The new Chicago News Cooperative, unveiled on Thursday by former Chicago Tribune managing editor Jim O’Shea, will begin life as a nonprofit, but will change over to an L3C after Jan. 1, when a new Illinois law takes effect, according to a Tribune report.

The L3C is a hybrid corporation that straddles the line between for-profit and nonprofit enterprise. Vermont last year was the first state to pass a law allowing formation of L3Cs, and Illinois this month became the most recent. Several other states are considering similar legislation, as is Congress.

The Chicago News Cooperative doesn’t appear to have investors yet. But it does have a major donor in the John D. and Catherine T. MacArthur Foundation. And it has a paying customer in the New York Times, which is planning a beefed-up Chicago-area edition, much like the Bay Area edition it announced earlier this month. There, the Times will partner with Warren Hellman’s nonprofit Bay Area News Project.

Speculation and interest in the L3C model in journalism has run high. Some have looked to the L3C model as a solution for newspapers because it allows a corporation to take on investors who are willing to accept varying rates of return — or possibly none at all. Foundations would be assured that their investment would qualify as a program-related investment — a crucial distinction under tax law — while socially responsible investors might be willing to settle for, say, a 3 percent return.

While CNC will partner with a newspaper, it remains unclear whether the model can be applied successfully to newspapers themselves. Jay Hamilton, director of the DeWitt Center at Duke University says newspapers may be reluctant to switch because of the legal uncertainties involved. Others who have written about the potential for L3Cs include Poynter columnist Bill Mitchell. Perhaps the most attractive aspect of the L3C is that it automatically designates the company’s activity as a “program-related investment.” Those are magic words for a foundation, which must prove to the IRS that its grant furthers its mission and also benefits society.

While L3Cs are relatively new in the United States, they’re old hat in the United Kingdom, where they’re called community interest companies. Although Vermont remains the only state to authorize the L3C, L3Cs formed in Vermont can operate in any state or territory.

UPDATE, Wednesday, 7:48 a.m.: Many thanks to Sally Duros, who has written extensively about L3Cs, for spotting our mistake in the first graf: It’s a low-profit, limited-liability company.

The entire issue is now online, so you can check through the table of contents to see more great pieces. Here are links to the ones with topics that most directly deal with online journalism and the startup world:

— local online investigative reporting, by Andrew Donohue and Scott Lewis of Voice of San Diego;

— lessons from Spot.us, by Alexis Madrigal;

— using tech in watchdog journalism, by Bill Allison of the Sunlight Foundation;

— data analysis and “computational journalism”, by friend-of-the-Lab Jay Hamilton;

— collaborations with universities on reporting, by Walter Robinson;

— a conversation on multimedia, with Brian Storm;

— doing video journalism online, by Nick Penniman;

— using social media in reporting, by Julia Luscher Thompson;

— using the web for big projects, by my former colleague Maud Beelman;

— using multimedia in a crime story, by Christine Young;

— and corrections, witty and otherwise, by Craig Silverman.

We’re nearing the end of our month-long Nieman Journalism Lab Book Club (which has seeped into March). Here’s my discussion with Jay Hamilton, author of All the News That’s Fit to Sell, about Chapter 8. It’s one of the most interesting chapters in the book, dealing with “journalists as goods.” Among the topics we discuss:

— Why poverty stories might generate more audience sympathy if they had fewer poor people in them;
— Why George Will is a different animal in print than on cable;
— How journalists’ self-conception might change over time; and
— What Joseph Stalin and Marshall McLuhan have to do with all this.

As always, there’s a full transcript below.

Josh: All right. We’re back with Jay Hamilton. We’re at Chapter 8, the penultimate chapter of his book, All the News That’s Fit to Sell — I always get an extra “s” in there. This is the chapter that I found really fascinating, and the title alone of the chapter is enough to get me interested: “Journalists as Goods.” Which I think is interesting to a lot of journalists who are interested in their own value as goods, and whether it is on a downward slope.

We talked about a lot of these issues during the previous video we did for Chapter 6, so a lot of that stuff is covered. But one thing that is in this chapter which is really interesting is the degree to which language can be evaluated — and how it differs depending on the medium within which a journalist is operating. Could you talk a little bit about that?

Jay: Sure. So what I always wondered was: Is George Will different in [print] than he is on television during the same week? Because he has the same set of stories to consider. Does the medium, does the audience demand, in part, affect what he does?

And you would expect it to, because people — journalists are increasingly part of the story. They are — again, information is an experience good. And a journalist does something in the same way, in a particular way, to signal to you what you can expect. And so what I did — and usually when I say “I” you should think of very skilled work study students at Duke, who are able to gather a lot information. In this case it was Lucinda Fickel, who did this analysis and created this data.

So we took transcripts from Lexis/Nexis of broadcast and cable TV, found those same people in their print columns. Ran them through a program called DICTION that Rod Hart had invented, which is basically taking a dictionary of 10,000 different words and pairing them up into 40 different categories.

And what we were able to find is, depending on the different time of day — you obviously had different types of Nielsen ratings for a particular type of program — and we were able to show how the attention of males and females by age varied for different ways of describing the news: the contrast in language and topics in the morning versus during the evening.

And then we also went back and got the advertising rates for those programs, and showed the different returns to talking about human interest versus another topic.

And then we did a contrast between how pundits behaved when they were on television, when they were much more likely to use less complex words, really focus on the individual as an example, as a way to talk about policy, versus in print — because they are reaching a different audience, they can be more abstract, talk about collectives, and not have to use as much of a human-interest focus.

I think that’s interesting for a couple of reasons. Number one, Shanto Iyengar has done research that says: Suppose you take a story like poverty. And what he did was he took the CBS Evening News, showed it to people in a lab, but did a subtle change. In one episode he had poverty covered about an individual poor person. In the other it was poverty about statistics being released: it was covered from a social angle.

And he found in the debriefing afterwards that the people who saw the individual story focus were more likely to blame the individual for being poor — to say their poverty is a function of their individual failings and circumstances. Whereas the people who saw the story about poverty as statistics were more likely to see it as a social phenomenon, and more likely in their conversations to hold the president accountable for poverty as an issue.

So this drive to personalize stories can actually effect how people derive political conclusions.

Josh: That is interesting. That’s almost the exact opposite of what I would have imagined. What’s the old Stalin line? — not that I thought I’d be quoting Stalin here, but — one death is a tragedy, a million deaths is a statistic. I thought it would have been the opposite.

Jay: Yes. The other thing that was interesting is that a political consultant read the book, read that chapter. Then he called me and said: “Do you think it would be possible that you could derive a list of words that the candidate could use when they are on one set of programs versus when they’re on another set of programs?”

And that type of thing shouldn’t surprise us any more. If you look at Bob Shrum’s book, the political consultant, for example, he talks about how Al Gore would videotape potential speeches, and then how they were tested through dial meters, so people could see responses to particular types of descriptions. Many political speeches go through that process now.

But this consultant said: “Could you take what you learned there and develop a set of words?” Then midway through the conversation we both agreed that, given the set of people he was working with, it’s hard enough to keep them on topic, and to actually try to get it down to particular types of words — that wasn’t going to work.

Josh: Well, I won’t ask you whether journalists would be any more able to handle that dichotomy than politicians would, but that’s, I guess, a separate issue.

Let me ask you a question then, to get vaguely McLuhanesque: Is it the medium that is the difference? Or is it the knowledge of a different audience? In other words, is George Will acting that way differently on television because there is something about the medium of television that encourages a different kind of behavior? Or is it that he realizes he is reaching a different set of people when he is on CNN than he does when he is on the op-ed page of The Washington Post?

Jay: I think that, again, if you go back to the logic of what a set of pundits who survive — the set of pundits and people who survive are the ones that meet the market test. And they’re given rules of thumb. And the rules of thumb are things that could be taught and translated.

There are even seminars in D.C. If you are an aspiring pundit, you can be trained as to how to be a great cable guest. And so, if you said to a particular pundit, “If you talk this way you will help us reach that marginal voter and sell it to an advertiser,” they might be offended by that. They might not any more. They might say, “Great, that revenue stream, in part, I get a part of that.”

But the set of ones who survive and get invited back are the ones who meet those audience demands.

Josh: So you would say it’s probably more of a learned behavior, either consciously or simply by observing others, rather than something that is inherent in the television medium, or in the cable television medium?

Jay: Well, I think it’s definitely more audience driven, because if you look across the time of day, the language varies by the demographic group that they are targeting.

And it’s even down to, on the morning news programs, there is a distinct shift after 7:30 — because there’s an idea of we’re trying to reach one demographic, people who are working, about to get out the door. So between 7:00 and 7:30 we’ll talk about one set of issues in a particular way. After 7:30, it gets much softer. We switch to different issues. It’s still the same medium, but the audience change generates that change in language and topic.

Josh: We’ve talked throughout these conversations about journalists’ identity and self-identity as professionals — and as part of a profession that has a professional code.

I’m curious how you see that self-conception evolving over time. This chapter when you are talking about journalists as goods, to a lot of journalists — certainly not all — and I probably wouldn’t include anyone who goes to aspiring pundit school in this group — but a lot of journalists — the kind of people who you might say have souls, if you want to be judgmental — view that with some suspicion. It’s part of the professional code.

