Media independence and sustainability

Mira Milosevic, Global Forum for Media Development

Acknowledgement and disclaimer: The views and positions expressed in this report are solely those of the author and do not necessarily reflect the views of the Department of Foreign Affairs, Trade and Development or the Government of Canada. The report is in its original language.

Executive summary

In only two decades, changes in the political, technological, social, and business environment have compromised sustainability and, thus, the independence of journalism and news media globally. With the COVID-19 pandemic amplifying the crisis, the coming years will be decisive for the future of journalism.

One of the main pillars of financial stability for many newsrooms—advertising revenue—is fast disappearing. Audiences are increasingly accessing news through their phones and mobile devices. Quality news and journalism is disadvantaged by the incentives and economies-of-scale model that digital platforms are pursuing.

While still an essential part of the revenue mix, digital circulation revenue will not address the gap left by advertising decline. Existing subsidies and support mechanisms are considered insufficient to address market failure and the lack of local reporting, and to preserve journalism as a public good. These trends are the most pronounced in less developed parts of the world and resource-poor settings. At present, there are no firmly established market mechanisms that transform the social value of professional, accountability journalism into an equivalent monetary return for news media.^{Footnote 1} Without new public funding, regulation of digital markets, and international support systems for non-profit media, independent professional journalism is in danger of becoming an expensive luxury rather than a universal public good.

Introduction

Democracy and fundamental freedoms are deteriorating globally.^{Footnote 2} More than 90% of the world’s population lives in countries where the level of press freedom is regarded as problematic, difficult or very serious.^{Footnote 3} Systems that underpin professional production of news and reliable information face challenges even in the most advanced democracies. The coming decade will be decisive for the future of journalism, with the pandemic amplifying converging crises, including the demise of journalism’s economic model.^{Footnote 4}

From 2009 until the present day, close to 200 radio stations have gone off-air in Venezuela, creating large areas without local news.^{Footnote 5} More than 30 million people in Brazil live in “news deserts” - municipalities that do not have news outlets.^{Footnote 6} At least one-third of Canadian journalism jobs have disappeared since 2010,^{Footnote 7} while the United States has lost 2,100 newspapers in 15 years.^{Footnote 8} The pandemic^{Footnote 9} and subsequent global economic fallout^{Footnote 10} have significantly accelerated this trend.^{Footnote 11}

How market failure leads to deterioration of media freedom and independence

Collapsing advertising revenue: Advertising revenue for newspapers globally has been in free fall since 2008, plunging from $103 billion^{Footnote 12} to $49 billion in 2019.^{Footnote 13} Due to COVID-19, this figure is likely to decline by a further 25% in 2020.^{Footnote 14} While the overall online advertising market is expected to continue growing at a compound annual rate of around 20%,^{Footnote 15} digital ad revenue largely circumvents news publishers.^{Footnote 16}

This decoupling of advertising and journalism content is a result of two long-term trends. Firstly, by taking advantage of high market concentration, large platforms and intermediaries have captured the digital advertising market^{Footnote 17} and other critical digital business segments,^{Footnote 18} and compromised market plurality and quality of our information ecosystem.^{Footnote 19} Secondly, firms that specialize in ad tech allow advertisers to block their ads^{Footnote 20} from appearing next to anything a brand considers “controversial,”^{Footnote 21} including journalism and news content.^{Footnote 22}

Profound changes in news distribution and consumption: Audiences are increasingly accessing news through their mobile devices,^{Footnote 23} social media and messaging platforms.^{Footnote 24} Users consider social media less trustworthy, impartial and accurate than other major news platforms. However, due to availability, reach, and the current system of incentives and recommendations, quality content is relatively disadvantaged in the economies-of-scale model that platforms are pursuing.

Ownership concentration and media capture: A small number of individuals and organizations control increasing shares of news media production, distribution, data collection and advertising channels.^{Footnote 25} Research shows that newspapers and local media are among the most vulnerable. A significant threat to editorial independence in a growing number of countries across the world is “media capture”^{Footnote 26}—a form of media control achieved through collusion between governments and powerful interest groups.^{Footnote 27}

What are the opportunities to address the gap for journalism funding?

