one substantial journalistic operation. Not one newspaper and one local broadcaster. But, one, presumably combined text and video, paper and air, increasingly digital operation.

So, finally, let’s turn back to the FCC. The Third Circuit Court of Appeals just returned cross-ownership regulations back to the FCC, largely on procedural (“hey, you forgot the public input part”) grounds. In addition, it will likely soon take up the national cap on local broadcast ownership. (Good sum-up of FCC-related action by Josh Smith at the National Journal.)

Which brings us back to the News Corp story. The national cap — how much of the U.S. any one national company can serve with local broadcast — is 39 percent. Fox comes close to that with 27 stations, and, of course, has lobbied for more reach. So, the media concentration issue may play out as the cap is further debated, and as cross-ownership — a News Corp. issue in and around New York/New Jersey — returns as well. Will Hackgate’s winds blow westward, as local broadcast news concentration comes up again?

Though it may be shocking to many newspaper people, though, local TV news is a major source of how people get the news. Some 25 to 28 million viewers watch local early-evening or late-evening TV news, according to the Project for Excellence in Journalism. That compares to about a 42-million weekday newspaper circulation, so those numbers aren’t quite apples to apples. In my research for Outsell, I noted that local survey data indicated that reliance on TV news equaled that of newspapers.

As Steve Waldman’s strong report for the FCC pointed out, local TV news is “more important than ever” — but thin on accountability reporting.

So while much of the media concentration questions centers on print, local broadcast ownership, and direction of news coverage, matters a lot.

Combine that local concentration — 39 percent or more — with the sense that the market may only support single journalistic entitities and we’re back to the theme of media concentration, perhaps on a scale hitherto unseen.

A declining local press, with signs of impending roll-up. Stronger local TV news, weaker in accountability reporting, and pushing for more roll-up. Winds of outrage wafting over the Atlantic. Regulatory breezes gaining strength.

These are powerful forces colliding, and in the balance, the news of the day won’t be quite the same.

                                   
What to read next
half-life
Craig Silverman    April 22, 2014
When you commit to explaining the important issues in the news, you commit to a life of updating. What’s the best way to manage a corpus of news knowledge with an uncertain half-life?
  • Pingback: Noticias que hoy nos interesan | wellcommunity

  • http://twitter.com/getconduit Conduit

    “Not one newspaper and one local broadcaster. But, one, presumably combined text and video, paper and air, increasingly digital operation.” 

    I personally believe this would be the right push for local news outlets. Keeping things segregated is only going to further damage the news industry as a whole (not only in regard to economic function but also in the quality of news). The big question would be, though, is whether or not the same stale, convoluted ownership model would exist?

    In regard to accountability reporting, there needs to be an invocation of citizen reporting. The tools are there and with a bit of training, seemingly anybody could participate in reporting on civic happenings (to further iterate this idea, I’m not referring to social media, but rather, solid, traditional reporting). In theory, you wouldn’t even have to have full-time staff members, but rather, adopt a freelance model where anyone could be assigned a political event, cover it, and report back to the station. 

    It’s time for the barriers of the old/traditional news system to drop.

  • http://twitter.com/getconduit Conduit

    “Not one newspaper and one local broadcaster. But, one, presumably combined text and video, paper and air, increasingly digital operation.” 

    I personally believe this would be the right push for local news outlets. Keeping things segregated is only going to further damage the news industry as a whole (not only in regard to economic function but also in the quality of news). The big question would be, though, is whether or not the same stale, convoluted ownership model would exist?

    In regard to accountability reporting, there needs to be an invocation of citizen reporting. The tools are there and with a bit of training, seemingly anybody could participate in reporting on civic happenings (to further iterate this idea, I’m not referring to social media, but rather, solid, traditional reporting). In theory, you wouldn’t even have to have full-time staff members, but rather, adopt a freelance model where anyone could be assigned a political event, cover it, and report back to the station. 

    It’s time for the barriers of the old/traditional news system to drop.

  • Pingback: This Week in Review: Murdoch’s defense, objectivity in nonprofit news, and a new paid news project » Nieman Journalism Lab » Pushing to the Future of Journalism

  • http://twitter.com/mteditor Bob Hunter

    Sounds good in theory, much less workable in reality if you’re the editor trying to work with a collection of “community journalists,” freelance or otherwise. The skill level is, well, the nice word is “varied.” The understanding and adherence to ethical standards and impartiality are, again, varied.  There’s a role for community journalists, certainly, but if anyone’s ready to replace professional journalists with members of the public, they should be prepared to get something other than journalism.

  • http://twitter.com/getconduit Conduit

    I definitely agree with you, though, with a bit of an investment in vetting community members who have existing experience (i.e. former reporters, established bloggers, etc.), I don’t think a pilot program of some sort is unreasonable. With any project there’s going to be a barrier to entry and reasons to say “no.” However, it’s necessary to remember that the information these types would be covering would be (minor) civic events (at least in my interpretation here). And, to be honest, a lot of local media aren’t prize winning affairs. There’s room for experimentation. 

    In times like these, it’s imperative that we ignore the negative aspects and work with the positives. In the event that it doesn’t work out, so what? This isn’t the time to be picky. 

  • http://twitter.com/mteditor Bob Hunter

    I agree there’s something to be gained by reaching out to the community and getting them to participate in the reporting. There are certainly a lot of things we don’t cover that we’d like to. Somehow, however, we have to figure out how to manage that content, because our editors are going 100 mph nonstop. Try throwing a report from an inexperienced writer/reporter into the mix and watch for the small mushroom cloud to appear over their desks. We’ve actually been trying, without success, to hire an interactive editor to seek out and manage just the kind of content you’re talking about.  Has proven to be a tough position to fill.

  • http://twitter.com/getconduit Conduit

    What sorts of things would make it easier for you to have reporters like *that* on hand? Would it be a system of organization, or would it strictly come down to their skill level? I see where you’re heads at and although I’ve never worked as an editor, I can imagine your heart rate is just sub of maximum all day. Regardless, I feel like if the right minds came together to develop a basic list of requirements for citizen journo “x,” then it may become a viable option. It would definitely require a little bit of work on the behalf of others who may already feel their time is stretched, but I think that’s where the most innovation happens. Perhaps that would assist with your difficulty in filling the interactive position? No? 

  • Pingback: What I’m Reading #3 | Maren Guse

  • Pingback: The newsonomics of the next recession » Nieman Journalism Lab » Pushing to the Future of Journalism

  • Pingback: How the Economic Downturn Will Affect the News Business | Ebyline Blog