Do you see that changing over time? And as people realize: Okay, I don’t have a safe slot on the state desk of a major metro newspaper anymore, I need to be marketing myself, I need to adapt to the audience’s needs, and so on.

Jay: I think that there are a couple of things that are changing. One is that the trajectory is changing. So the idea that you would potentially work in newspapers and — a smaller newspaper — learn a set of skills, maybe they were individually or family-owned, and learn a particular craft — that career model is changing. In part because a lot of people — some of those outlets are on hard times. They’re not hiring.

In the development of television, at least in the ’50s and ’60s, some of those folks that once worked in newspapers — and newspapers are really where many stories are created. So the fact that people have different career trajectories now, less experience working their way up, maybe in areas where there was more focus on public affairs — that could affect them.

And then now the better monitoring of audience attention and the increased competition from other outlets means that profit margins are going down. So people are watching what you are saying and what you are talking about. And they have a better sense of who’s watching and what the demographics are.

So all of those things are pushing you away from that old professional norm. And there’s actually a wonderful book, co-authored in part by Howard Gardner, called Good Work, in which he interviews people in two different fields. One is biotechnology, which is a field which has more responsibility but is also growing economically, and then journalism, which is a field which also has a moral element to it, which is declining. And he does a great job talking about the job tensions — what it’s like to be a field where the economics are good versus where the economics are bad.

Josh: All right. Well, we know which field we are in. Thanks very much.

Jay: Thank you.

While the previous chapter’s data about the early days of online news do not age well, the focus of Chapter 8 — the value of celebrity among television anchors in 1999 and the likelihood that a political pundit will speak in shorthand and soundbites on television — hold up better.

In short, Chapter 8 is all about how television news personalities — whether anchors or pundits — became high-priced and marketable commodities, and how at least some of them streamlined their act (dumbed it down, Hamilton implies) for the small screen.

Among the evidence cited:

1. Television news anchors in the late 1990s made much more money than their predecessors. By any measure, these anchors commanded significantly higher salaries, even though ratings for the network evening newscasts had already begun their inexorable slide ten years ago, the date of the data set. The reason? Their networks believed that the celebrity and the personality of the anchor served to pull in viewers, especially as the marketplace became more competitive with the growth of cable.

In 1976 anchors such as Walter Cronkite and John Chancellor were paid the equivalent of 28 ads per year, while in 1999 this had grown to 149 ads for Dan Rather and Tom Brokaw… This was a time of declining absolute audiences, but rising importance of anchors in attracting viewers.

2. This popularity translated beyond the tube. In a study of available prices at a speaker’s bureau in the late 1990s:

The star quality associated with well-known television reporters and some print journalists translates into a demand for speeches. [T]he mean speaking fee for reporters is higher than for the former politicians that they once covered.

3. Political pundits were more likely to offer nuanced arguments in print and tended to simplify their message, use smaller words and “play to type” when appearing on television.

Given the same subset of possible events and ideas to talk about, those appearing on television were more likely to focus on human interest elements, use simplified language, and make self-references than those writing in print outlets. Journalists who appear in two media adopt the conventions of the particular outlet type when discussing events. … The combination of audience demands served by television and the technology of information delivery creates incentives for individual journalists to approach politics differently in print than in broadcast.

As a case study, Hamilton cites George Will. Analyzing his columns and his appearances on ABC news in the late 1990s, Hamilton notes:

In terms of the summary measures calculated by (the study), George Will’s changes between print and television embody the different market imperatives of the two media. On television Will offers opinions that are marked by greater activity, realism, and certainty. In print, he is more likely to use abstract terms relating to groups and their actions. Though George Will has developed a brand name for expression, he changes the delivery of his product to suit the audience  demands and cost constraints of the medium.

Chapter 8 doesn’t exactly break new ground, but it is interesting in that it puts some original research behind commonly-held assumptions about television news personalities. As to whether it holds today for Katie Couric, Rachel Maddow, Sean Hannity, Brian Williams and others in the current crop of TV news stars, there’s no evidence here either way but, based on their continuing heavy promotion, on cable and broadcast, it seems that the network bosses continue to believe that personalities still drive loyalty and viewership.

Here’s the newest part of my interview with Jay Hamilton, author of this month’s Nieman Journalism Lab book club selection, All the News That’s Fit to Sell. Here we’re talking about Chapter 7, which focuses on what we can learn from the economics of online news around 2000. Our topics include:

— How the power-law graph explains Internet distribution patterns;
— The importance of audience scale for Internet advertising; and
— Why Google ads for “stocking stuffer” have replaced George W. Bush belt-buckles.

As always, there’s a full transcript below.

Josh: All right, we’re back with Jay Hamilton. We’re at Chapter 7 of his book, which is “News on the Net.” As we mentioned earlier, your book was first published in ‘03, and then in paperback in ‘06, I believe.

Jay: That’s right.

Josh: I must say, this is the one chapter where it kinda — you’re talking about Lycos search results, things that are from an earlier era of Internet research. I’m curious from what you’ve seen, since this is the chapter of the book that has seen the biggest changes in its environment since then, is there anything in particular that you’ve noticed that you thought was happening back then that isn’t happening? Or that is happening more or less than you thought was happening? Or have any of the motives changed?

Jay: It’s interesting. I still think that people have four information demands: producer, consumer, entertainment, and voter. And a lot of times when people saw the Internet as free information, free search, they thought: “Well, this market failure is going to go away, because if people want to know about government, they can find out.” And what I used the search information data in the book to look at was: “Well, what do people actually look for, and what are the advertising returns for that?”

If you look at search patterns, people are much more likely to search for entertainment information than government information. I think I showed in the book at the time, when I took a snapshot, people were much more likely to search for James Brown than the Supreme Court, for instance. And if you look at the advertising returns, what people were willing to pay to be associated with a search — so if you think about Google today, if you type a search term on Google, you see on the right-hand side these mini ads. If you click through that, then the people who placed the ad pay a price, and they were bidding for your attention. And again, there’s a lot higher return if you’re making a consumer search, because people think: “This person is about to buy something and I can benefit from that.”

And ironically, when you look at some of — when I initially wrote the book, if you looked at political terms, often times what the ads would be would be T-shirts for that person. So if you typed in “George Bush,” it would be a George Bush belt-buckle, rather than somebody trying to get your attention to a policy issue. But as things have evolved now, the campaigns are using search as a way to target people. So one of my favorite examples of this was that, in December 2007, Emily’s List, a liberal group that tries to support female candidates, set up a website, “You Go Girl,” that was meant to help women in Iowa learn how to caucus — aimed at those first time caucus-goers, with the caucus in early January 2008. So what they did is they went to Google, and they bid on the words “recipe,” “stocking stuffer” — things that they thought in December, women in Iowa would be searching for. And they got 20,000 people in Iowa, in many different towns, to click through — searching for “recipe,” they see the “You Go Girl” site about caucusing, and that was a way to use your consumer interest to re-direct your attention to political interest.”

Josh: Let me ask you about one thing that is sort of a hobbyhorse of mine that seems to fit into your research, although I don’t think you get into it in the book. One reason why newspapers in particular — the medium I’m most familiar with — have historically created stories the way they have is based on their publishing cycle. You publish a newspaper once a day. You have a story that is reduced to that one-day unit, and it is meant to be disposable because the next day there would be another newspaper coming along. I’m curious with the shift online, if you see an environment that would encourage different kinds of content being produced by news providers — in that it might encourage investment in longer-term content that might have a shelf life that is longer than one day, that isn’t just the snapshot style that newspapers have traditionally produced, since there would be more of an economic opportunity for that story to have value over time.

Jay: Sure. It’s very interesting that some of the database journalism — computer-assisted reporting — is justified on the fact that once you create, pay the fixed cost for the creation of the database, it’s going to be around and can be used.

So if you talk to creators of newspapers, people who have created searchable information about elderly care in their area or hospital safety in their area — that there’s a lot of databases that are created on the idea that you can continue attracting attention and continue selling that attention. So I think you’re right that the ability for the information to live on in a searchable form is helpful. Another thing that you raise though is you use the term “story.” There’s an interesting experiment going on, I think, about what the level of information is that people want. So if you go to the wonderful site EveryBlock, funded by the Knight Foundation, founded by Adrian Holovaty — basically, you enter in your address in a two- or four-block radius. They provide you with very granular information — Flickr photos from that block area, crimes, restaurant inspections, house sales. So the idea there is that you’re pulling information and creating your own story in a sense. They give you the raw data.

Josh: There is one graph that is in this chapter where — I don’t think you actually used the phrase “power law,” although that is the phrase I am familiar with from previous iterations online — that shows that online as opposed to in print there is a greater premium for, I guess, scale — that the largest institutions have a disproportionately large share of the market compared to, say, print. The New York Times has a larger percentage of web hits than it does print publication. What is it about the Tnternet that creates that sort of environment, since it seems to pop up in a lot of different areas online, not just news?

Josh: Sure. Well, there could be a couple of things going on. Number one is that the Internet expands the choice set. So if you were growing up — or actually when I first moved to Durham, I would buy The Washington Post, which was selling for a quarter in D.C., I could get it a day late for a dollar at a convenient store that got it via the airplane.

So there weren’t that many people here reading The Washington Post, or The New York Times for that matter. Now online, if you are interested in national affairs, then you have a much easier way of reaching it. So the Internet opens up more options, and then quality can rise to the surface. That’s number one.

