58 Business The EconomistOctober 17th 2020
I
n the early17th century the best place to gather news in London
was the old cathedral of St Paul’s, a place that buzzed with gossip
on politics and was described—unusually for a house of wor-
ship—as “the ear’s brothel”. Some of the informants were entrepre-
neurs; they had recently started writing “letters of news” which
they sold to subscribers at a hefty price. Some 400 years later, the
original newspaper business model is finally making a comeback.
The reason it has taken so long to resurface is that, for almost
two centuries, newspapers have been on a journey into the mass
market which gave them scale, prestige and profit but which has
now reached its end. They mostly abandoned dependence on sub-
scriptions and instead sold below what they cost to produce as a
way to attract legions of readers to sell to advertisers. The apho-
rism today applied to users of technology platforms—“If you are
not paying, you are the product”—rang almost as true of newspa-
per readers in the heyday of print advertising.
No longer. Since the internet took off, the print media’s adver-
tising-supported business model has floundered. In the past 20
years newspapers’ ad revenues in America have fallen by about
80% (to Depression-era levels), while circulation has roughly fall-
en by half. Though online traffic has surged, revenue from digital
advertising has failed to offset the profit draining out of print. Plat-
forms such as Google and Facebook have become the new moguls
of the media landscape. In Britain, for instance, Google accounts
for more than 90% of search-advertising revenues and Facebook
for half the value of all display ads, says the Competition and Mar-
kets Authority (cma), a regulator. In the past two years they have
between them disgorged 40% of online traffic going to national
papers. The cma warned in July that ad-fuelled online platforms
could hasten the decline of reliable news media.
This power shift has led newspapers in many countries to plead
with politicians that they need help in the face of big tech. Partly
because they have, by their very nature, a loud voice, they have gen-
erated sympathy. How much they deserve it is another matter.
The world is strewn with businesses, from books and music to
travel and taxis, that have been torn apart by the digital revolution
without anyone rushing to the rescue. Why are newspapers differ-
ent? One argument is that a thriving press supports grass-rootsjournalism which, though often loss-making, supports democra-
cy. That is reasonable. Yet it is muddled up with other motivations,
such as the desire to throttle the tech giants. The result is an array
of government interventions in recent months aimed at putting
the squeeze on Google and Facebook. In Australia and France trust-
busters are striving to force the duo to pay for news they link to on
their platforms. In America a congressional subcommittee this
month recommended a “safe harbour” for newspapers to negoti-
ate collectively with online platforms.
Mindful of the hue and cry, Google is offering a handout. This
month it pledged $1bn over three years to newspapers to curate
news content for its site. Some publishers saw it as a precedent—
and a tacit admission that Google should pay for news. Even News
Corp, a media behemoth controlled by Rupert Murdoch, which has
led the crusade against the tech giants, welcomed the move. Last
year Facebook agreed to pay News Corp a licensing fee for display-
ing some articles in its news tab.
If anything, the gratitude for big tech’s largesse shows how des-
perate newspapers are for payment of any kind. Yet set against rev-
enues of $162bn last year at Google’s parent, Alphabet, $1bn is a pit-
tance. More to the point, it will not change the underlying
economics of the global newspaper industry, which had about
$140bn of revenues last year. That is because the ad-funded busi-
ness model was living on fumes even before the internet ate the
world this century. Data from Benedict Evans, who writes a tech-
nology newsletter, show that newspapers in America have been
losing share of ad dollars to tv since the 1950s—long before the
web. Circulation has also fallen relative to population, suggesting
that profits were bolstered by economic and demographic growth,
not because the industry was producing a more popular product.
Claims that the tech giants are plundering newspapers for pro-
fit sound far-fetched, too. The real failure is that papers have lost
control of distribution to Google and Facebook, making it harder
to monetise the traffic. This is a mistake some content industries,
such as video-streaming and music, have avoided. Moreover,
some of the advertising dollars made by big tech came from bring-
ing new firms, particularly microbusinesses, into the market,
rather than poaching online advertisers from newspapers.The (slightly) better news
So ignore the moaning of old-media moguls in distress and look
instead at how some newspapers have already adapted to the digi-
tal onslaught. Revenues at the New York Times, for instance, are
still far short of their ad-funded halcyon days. Yet the number of
subscriptions exceeded 6.5m this year, a number that should give
the paper enough clout to bypass the tech giants. Tabloids find it
harder to turn readers into subscribers, especially with so much
clickbait around. But some digital publications with a newsworthy
focus such as Axios, which produces sponsored newsletters, are
thriving. Axios even plans to enter local markets, where newspa-
pers are in particular trouble.
The question of who pays for public-interest journalism re-
mains unanswered. But few think it ought to be Google and Face-
book. That would “undermine the principles of an independent
press”, says Alice Pickthall of Enders Analysis, a consultancy.
Curbing the power of big tech is a matter for the world’s trustbust-
ers, which must not be conflated with bailing out press barons.
The survival of newspapers should depend on business, not regu-
lation. Like the gossip merchants of St Paul’s, they need to produce
a product that readers are happy to pay a fair price for. 7Schumpeter Bad news
Big tech cannot—and should not—rescue the newspaper industry