Digital markets for news: While it would be easy to dismiss digital advertising and declare it irrelevant for the revenue portfolio for journalism and news media,^{Footnote 28} the future of our overall information system is intrinsically linked with digital markets and how the Internet is governed. Authorities in Australia^{Footnote 29}, Europe^{Footnote 30} and the U.S.^{Footnote 31} are setting the stage for future regulation.^{Footnote 32}

On the consumption side, the pandemic has substantially increased demand for trustworthy media, with television news and online sources seeing significant audience growth.^{Footnote 33} News publishers are building lasting relationships with readers willing to pay for online content in the form of subscriptions, memberships,^{Footnote 34} access to premium articles, donations or micropayments.^{Footnote 35}

However, even in countries with higher levels of payment, “winner-takes-most” dynamics are persisting for digital news.^{Footnote 36} While still an essential part of the revenue mix, digital circulation revenue, estimated at only US$5 billion in 2019,^{Footnote 37} will not address the overall gap left by advertising decline.^{Footnote 38} In addition, relying mostly on subscription and membership models raises the question of whether all segments of society will have access to independent journalism and reliable information.

Public funding, subsidies, and cross-subsidies: Subsidies and different models of state aid have been historically used in Europe and other regions,^{Footnote 39} mainly to secure media pluralism^{Footnote 40} and local reporting,^{Footnote 41} and to maintain competition.

Existing subsidies and support mechanisms are insufficient to address the dearth of local reporting and the failure of the market, and to preserve journalism as a public good. The Cairncross Review in the U.K. has called for direct and indirect subsidies, tax relief and other forms of financial incentives.^{Footnote 42}

One of the forms of media that still has strong public funding is public service media.^{Footnote 43} This model is increasingly under attack^{Footnote 44} and has unfortunately been less successful in other regions.^{Footnote 45} The problem remains that in many countries, governments use their budgetary influence to capture the media.^{Footnote 46}

Philanthropy and donor support: Support for journalism and independent media in developing democracies, post-conflict regions, or those plagued by media capture has been a fixture in international development since the fall of the Soviet Union. Today, official development aid (ODA) funding for media development is around US$500 million per year.^{Footnote 47} In the most developed markets, philanthropy plays an increasingly vital role in providing support for non-profit news. Between 2010 and 2015, more than 32,000 grants totalling US$1.8 billion were awarded to non-profit journalism outlets.^{Footnote 48}

A combination of commercial income, audience contributions and donor funding is rapidly becoming the new, hybrid business model^{Footnote 49} for the independent, non-profit journalism sector.^{Footnote 50}

The urgent need to address gaps in funding for journalism is described in a feasibility study for the International Fund for Public Interest Media (IFPIM).^{Footnote 51} Numerous other initiatives^{Footnote 52} are looking at ways to drive systemic change,^{Footnote 53} scale funding,^{Footnote 54} and eliminate the obstacles that stand in the way of effective collaboration,^{Footnote 55} knowledge-sharing,^{Footnote 56} and creating scalable systems^{Footnote 57} for supporting non-profit news organizations.^{Footnote 58}

Recommendations

Without new public funding, regulation of digital markets, and international support systems for non-profit media, independent professional journalism is in danger of becoming an expensive luxury rather than a universal public good.

The press freedom and media development communities have joined journalism and media organizations to call on the international community,^{Footnote 59} U.S. government,^{Footnote 60} E.U. member states^{Footnote 61} and others to adopt ambitious policies and budgets that correspond to the urgency and scale of the crisis. Recommendations include:

• Firmly positioning the support for the sector within overall international development assistance and governance support and scaling funding available to journalism and media, especially in low and middle-income countries.^{Footnote 62}
• Creating mechanisms to support local public interest journalism (especially in “news deserts” and areas where the public is underserved), accountability and investigative reporting, as well as innovation related to new hybrid business models. Greater institutional/core support, capacity building and flexible, longer-term funding are needed.^{Footnote 63}
• Addressing digital market failure and the regulatory disparity between digital platforms and heavily regulated media businesses with affirmative action for journalism content visibility, media diversity and plurality.^{Footnote 64}