Number two, there are many different outlets — meaning that again since information products are experience products, you can’t know exactly what’s in them, but if you have heard of the brand name, that is a big advantage.

And then number three, some sites have network effects. They are more attractive because more people are using them — better commentary, better feedback, more interesting things. So I think those three reasons generate this higher concentration of attention.

Josh: I was at a conference at the Poynter Institute in November and Lincoln Millstein from Hearst was talking about how he felt that the newspaper business needed more scale economically — that individual newspapers in smaller cities or medium sized cites, or even some large cities, aren’t going to have enough scale to be able to compete on an advertising-even level with Google and Yahoo and Facebook and these other folks who have an enormous audience. Would that seem to play into the same sort of idea, that you need to be big online to be able to take advantage of the benefits of the scale?

Jay: Oh, it is interesting — you could think about scale in spreading out fixed costs of news gathering. But I think another thing that people are talking about there is spreading out the fixed costs of your advertising sales and your advertising force, because a lot of local news sites get a lot of attention, but they don’t get much advertising.

So The News & Observer, where I live, they have a lot of eyeballs. But the question is: How do you get the local advertisers to advertise online? And one thing that people have proposed is maybe making the local newspaper a hub for local advertisers to reach people in many different areas of the web. So, maybe for local advertisers, your newspaper sells you advertisements on the newspaper site, but also on other sites that are consumed locally.

So, in that sense, if the local newspaper invests in a sales force and the knowledge of the local area, and then can add other products that they can sell the advertising through, that’s one way to get scale.

Josh: That’s sort of like the Yahoo partnership that you’re probably familiar with?

Jay: Exactly. So Yahoo is working with companies like McClatchy, so that you could sell a local ad that would appear on a local person’s Yahoo screen, but also on the newspaper [site]. I have great hopes for that, but right now the tumult that Yahoo has made the implementation less speedy than at least some of the newspaper partners had hoped.

Josh: It is interesting to go back to what you had in Chapter 2 of the book, where you describe one of the reasons for the consolidation in the number of newspapers in the late 19th century was that advertisers didn’t want to deal with nine different newspapers in a city. They would prefer to deal with a smaller number. I wonder if a similar phenomenon that would be happening online, where someone who has a local business would rather just go to The News & Observer and have them be able to supply a broader audience — on their site and outside of their site.

Jay: That’s right. And that’s a big empirical question about what amount of local knowledge you need and local explanation and content. The more the human element is important, then the more that local newspaper site might be able to survive. If Google becomes that dominant way for local advertising, then that would potentially be bad news for the newspapers.

Chapter 7 of All the News That’s Fit to Sell, like much of the book that surrounds it, is a moment frozen in time, like Pompeii or Colonial Williamsburg. Published in 2004, using data gathered in 2000, it’s a slice of history.

But what can we learn from this detailed look into the past? Let’s jump into The Wayback Machine, crank up some ‘N Sync on your CD Walkman and let’s take a look at the state of Online News, circa 2000.

Some key points Hamilton makes:

1. Newspaper web sites’ relevance on the web — as defined by links from other web sites — and, by the way, good job on noting that key metric years before it became a common indicator of success — do not necessarily track with the circulation of the newspaper. In other words, just because a newspaper has been successful in building an audience in print, that’s not a reliable indicator of how well it will do online.

Following a somewhat complex formula, Hamilton plots where a newspaper’s online popularity should have been in 2000 versus where it actually was. The straight line in the chart below from the book represents the predicted popularity and the scatter points represent the actual popularity.

As you can see, most of the top 100 papers in the U.S. at the time clustered at the lower end of the scale, with many more falling below the line than above. The few outliers above the line are those online papers which more aggressively embraced the medium, and those below are either online laggards, like the L.A. Times, or the sole experimenter in paid subscriptions, The Wall Street Journal, which by the 2004 publication of this book had not yet turned a profit from its paid strategy (a goal since achieved).

2. As the cost of publishing online plummeted, more voices began to be heard online. These voices, while skewing somewhat toward higher incomes, were less skewed than in other forms of expression, including individuals who had published traditionally (i.e., books) or contributed money to a campaign. The earliest stages of citizen publishing on the Internet can be seen emerging in this 2000 data. 

3. Hard news is a hard sell to make to advertisers. Hamilton looked at four sources of information:  

For my snapshot of the Internet, in May 2000, I thus use four different types of information. The stories from the Lehrer program represent hard news topics. The people, groups, and entertainment products described on the USA Today Life section (front page) define soft news. The Go To queries represent consumer and producer information demand. The Lycos data represent the most popular search terms on the Internet. 

What did he find? In 2000, people searched more for things that were entertaining or personally useful and less for information related to broader social or political decisions. Not surprisingly, advertisers followed that traffic:

The willingness of advertisers to sponsor links for hard news is less robust than for soft news, whether the measure used is total advertisers, average bids, or dispersion of support across topics within a news category…

Overall, these results show the strong advertiser support for information related to consumer and purchasing decisions and the relatively weaker advertising support provided for hard news topics.

From our perspective as virtual time-travelers, would it have helped in 2000 — or even 2004 when the book was published — to listen more closely to James Hamilton? Does the removal of barriers to publishing, combined with the difficult-to-monetize hard-news focus of newspapers (and, largely, their web sites) sound a warning bell about the business model of giving away the content — both in print and online — and supporting its creation by selling access to the consumers of that content to advertisers? Once the scarcity of distribution disappears — as we now know it did, not just for print, but for audio and video as well — where does that leave the business?

Reading in 2009, it’s almost impossible not to shout at the page: “How did we miss this? Why didn’t you see the current crisis coming?”

Because, I’d argue,  many in the business made a critical error in judgment, one that Hamilton makes here as well:

In a world of many outlets and scarce attention, consumers on the Internet are likely to go with familiar media brands.

“Where else will they go?” was the prevailing thought at the time. Into the anarchy of the web? In a choice between an unvetted site and an edited news brand, the answer would be clear. Readers might flirt with other web offerings, but at the end of the day, they’d come home to the familiar newspaper brands they know and love.

So, how did that all work out? Fast-forward back to the present. Here’s a recent ranking of the top 15 web destinations in the U.S., from Alexa:

1. Google
2. Yahoo
3. YouTube
4. Myspace
5. Facebook
6. Windows Live
7. MSN
8. Wikipedia
9. eBay
10. Craigslist
11. AOL
12. Blogger
13. Amazon
14. Go
15. CNN

The best-performing newspaper brand, nationally, is The New York Times, which comes in at No. 26 in the Alexa rankings.  In local markets, the story’s not much better, with local newspapers fighting for audience among the incredible abundance of online content offerings.

So what happened?

Many of the blockbuster brands in today’s list did not even exist in 2000, including YouTube, Myspace, Facebook and Wikipedia. Blogger had launched in 1999, but was yet to become the force it is today, together with Wordpress. Craigslist — the company that would make unnecessary 60-65 percent of local newspapers’ business by giving it away — existed, but had not yet gone national. eBay, another nibbler of traditional newspaper revenues, went public in 1998. 

And yet none of the companies that were already well on their way toward at least partially supplanting newspapers as a marketplace of ideas and commerce are mentioned in this 2004 book. Where’s Craig Newmark? What about eBay or Wikipedia, also absent? Is it fair to look back from the remove of 2009 and wonder how this could be? Perhaps not, but it is suggestive of why it is that newspapers found themselves in the role of the frog in the gradually boiling water; they didn’t see it coming because they just couldn’t imagine it happening. These upstart brands were irrelevant. Until they weren’t.

The brand wasn’t enough, it turns out. As options for readers increased and as scarcity as a monetizable asset essentially disappeared in the nine years since Hamilton gathered his data, much of what he predicted came true, with the notable exception of the silver bullet that he thought would help: the brand.

Clearly, that’s not the end of the story. Newspapers would be in even worse shape without their digital assets and their revenue streams. In nearly every market, newspaper web sites remain reliable drivers of income for their parents. But the business model is not optimized yet for the modern online world, and it’s instructive to look back, with the help of this book, and realize that the clues were always there, hidden in plain sight.

We’re up to Chapter 6 in our video interview with Duke economist James Hamilton. He’s the author of this month’s Nieman Journalism Lab Book Club selection, All the News That’s Fit to Sell. In this chapter, Jay talks about the role prestige and personality play in how media is produced and consumed. Among the topics:

— The psychic return of owning a big-city newspaper;
— Why a journalists’ brand matters more in a fractured-media age; and
— How the Duke men’s basketball team qualifies as an economist’s “excludable good.”

As always, there’s a full transcript below the jump.

Josh: All right, we’re back with Jay Hamilton. We’re discussing his book, All the News That’s Fit to Sell. We’re at Chapter 6 right now, which is titled “The Change in Nature of the Network Evening News Programs”. In this chapter, you talk about prestige as a factor in the heyday of network news operations.

You have a great quote from the head of CBS telling the head of his news division: “They say to me: take your soiled little hands, get the ratings and make as much money as you can. They say to you, take your lily white hands, do your best, go to the high road and bring up prestige.”

I’m curious what you see as the role of prestige in the news market today. It seems — it sort of was a different era when, as you said, the original owners of networks were still alive and newspapers were family-owned, and it was a position of prominence in the community to be a publisher. Is there still a role for prestige in the media today?

Jay: Well, it could be defined in two different ways: prestige as serving the public good, or prestige as in fame. So let’s think about those two different things. There was a great study done in the 1980s looking at many different industries in the U.S., and they found that — two researchers, economists Demsetz and Lehn — found that in two types of industries family ownership was much more likely. And those two businesses were sports and the media.

And in both of those, the individual owner or family got a return — a psychic return — to owning the outlet. They had power within their city, and they could be seen as good citizens. Through tax law and many other factors, those individual owners disappeared — sold out to chains.

And it’s much less likely that the individual owner today is a person. It may be you or me through our declining mutual-fund holdings, or things like that. You do see it in The New York Times and The Washington Post — they have that dual stock structure where it’s still a publicly traded company, but the family has shares with more voting power. And that allows the family to derive some prestige.

The fact that we know who owns, who has that power at the time — the Sulzberger family, the Grahams at the Washington Post — the fact that we know their names shows that there’s still a prestige factor at play. Who else says that dual-stock structure? Rupert Murdoch, and interestingly, Google does too. So the prestige factor is still there — but in terms of doing something that is now profit maximizing, it’s less there today because you don’t have the family or individual owner.

How does fame factor in? In a world of five channels, you can surf pretty easily. In a world of — name the number of channels you have now in your particular outlet, potentially more than a hundred — brands, reporters become part of the story more, because the news changes every day. But if Katie is always there or Tom is there or Charlie’s there or Diane is there, that becomes a way for you to know what is in that news product.

News products are experience goods: In order to know what’s in them, you need to experience them. But that’s a chicken and egg situation. The way that news products have gotten around that is by creating brand reputations: We are going to show you information in the same way, and on television that means with the same person.

So in that sense, the returns to fame are actually greater today. What I showed in my book was that even as the ratings for network evening news were declining, the salaries were increasing — because the actual anchor played an increasingly important role in retaining your attention.

Josh: So what lesson would that give to an average working journalist who isn’t Dan Rather, who isn’t in that sort of an environment where — I understand that that return investment of the brand there. Do you think we are destined, as journalists act in self-interest, to less of the objective distant voice that has typically come in newspaper stories, for example? That were going to have more personality showing through, as journalists try to maximize their own profitability and their own salaries?

Jay: Well it depends on the location of your outlet. If you are in an outlet which is providing business news to people who want to make a decision, based on that information — the closer it is to an investment decision — probably the less likely that personality is gonna come into play.

The more that the information provision is about entertainment or a motive like that, the more room there is for the personality to play. One other thing, though, is if you look at the Times online, think about the proliferation of blogs on the site and the popularity of the opinion columnists there.

It wasn’t a surprise that when they tried the TimesSelect, the information they put behind the wall that you had to pay for was the most differentiated product they had. Which was their columnists — the idea that there aren’t easy substitutes for Paul Krugman and Maureen Dowd meant they could get a certain number of people to pay.

That was an experiment, and what they found was they got some people to pay, but by removing the wall they would get a lot more eyeballs in. In addition, when they balanced off the subscription fees verses the additional advertising revenue, they made the call, which I think is correct, that it’s better to take it down and let everybody read Tom Friedman.

Josh: In terms of maximizing the resources you have in a newsroom, one possibility might be creating more Paul Krugmans and more Thomas Friedmans — that is, more individual personalities in a news organization then people connect with. As opposed to the sort of the faceless city hall reporter who news organizations have traditionally had.

Jay: That’s exactly correct, and one of the things — there’s a great book, Information Rules, that talks about excludable goods. One thing I can do is give you information for free — and then create an avenue where you have to pay if you want something more.

So Tom Friedman’s columns are free, but if you want to read his book, you have to pay him — or if has going to come to your area that the person who is sponsoring him is probably paying him a speaker fee. So the fact there could be exclusion — so if you do not pay you do not get the book; if someone does not pay him, he may be less likely to show up for a lecture — what that means is that you give away information free, you create this brand about yourself, then you put yourself in a situation where somebody has to pay a conference fee or click on Amazon to buy your book. That creates an alternative revenue stream.

The very interesting point that you are raising is: How does that affect what comes out of my mouth, now that I need to create this separate revenue stream?

Josh: Particularly since in a later chapter, in Chapter 8, you talk about how journalists who have this dual identity of, say, a print life as well as a punditry TV life, how they use different language. They not only speak differently — they approach their subjects differently in different media when there trying to be the branded George Will as opposed to the prose stylist George Will.

Jay: That’s exactly right. But I have a hard time criticizing that because that pays university salaries for professors.

If you think about what we do, a lot of what we do, the information is giving away free via research. And then the way the university pays our salary is by setting up an excludable good — we’ll call it Krzyzewskiville and a set of classes. And you only get those if you pay a fee. And if any college-age people are watching, Duke has need-blind financial aid, so the fee isn’t as large as you might think.

Josh: Sorry about Wake Forest beating you guys last night.

Jay: It’s a long season.

Josh: Although I’m wearing Carolina blue and I’m showing my allegiance here. All right, after that brief basketball interlude, thanks very much.

Jay: Thank you.

Here’s the next installment of my interview with James Hamilton, author of this month’s Nieman Journalism Lab Book Club selection, All the News That’s Fit to Sell. Our topic here is Chapter 5, which focuses on, among other things, how market forces influence local TV news. Some of the topics we cover:

— How the format of local TV news forces news directors into certain kinds of stories;
— Why you never saw coverage of your local anti-Iraq War protests on TV;
— Why journalism sometimes requires going against market tastes; and
— Whether we’ll rely on a single online hub for our information in the future.

As always, there’s a full transcript below the jump.

Josh: All right, we’re back here with Jay Hamilton. We are at Chapter 5 of his book, All the News That’s Fit to Sell.

This chapter is a very fun chapter. It has a lot of great statistics looking at the correlation between the media activities that people partake of in a particular market and the way that local television and local newspapers cover issues — like the connection that if People Magazine subscriptions are high in a particular market, then you are also going to have a disproportionately large amount of soft news on local television, which I thought was kind of fascinating. You said if there are more Modern Maturity subscribers and AARP members, there are going to be fewer computer stories and the more Playboy subscribers, the less food stamp stories — which is an interesting set of correlations.

One difference that you point out in this chapter is that newspapers at one level don’t have to be as responsive to public demands, because they are able to bundle together lots of different types of information and types of stories into one package. And there’s so much of it that a reader can choose to read only the sports section if he wants or only read Home & Garden or whatever — as opposed to television, which is an ‘everyone gets the same product for 30 minutes’ kind of medium.

How do you think that kind of divide translates to an online environment, where there isn’t that sort of bundling? What kind of behavior would you expect online news sites to show, given that experience in print and television?

Jay: Sure. So in part, as you see convergence in England for instance, television — you have an ability to go a little bit deeper into stories so that you can already have a differentiation. With online sites from TV stations, to the extent that they are reusing or drawing on what they made to show on the screen at home, I still think that you would see this bias. Then in print it is still the great portfolio — you can go deep and you can ignore what doesn’t interest you.

So they’re both driven by economics. But what the television news in particular shows is that with the advertising focus — they have always been doing surveys. Many of them, in fact of the local television news stations, subscribe to consultant surveys.

So they found out, for instance, in the aftermath of the start of the Iraq war — they were given a list of stories that people said that they were interested in. Now I remember I was struck by the fact that the story that people said they were least interested in would be coverage of local protests against the war. And in fact, the war has often been a loser in terms of attention.

I remember back midway through the war, ABC News effectively when somebody said, “Why aren’t you putting the coverage on?” one of the producers said: “Women.” They had been looking and found that women that number were not interested in hearing yet another story about Iraq. At the network level, they have minute by minute Nielsen ratings by demographic groups so they know what types of stories and countries are boring to what people.

At the local level, essentially they do some surveys — so they know the type of market that they are in. In a market with low public-affairs attention, which I proxied by low subscription to something like Time or Newsweek, they’re less likely to talk to you about national-government stories in their local news.

Josh: I find it interesting that you say that the same newspaper portfolio model translates online somewhat. I would think that part of the reason why that portfolio model works is because the information is bundled and delivered to you. You buy the entire package. You have it so maybe you might look at some of the other stories that you might not be directly interested in. Whereas now, if I am interested in sports I can go to ESPN.com — I can choose a media source that is not my local newspaper.

And we’ve seen a lot of local newspapers, both for cost-cutting reasons and also for broader philosophical reasons, say: “OK, we have to focus now on not covering foreign issues anymore and not covering national issues anymore. We need to cover Topeka and be the best news source of information for Topeka.”

Jay: Right. So that’s a great point. So I guess it’s a question of how much of a portfolio are you. Because if you look at, say, the Seattle Times — I remember about five years ago being at a conference where one of their columnists said that they had been told that they could no longer write about national issues in the column and that they had to gave the Seattle take on particular issues.

I think the newspapers are definitely doing that so that they become more local. In the sense that their portfolio was once national/international/local, many of them are becoming much more local. But at the same time, within that local focus, you would still have local sports, local restaurants, local government. And unlike the local television news, over the air or now through your cable — they’re still telling the same story. Whereas the newspaper or the website does have that portfolio approach of: OK, I’m going to be local now, but is it local sports or local business?

But I think you have also hit on a question, which I think is a really open empirical question, which is essentially: Will people have what they think of as trusted hubs in the future? Will they go to The New York Times and say, “Okay, The New York Times is going to direct my attention to these different areas,” or are they going to knit together specialty sites and not start from one general interest site. And I don’t know the answer to that.

Josh: How does social media fit into this? I guess the book was first published in ‘03, which is a bit before the MySpace/Facebook revolution. I guess it would have been around Friendster time. Does that environment, in which people are simply saying, “I want to learn certain things but I can rely on my friends who have their own blogs or their own Facebook pages, or whatever else, they will be the ones who inform me. I don’t need today go to the front page of nytimes.com every day to get informed.” How does that change the dynamics, since it seems like a very different delivery mechanism?

Jay: It is. I think people still have these basic needs of — I need to buy something, that’s consumer. I need to know something for my job, that’s producer. This is just interesting to me, and it could be I’m interested in a particular movie star, or I am interested in the person that I am going to see the movie with next weekend. And then there is the voter information. So I think the information demands are the same.

I think of social media as different in a couple of ways. Number one is: The low cost to it makes it a lot easier for expression as a production incentive to generate information. So when you think about people typing in, there’s an opportunity cost, right? They could be typing in or they could be playing soccer with their friends, or doing something else. But if they have this expression motive, they are going to be giving you some information.

You talked about people who no longer go to the Times, somebody emails them or lets them know what they are following on the Times. That’s true and my students are fascinated, at Duke, by aggregation. I still think the thing that’s missing is the creation.

So I think social media is great at saying: “Here’s information that exists that you might be interested in.” It’s almost like an Amazon. If you like this, you would like that. I still think what you need to worry about is who pays for the underlying creation of that information and who’s going to synthesize it.

Josh: Sure. But at the same time, even if social media is not producing this information, it would seem that it would have a significant influence on how it is produced. I mean, if people who work in newspapers always talk about the tyranny of the most-emailed lists. They can actually see these are the 10 stories that are most getting sent around from our readers to their friends, and they tend to be the ones that are the health tips, the cute dog story — things that don’t fit in with their journalistic paradigm of hard news. Is that influencing it?

Jay: It definitely is and it’s interesting. You talked again about the professional idea. In the past a reporter could say: “People are really interested in this. You, the editor, have a different assessment, but I know people care about this.” In a world of clickstreams the editor truly knows that, too — and so does the manager and the publisher. And that makes it harder to go against market tastes.

Why would you want to go against market tastes? Again, there’s this idea that there’s some information that people as citizens need to know, but individually they don’t demand it. The good news is, in a spatial model, there will be a subset of people who want to know about hard news — maybe because they work in government or interest groups, or maybe because they have a notion of civic obligation, or maybe just because they think that polls are like sport stats to them — they’re just inherently interested in it.

So there will be a sort of high-end market for that. The problem is that may work for national or international coverage but how many people in your local area would have to have that taste so that that information is created at the local level — the city council coverage, the county commission coverage.

Josh: Right, right. Well on that depressing note we’ll finish. Thanks again.

Jay: Thanks.

Who’s to blame for the scourge of soft news: men, women, or the system?

The list of people, trends, and things responsible for the death of hard news is so long that it would take the entire cast of CSI a week to process them — women who want celebrity fluff; tuned-out young folk who are stuck on Facebook and text messaging; the moneyed few who manage the industry; Congress; Craig Newmark; the Internet; TiVo. But the leading suspect? Women.

James Hamilton’s discussion of local news in All The News That’s Fit To Sell opens with a commonplace — if a local station is trying to appeal to women, they’ll feature soft news.

That’s right, it’s all our fault.

Hamilton uses magazine subscriptions as a proxy for audience interests — Modern Maturity for those over fifty, People to represent the general appetite for Brangelina. “Soft news coverage is lower in areas with higher circulation of Playboy, which may be because soft news is generally targeted at female viewers, and higher Playboy circulations may represent more young males in a market.”

But wait a minute. Can we really tell from Hamilton’s analysis whether or not the desire to attract women or men to a local news broadcast really tilts the news in favor of the soft and fluffy? Nope.

Why? Because although the percentage of a newscast that features celebrity news might vary, one thing is fixed: every local news broadcast will have a segment devoted to sports. A program director’s interest in getting the distaff side of the house to sit down and watch the news may vary — but sports? The sports segment is forever.

Is this included in Hamilton’s analysis of what represents “soft” news, or do the tables of figures represent the newscast’s content without sports? There’s no indication of this, so we can’t tell.

In either case, you’ll be glad to hear that it seems that neither men or women are ruining the newscast with fluff — the consolidation of the media into large chains is doing it for us: “Stations owned by a company with more than one broadcast station are less likely to provide hard news. Programs on group-owned stations provided 4.19 fewer hard news stories [per broadcast].”

What shapes the news, Hamilton points out in nearly every chapter of the book, is the shape of the market. And consumer preference is only one factor shaping a market, and it’s not even the biggest one. Technology, regulation, and the level of consolidation are bigger factors in laying down the template for the news.

Take, for example, technology’s impact on whether the newshole is fixed or not. Hamilton takes a look at local news as delivered by newspapers, too, and comes to the not-too-surprising conclusion that yes, they’ve got more hard news in them.

Hamilton refrains from coming to many resounding conclusions in either his discussions of local or national broadcast news.

My read of what he’s presented is this: You can’t blame people — men, women, old, young — for the collapse of hard news. And you can’t even blame the people who are obsessively watching ratings and putting together the programming to attract (pander to?) those same people.

All those are just symptoms. The bigger factors at work rule the day — consolidation, competition, regulation/deregulation, and format.

So let’s take a look at each.

Does competition make for better news? It does — but only when you respond to competition by narrowing your topical focus and your target audience. Even after cable, TV stations still wanted to reach mass audiences, and so the result was very often a dumbed-down product.

Does deregulation make for better news? This one’s a wash. Regulation did make for more hard news — but only when there was little competition to start with, as in the days before cable when broadcasters had to justify their monopoly on the spectrum with public-service programming. Deregulation that allowed media companies to create chains had no such effect.

Does the flexibility of the format create better news? There seems to be little downside to a more flexible format; newspapers are more likely to go deep on a subject as they’re not worried about losing readers because readers can skip over to another page where they’ve featured something of abiding popular interest. The more flexible the format, the easier it is to go deeper on a subject. As the Internet shows, though, we have choices on what we want to do a deep dive on. The net can bring us Talking Points Memo — and it will also bring us TMZ and, my favorite, Television Without Pity. In a sense, the flexibility and obsessive depth that the net affords us may even give us a way to be smart about the stupid fluff of our choice, be it Battlestar Galactica or Gossip Girl.

Most of the research in Hamilton’s book comes from snapshots of broadcast and print coverage that’s nearly ten years old. But the lessons of the book leave us with an interesting starting point on how news organizations can succeed or fail in response to the challenge posed by the internet.

News outlets could respond to the “infinite channels” offered by the web by trying, as newscasts did in response to cable news, to be all things to all people — a strategy which cannot and will not make them any smarter or more incisive. Or they could respond by re-evaluating what’s important and choosing to be the best at something focused, and letting those feed and shape general purpose news. The web rewards “narrow comprehensiveness” — that is, everything about something. Excellence on the web is about picking the right something — and then committing to really being “everything” about it.

Lisa Williams runs Placeblogger, a searchable index of the world’s local weblogs. You can follow her on Twitter, where she’s @lisawilliams.

Here’s the next installment of my interview with James Hamilton, author of this month’s Nieman Journalism Lab Book Club selection, All the News That’s Fit to Sell. Here we talk about Chapters 3 and 4, which use TV as a jumping-off point to discuss how economic incentives encourage certain kinds of news coverage and discourage others. Among the topics we cover:

— How FCC deregulation led to more liberal subject matter on the evening news;
— How old Bill O’Reilly’s viewers are (hint: really old);
— How family-owned newspapers encouraged more public-service journalism; and
— How NPR encourages you to “consume an image of yourself.”

As always, there’s a full transcript below the jump.

Josh: All right, we’re back with chapters three and four in All the News That’s Fit to Sell. Those two chapters are entitled “How Strong are the Public’s Interests in the Public Interest” and “Information Programs on Network Television.” And they talk about the demand side of the equation we have been talking about a bit here.

You write about the perception of bias, and how part of that could be a response to the media’s targeting of certain demographic segments of society, particularly young adult women.

Are you saying that it’s primarily the selection of topics of stories that spur bias criticisms — is it more the topics that the news covers or the way that they cover them?

Jay: Both of those could be affected by economic considerations. Let’s first take the topic selection. What I looked at in my book — one of the first things I did was read a lot of biographies of network correspondents, people who’d worked in network news. And it was clear that things were changing when television was deregulated. And in fact, if you go back to the 1980s, there were several great quotes by the chairman of the FCC. One is “Television is just a toaster with pictures,” And the other is “The public interest is defined by the public’s interest.” And what that FCC commissioner was saying is that there really is no market failure in news. News is just like any other good — it’s like a toaster.

And in part, there was a deregulation — and television stations were no longer required to extensively document the type of information that they were providing, and you could essentially get your license renewed by sending in just a little bit of paperwork. And at the same time, with the explosion of cable channels, you saw the erosion of what you could think of as the oligopoly of boredom. When there were only four or five options, each of the major networks could provide a network news program heavy on public-affairs programming. They needed that in the ’60s and ’70s to get their licenses renewed. And if they did it at the same time, they weren’t really going to lose out to other people.

Then with the explosion of cable channels, things became more competitive, and you found this more market orientation for the network evening news. So what happened was, if you look at who the marginal viewer was in the 1990s — the person would switch in and switch out — it was people in their 30s and 40s, early 40s. They could watch cable or they could watch the network evening news.

Those people aren’t the average viewer — the average viewer was much older, in their 50s. But if you’re running in an economic marketplace, sometimes you take the average viewer for granted. They’re not going to go off and watch MTV or the E! channel. You focus on that person who sometimes watches and [sometimes] doesn’t. And, in particular, they focused on women in their 30s. Women’s attention commands a higher ad rate, because surveys show that they are more likely to make the purchasing decisions within the household.

So if your a network producer in New York, you want to attract women in their 30s to your network evening news program. Toward the end of the program or middle of the program, you have more flexibility about issues you want to talk about. And if you want to talk about issues of interest particular to those women, they’re more interested, I found in looking at survey data — gun control, poverty, issues of families with children. Those issues are traditionally identified in the press with the Democratic Party.

So what you’re trying to do is attract marginal viewers with high advertiser value, and what that means is you talk about Democratic issues. And so I show that the higher the interest of women in their 30s in particular topic, the more content directed towards them — both the number of stories and amount of time — in the 1990’s. That sets up a great counterprogramming strategy by Fox.

Josh: One of my favorite media statistics ever was in a New York Times story about a year and a half ago, that the average age of a viewer of the Bill O’Reilly show on Fox was 71 — or the median age, excuse me. Not the average, the median. And that had just stunned me, because it was in the context of an article about Keith Olbermann’s show, and his people at MSNBC were so excited they were attracting a younger audience because his median age was 59 — which did not strike me as stunningly young.

Jay: Right. Well, the other thing too is, you can remember those in part are subscription — they get some subscription from cable. They also care about advertising, but they can also get a revenue stream from your cable bill.

Josh: In one of our previous talks, you described the level of hard news not being as high as it should be as a market failure. And you just described how in the ’60s there was a way to get around that market failure — which was regulation through the FCC. Do you see any room for a return of government regulation in this space that would be productive? Do you think there would be anything to be gained for going back into that direction?

Jay: I think that if you talk about it as pure content requirements in news, it would be very hard now, because in the old days you could do well and do good at the same time — because the profit rates were so high and the competition was so low given that there were only five channels. The other thing that you had operating, too, was that for a while, the owners or founders of the networks were still alive and they got some utility from the notion that they were doing the right thing — just like in the 1980s, you had newspaper owners that were individuals or families, and they got a return from providing more public-affairs coverage in their newspapers than the market was demanding.

So the fact that the channels are now owned by very large companies which are not even branded as media companies anymore — they’re conglomerates — that means that the real focus and the real fiduciary responsibility is to maximize profits. If you told them they had to cover certain types of hard news, that’s going to be difficult because of the First Amendment. What they would probably try to do is skirt it by providing the thing that’s most profit maximizing. So again, if they said “you want more hard news, let’s talk about another scandal,” or “let’s talk about the horse race or the poling.” So I think one of the things that the government could do most easily is what the Obama administration said it’s going to do, which is be more transparent. Because if you have more transparency — if raw data is provided, if people, interest groups, and the media get better access to information, the granular information of what government is doing, that’s effectively lowering the cost of covering hard news so I’m more hopeful that that would happen.

Josh: You had a quote in this chapter that was “The high fixed costs of gathering, producing, and distributing news mean that the varieties of information products offered to the market will be limited.”

Jay: That’s right.

Josh: And it’s interesting that were at a point at which two of those three high fixed costs have, as we’ve talked before, gone to something near zero online. But the cost of gathering, which is largely the salary of the people who have been laid off in our industry in recent months and years, hasn’t significantly gone down. From your economics knowledge, would you expect different reactions economically when different layers of the fixed-cost puzzle change? Is there something about the gathering costs still being high that would affect the way that media is produced?

Jay: Sure. Well the good news is, with the drop in some of those fixed costs, it means you get more variety, because it takes fewer people’s attention to cover the fixed costs of a particular outlet. So you get more and more niche products. If you take an overview of it, I think today versus 1960, you’re much more likely to find a media outlet that reflects what you are thinking.

The bad news is that the number of eyeballs whose advertising rates support that outlet may be declining. So we have more outlets but fewer people watching any particular one. And it’s really that attention or subscription from them that allows the creation of the information. So I worry about the quality of information that can be provided. And I think that’s why people are wringing their hands about some of the traditional mainstream media which we’ve really relied upon — The Washington Post, The New York Times, the financial straits that they’re in right now.

Your point about the news gathering — one of the things that you could do is try to lower that cost. Some people do it through crowdsourcing. Some people — American Public Media has something called Public Insight Journalism, which you probably read about, where you basically create a database of people in your area. WUNC, the local public radio station here, is doing this. People give information about themselves — their demographics, their interests — to the radio station. Then the radio station puts out a query, and a query might be, “What do you think is the next bubble that is going to burst in our area, now that the mortgage crisis has partly worked its way through? What’s the next bubble that you see?” Or, “What’s the most pressing financial concern that you have?”

So that’s trying to lower the cost by basically relying on people’s expression to tell you what is going on. But I’m also very hopeful about text mining, what I would call data mining in the public interest, as a way to lower the cost of new gathering. And that’s going to be more possible if government is more transparent.

Josh: One last question on these chapters. When you say that it’s easier for people to find a media source or a news source that they connect with in a more intense way than would have been the case before — one that reflects their beliefs — and that obviously has an impact on the advertising model.

Would it though, on the flip side, have a potential benefit in that if people do feel more that their beliefs are more reflected in their media outlet or that they feel a stronger connection to it, that they might be more willing to pay for access to that media — that it’s possible that, in the way that someone who loves Morning Edition is more likely to want to give money to NPR, that there might be room for an area of the media where the consumers are willing to pay for part of the gathering of news?

Jay: That’s a great question. The way that people talk about that in educational programming for children is that you have to reach before you teach. So what you’re pointing out is that if the product more closely matches your ideal, you may get more satisfaction from it.

The question is, let’s suppose we were talking about an Internet site. On the Internet, if we’re talking about facts or information that’s more like a commodity, if you have more people offering it to you, that’s a competitive market. And in a competitive market, the price gets competed down to the marginal cost. And the marginal cost of one more pageview is zero. So even if somebody values information, other people are going to be offering it to them at a zero price.

Now, two hopeful things. One is you could make an appeal to them based on their identity, just like NPR does — that you have a responsibility to do that, so we’re taking it away from an investment equation. We’re saying this is a duty or this is what people do. So by giving, you are consuming an image of yourself. That’s one way that you could do that.

And then the second thing is partisan information. My.BarackObama.com, MoveOn — they are providing people who are partisan with more detailed information about politics and sparking face-to-face political interactions. So another source of information, it might not be the media. It might be partisan information — but partisan information today is not just negative advertising on television. It’s telling you in a very specific way about the issues that you care about.

Josh: It’s also folks like Human Rights Watch going and doing original reporting on human-rights situations in Darfur or elsewhere, that sort of thing.

Jay: Exactly, nonprofits. I think if you ask how does information get created — information gets created if you pay somebody, if they can sell your attention to advertisers, if they want your vote, or if they want you to think about a different set of issues, and that is what I view nonprofits as doing.

In Chapter 4 of All the News That’s Fit to Sell, James Hamilton tackles information programs on network television ranging from 60 Minutes, Dateline, 20/20 and the nightly news shows all the way down to non-fiction entertainment shows like World’s Most Amazing Videos, World’s Sexiest Commercials, and When Good Pets Go Bad (some of which appear to have been sweeps-period one-offs, not series).

In an analytical tour the force (made possible, one assumes, by a generous alotment of research assistants), he gathered transcripts of a week’s worth of these shows, carved the text up into 1,010 500-word segments, ran all of these through a software program called DICTION, which was designed to analyze the language of politics — all in order to derive for each program linguistic profile measurements in DICTION’s 33 categories, which fall into five overarching silos: certainty, optimism, activity, realism and commonality.  This analysis demonstrated that there were statistically significant differences between the various programs, not surprisingly.  For example, the evening news shows scored highest in activity terms, and in subcategories like numerical terms and collective terms that refer to groups and organizations.  Morning news shows and news magazines scored much higher on human interest terms and self-references.

Hamilton then combined these results with Nielsen ratings data.  While he found that some of the DICTION-delineated content profiles attract a full spectrum of demographic groups, others are specific in their appeal to various age/gender combinations.  For example, human interest language attracts women aged 18 and up, but men 18 and up are less attracted as the human interest score rises.  Instead, they have an affinity for programs with more self-referential terms — something that tends to lower preference among women.

Hamilton’s analysis supports the contention that networks skew their news toward the soft side, since the majority of the analyzed programs showed a softer linguistic profile distinct from that of the clearly hard-news content of the evening news.  In creating this programming mix, networks show an economic slant toward the more lucrative demographic segments (principally, younger women) who are more strongly attracted to soft news.

This line of inquiry raises the question (not explored by Hamilton, but an interesting possible side exploration): To what extent are all of these linguistic differences consciously pursued by network writers, and to what extent are they normal outcomes of the differences in content?  An evening news program that reports the day’s economic and political developments is unlikely to produce a high self-referential score, so it attracts relatively fewer young women.  But if the network cultivates a degree of celebrity status for its reporters, as some have tended to do, and those reporters engage in a more personal style (“I went here, I saw that, I spoke with”) that would increase the self referential and human interest scores that attract the 18-and-up females. Reporter/stars like Geraldo Rivera intuited this less long before Hamilton made it explicit, but perhaps it can also be seen in the minor personality cults of reporters like Sanjay Gupta and Anderson Cooper, and in the selection of morning-show veteran Katie Couric to become a nightly news anchor.

James Hamilton begins Chapter 3 of All the News that’s Fit to Sell with a question that frames a long-standing debate within and surrounding the media industry: “Do the media provide people with the information they want or the information they need?”

When I started out in the newspaper business in the late 1970s, there were still plenty of old-school editors around — the Lou Grant types whose only tone of voice was gruff, who typed with two fingers, and who (one imagined) still had a hat with a press pass stuck in the brim and a bottle of whiskey in the bottom desk drawer. They were schooled in objective journalism and in the newspaper as an institution providing a great public service, resented references to the paper as as a “product,” would throw us advertising hacks out of the newsroom if we suggested or requested any small editorial favor for our customers, and firmly believed that indeed, their job was to give people news they needed, with “need” defined by them, the almighty editors. They would have no use for surveys to find out what people “wanted”; they made only a few concessions to perceived wants, such as tolerating in the paper non-hard-news features like comics and the “women’s pages.”

But the television news market was never like this — from TV’s earliest days, it was clear that most programs were tailored for specific slices of the viewing audience.  The varying demographics of those audience slices differed in value to advertisers, who were willing to pay premium ad rates (expressed as “cost per thousand” or CPM) for a more valuable audience mix — one more responsive to their particular messages.  Eventually, this evolved into the highly sophisticated slicing and dicing of an audience that’s now spread across a multiplicity of channels.

This type of targeting is most obvious on the entertainment side of TV content, where it is not hard to discern the program director’s intentions to appeal to younger or older viewers, males or females, sports fans, music fans, cooking enthusiasts, and so forth.  But it’s less obvious that different news programs also appeal to demographically distinct audiences, and that these differences are intentional.

Hamilton demonstrates this through an exhaustive set of economic analyses of surveys exploring TV news audiences: their viewing habits and preferences,  their political leanings, their news topic priorities and their perceptions of broadcaster bias. Ultimately he concludes that news content producers do indeed select and package topics with an intentional (but not huge) bias toward liberalism.  This is driven not by ideology on the part of network owners or managers, but by their preference for demographic groups (especially younger women) that have more influence over spending decisions of value to advertisers and therefore command a higher CPM.  In doing this, programmers are reaching for a marginal audience, hoping to enhance the value of the audience mix.  They essentially take for granted the larger, more loyal core audience, which is the over-50 crowd. 

In other words, news programmers insert content they know is “wanted” by the more liberal, younger, female groups in order to enhance profitability; in so doing, they create a content mix that’s perceived as having a liberal bias by the older, more conservative groups that have a lower value to advertisers.  It’s an economic, rather than ideological explanation for perceived news content bias.

He then goes on to show that regular voters are more likely to view media with hard news content.  For example, more than 50 percent of devotees of programming like News Hour with Jim Lehrer, C-SPAN and National Public Radio, and publications like Time, Newsweek, U.S. News and World Report, Fortune and Forbes reported that they always vote.  By contrast, less than 35 percent of the audience for publications like People and National Inquirer, and shows like Cops, America’s Most Wanted and Jerry Springer report that they always vote.  One might confidently guess that result, but Hamilton backs it up with data and suggests that as a result, program directors in their quest for marginal viewers have more incentive to present soft news aimed at younger, marginal viewers who also happen to be marginal voters, regardless of the dissatisfaction this induces among older viewers, or its effect on the functioning of democratic machinery.

And yet, Hamilton shows, the “market for political information” works well enough that even less-frequent voters who are less well-informed and are not attracted to hard news programs still get enough information at least to be able to correctly rank a set of prominent candidates on a political spectrum.

I have one caveat for Hamilton’s readers, one quibble, and one wish:

• The caveat is that since the book was published five years ago, the data is now as old as ten years or more, which raises the possibility that some of it may be out of date.
• That leads to my quibble about the analysis: So far in the book, Hamilton has not added a time dimension to any of the data.   Doing so in all cases might have expanded the project beyond feasibility, but since the mix and nature of TV programming does change over time (witness, for example, the rise of “reality” programs in the last decade), it’s reasonable to ask whether, for example, the economically-incented liberal skew Hamilton found is increasing, or decreasing over time.
• My wish while reading this book is that some of the data had been presented graphically, for example in scatter diagrams, rather than in table after table (there are 22 in this chapter alone).  Doing so would have made Hamilton’s points much more clearly and forcefully.

This is the second portion of my interview with Jay Hamilton, author of this month’s Nieman Journalism Lab Book Club selection, All the News That’s Fit to Sell. We’re talking about Chapter 2, which is where the meat of the book begins. Jay uses the transition from party-affiliated to independent newspapers in the late 19th century as a way to look at how economic factors influence what many journalists would like to think are independent decisions of craft. A few points we discuss:

— Why it makes economic sense for so many people to ignore the news;
— What the Internet has in common with the mid-19th century;
— The role of fixed costs in a news organization’s distribution strategies.

Full transcript after the jump.

Josh: We’re talking about Chapter 2, and that’s the chapter in which you go through the evolution of nonpartisan newspapers in the 19th century — how the print press moved from being predominantly partisan to being more independent and more nonpartisan. What were the primary forces in that period that pushed newspapers in that direction?

Jay: Well, if you think about information markets, people demand four different types of information: consumer, producer, entertainment, and voter or citizen information. And the first three types of markets work pretty well. If you don’t get the information yourself, you don’t get the benefit. So if you want to buy a car, you go to Edmunds, you go to Consumer Reports, you learn about cars, you get a better car.

If you think about that fourth information demand, citizen or voter information, you and I could study up on global warming, but global warming policy isn’t going to get better just based on the individual actions of you or me. We are really not, in a statistical sense, the decider.

And for economists that means that most of us remain rationally ignorant about the details of politics and don’t consume or demand a lot of information about politics and government. And so that sets up this tension between what people need to know and what they want to know. And that tension has been solved in many different ways across time. A hundred fifty years ago, the parties, in part, subsidized the provision of information. So you had a partisan or party press.

And then around 1870, when you had the invention of the high-speed press — they were very expensive. They had high fixed costs. And to spread those costs across different people, people stopped being the Republican newspaper or the Democratic newspaper, they became independent. And that allowed them to reach a larger number of people, which allowed them to spread the cost of those presses across many different people.

So number one, it was the high fixed cost. It was the need to spread the cost of those high-speed presses across many different people. And then number two is the evolution of the advertising market, where you started to have national brands, people who wanted to come into communities and advertise.

And they found it cheaper and easier to deal with one large paper or two large papers rather than five or seven small papers. So those two forces generated. especially in the large cities in the United States. a big change between 1870 and 1880 in how people identified their paper.

Josh: That’s interesting. When you describe the rational ignorance of political issues on the part of a lot of voters, I think a lot of journalists — particular ones who cover the government, who cover these public policy issues — at some level they are conscious, and I know I was when I was a reporter, of writing for an audience that is different than the general audience of the newspaper.

I wrote a lot of stories about education policy in Texas, and I knew at some level that the main audience that those stories were intended for [was] the policy makers, who then might use the information that I found to make things better within the system. And the identification of an audience within that audience seems to connect with that economic theory you mentioned.

Jay: That’s right. First, you mentioned that you wrote for a newspaper — newspapers can offer a portfolio of stories. They don’t have to tell the same story to everyone at the same time, like a broadcast local news channel does today. So that meant you could have a large number of stories which were boring to a large number of people — but a segment of the audience could be attracted to it.

The next thing is you mentioned policy makers. If you go back and think about the four information demands: consumer, producer, entertainment, and voter — for some people news about politics is something they need to do their job, and so that’s a producer demand. And that’s in part why The Washington Post can specialize in coverage of government, because of its local market. In D.C., news about government and politics is producer information, just like financial information is producer information in New York City.

And the other thing about the market for public affairs — I think it comes from what I call the three D’s: duty, diversion, and drama. Some people believe they have a duty to vote, and those people also feel they have a duty to become informed. It is not an investment decision, really. They are not saying: I’m the marginal voter, I’m going to determine who is going to be the senator. They are saying: I’m a citizen, I vote because that is part of my identity. It is almost like a consumption act. So they demand news.

For some people C-SPAN is like ESPN. And I will plead guilty to that, and you probably would too. The details of politics are just inherently interesting. And then there is drama. Maybe some people won’t sit still if we are going to talk about the details of the stimulus plan, but if we could say how the stimulus plan is affecting somebody’s polls — who is up, who is down, what the political horse race is, a scandal, who paid their nanny, who paid their taxes — if we could look at politics through the prism of a horse race, that’s human entertainment, and that’s another way you get information delivered.

Josh: One thing I found interesting about this chapter was the parallel to what has happened in an era in which the fixed costs of producing information have radically dropped — how distribution of news and information online is essentially at a zero cost at this point, other than the production of the information. And at the same time, a lot of the real energy in new media, the examples that people point to like Talking Points Memo and others that have done innovative and interesting things — a lot of them are in openly partisan environments. They are liberal news organizations or conservative news organizations. Is the Internet essentially bringing us back to what it was like in the pre-1870 era?

Jay: That’s a great insight. It’s truth. Large fixed costs brought us objectivity as a commercial product, and the reduction in fixed costs is bringing back partisan news outlets. If you look at the cable channels, Fox is counterprogramming against a slight liberal media bias in the network news, which I think we’ll talk about a little bit later, but you’re exactly correct. If you look on the Internet, the small cost of setting up a website means that today you can get your world view reflected back at you at a much higher probability than the past.

Josh: Did you see a connection in your work between objectivity and hard news content? Because the partisan press was interested in producing information about public policy — it was just doing it from a partisan perspective. Does increased objectivity increase or decrease the amount of hard news being produced?

Jay: Well, it’s interesting. I think it creates a different type of news, in the following sense. If you think about — imagine media products were arrayed along the line, from left to right. What you are seeing now is more products spread across that line. And what I show in my book is that if you tell me where you stand on a left/right seven-point scale of liberal and conservative, I can place you on that line. Then if I look at the average liberalism and conservatism of who’s consuming a media product, I can put a newspaper or television show on that line. And then what I show in my book is that the greater the space between where you stand and where the average reader or viewer is of a program, the more likely you are to say that that program is biased.

Josh: I was on a TV show a couple weeks ago talking about people evaluating the Israeli-Palestinian conflict coverage, and those great studies done in the ’80s, about the exact same stories would be viewed as radically pro-Israel or radically pro-Palestinian — depending on the bias of the person or the perspective of the person who is doing the evaluating, even the same story.

Jay: That’s right, and I think that the reason that happens in part is because you don’t really pay a price to having mistaken political views. If you think about it, if I believed my car ran on water, after about a day I wouldn’t be going around town driving. And if I really wanted to watch a news source that told me it was going to rain every day, I would pay a price for that, pretty quickly. But if I want to believe different things about the way the political world works, because my own political decisions don’t have a large statistical impact on that, you could have a set of people of that were studied by the University of Maryland, where they looked at Fox News viewers and found that they were more likely to believe that Saddam Hussein was directly involved in 9/11, and that weapons of mass destruction had actually been found. Those two statements, most people would agree, are factually inaccurate. But if you do believe those statements, you personally don’t pay a price for believing that.

Josh: So it would seem like from what we’ve been saying, two routes to increasing the demand for hard news would be (a) to increase the stake somehow attached to people’s knowledge of hard news, which seems hard to do, or (b) to increase the duty factor that you mentioned, the people who view being informed as citizens, as part of their responsibility even if they don’t get a specific benefit from it.

Jay: Well, it’s interesting. So actually, if you ask me that direct question — how do you support a hard-news provision — the part that I’m really most interested in is accountability or watchdog coverage, because I think that’s the most at-risk to this rational ignorant problem, and it’s also the most costly. I think the policy items that should be on the table for that are: non-profit ownership or non-profit subsidies for the creation of information; something that I would call computational journalism, which is essentially lowering the cost of doing that type of investigative or accountability reporting; or better monetization today of the attention of people who are interested in hard news. And I think that’s going to involve a big debate about privacy — what you’re willing to let Google or Yahoo use about what it knows about you to deliver a higher advertising rate for a newspaper.

Josh: Ok. Well, we’ll get into that in future chapters. Thanks.

Jay: Thanks.

The New York Sun was one of the first non-partisan newspapers in the United States, and it might have been the country’s last partisan newspaper as well. What happened in the intervening 175 years was the full-circle transformation of American publishing.

To be clear, there have been two New York Suns: one that printed from 1833 until 1950, reigning for a time as the most important daily in New York, and another, unrelated except by name and motto, that published between 2002 and 2008. The original Sun’s founder, Benjamin Day, credited his newspaper’s success in the middle of the 20th century to a new invention, the rotary press, which upended the model of printing that had reigned since Gutenberg. “The development of presses with runs of 25,000 sheets or more per hour meant a single newspaper could supply a significant portion of a city’s readers,” writes James Hamilton in chapter two of All the News That’s Fit to Sell. The increased output, along with a decline in the cost of paper, meant that publishers like Day didn’t need to rely on expensive subscriptions like typical American newspapers of the time. Instead, he charged a penny.

The Sun also broke from its competitors in political perspective — or rather, by choosing not to have one. According to Hamilton’s data, 87 percent of daily newspapers in large American cities were allied with either the Democrats or the Republicans in 1870. But the Sun pitched itself this way to advertisers in 1880:

In its comments on men and affairs, THE SUN believes that the only guide of policy should be common sense, inspired by genuine American principles and backed by honesty of purpose. For this reason it is, and will continue to be, absolutely independent of party, class, clique, organization, or interest. It is for all, but of none.

Hamilton sets out to argue that the non-partisan stance adopted by the Sun — and, increasingly, most major-market dailies between 1870 and 1900 — had little to do with journalistic ethics or a commitment to the truth. Like charging a penny, political independence was a business calculation intended to reach the largest possible audience. The newer, faster presses cost more money, and publishers could no longer afford to limit their readerships by taking a narrow point of view.

And while that’s been argued before, Hamilton adds the rigor of his field, economics, to demonstrate the effect more conclusively. By 1900, he finds, just 50 percent of dailies in large American cities still considered themselves Democratic or Republican. The increasing collection of independent newspapers charged premiums to advertisers, employed more journalists, and were more likely to establish Washington bureaus — laying the groundwork, essentially, for the business of 20th-century newspapers.

It is often said that the crisis now upending print periodicals is secular rather than cyclical, and that’s true enough. But if you take a long enough view, it certainly seems as though the American press is returning to something like the early 19th century before Benjamin Day’s Sun broke the model. It’s been said before, but Internet publishing is a technological innovation at least on the order of the rotary press, and there’s probably something we can learn about our current situation from that earlier transformation. There are plenty of comparisons to be made.

In one of my favorite tables in chapter two, Hamilton counts the average number of newspapers and their circulation in American cities between 1870 and 1900. He finds that in 1870, dailies in medium-sized cities had a combined circulation of .25 copies per person, which grew to .54 by 1900 for the reasons described above. So I ran some numbers from present-day Seattle, a medium-sized city experiencing a similarly dramatic transformation among its daily newspapers. The results are uncanny: The Seattle Times and Post-Intelligencer currently have a combined circulation of .53 copies per person — or pretty much exactly the situation in 1900. When the P-I folds its print edition in March, Seattle will return to an average daily circulation of .33 per person, just slightly above where the number was in 1870 before everything changed. (The number may be higher for a time if former P-I subscribers move to the Times.) The common refrain that bloggers are the pamphleteers of yore starts to gain more heft when the data harkens back to the earlier era, too.

Which brings us back to the Sun — this time the second one, which made an impressive but unsuccessful seven-year run at profitability this decade. Though its news pages were smartly written and largely without bias, the new Sun’s publisher, Seth Lipsky, called it a “right-of-center broadsheet” and sought to cover topics like Israeli foreign policy with a sympathetic eye. Its print audience was a small subset of like-minded conservatives and Orthodox Jews — in other words, the kind of partisan niche that the rotary press had long ago rendered unprofitable and for which the Internet promises a new refuge.

Mark Zuckerberg has added a wealth of features to Facebook in five years, but he has also taken a few away. There was an ill-fated foray into file-sharing and a course catalog that didn’t survive the site’s expansion. In the first few months, Facebook profiles also listed every mention of a user’s name in the archives of Harvard’s student newspaper The Crimson. It was a useful widget for keeping track of news in your friends’ lives, but Zuckerberg killed it not long after bringing Facebook to a few other universities.

There was no explanation for dropping the feature, and it could have been a problem with scalability, but this is what I think happened: Zuckerberg, who had initially played down the scope of his site, realized that Facebook wasn’t a tool for keeping track of news made somewhere else. It was a tool for making news right there, on Facebook.

In the first chapter of this month’s Lab Book Club selection, economist James Hamilton defines information as “any description that can be stored in a binary (i.e., 0,1) format” and news as “the subset of information offered as news in the marketplace.” Zuckerberg had created a marketplace, though he did not charge an entrance fee, for data in high demand on a very local level: relationships, memberships, likes, dislikes, birthdays. His site transformed that information into news. It was the perfect model, perhaps, of a community or campus news organization that deals in the treasured minutiae of localized networks. And this was at least two years before Facebook’s news feed would give the concept its proper shape.

Such was the state of news on an American college campus in 2004. The student newspaper did its thing — very well, I’d argue — performing a valuable service for its community, one member of which coded a website in “literally…a week” that eclipsed the newspaper’s audience in less than a month. And soon enough, the website didn’t need the newspaper. It was a news organization unto itself.

Related: Facebook has posted some of its early site designs, and here’s a timeline of the site’s expansion, which doesn’t mention the time Zuckerberg compared his unattractive classmates to “farm animals” or tried to organize a nationwide Beirut tournament. On Twitter yesterday afternoon, I asked how Facebook had changed reporting and got two responses. Feel free to add your own thoughts on the five-year-old site’s relationship to journalism in the comments.