TheMarketFarm.com

Journalists are historically thick about the notion that they are part of a business model; that they are employed not so much for the public good but because somebody has figured out how to make more money from their work than it costs to produce. That thickness is part of what makes them good at what they do; good journalists tend to follow the trail of information regardless of how they fit into someone else’s profit motive. It’s also why the outsider complaint — “The reporter only wrote that story to sell papers” — never gets any traction.

But the business model under which  most journalists have always worked is under attack right now, and that’s changing the very basics of the job: who wants to hire them, what the job requires, and how much it pays.

In recent good times, a newspaper would bring in about $1.35 in revenue for every $1 spent to run the place. That includes such inelastic expenses as distribution and printing. If you eliminate those expenses from the equation (which an economist wouldn’t do, but this is a journalist-centric view, in which the value of a newspaper to its readers and advertisers is directly proportional to the quality of its reportage) then the economic value of a journalist is at least 1.35 times salary and benefits.

But in times like this, newspaper profits are down — which means the economic value of  journalists is down too. The work of the newsroom simply produces less profit so, therefore, the value of each person in that newsroom is less.

Media companies deal with this as any business would: When profits drop, you reduce costs. Most media start with manufacturing: production, printing and distribution. (Tips for reducing production costs; 34 tips for cutting costs; United Media cost-reduction strategy.)

But when profits continue to drop, people start to lose their jobs. And despite what journalists like to think about their value, cutting reporters and editors usually stops the bleeding pretty quickly. That’s because producing news isn’t the same as producing, say, cars or other manufactured goods.

If you cut people from the auto assembly line, you can’t make as many cars. Which means you can’t sell as many cars. In a recession, that’s OK because fewer people want to buy those cars anyway; jobs get cut because there’s an imbalance between supply and demand.

But in media, you can cut an untold number of reporters and editors without actually reducing output (Journalism jobs decrease 34% Jan 08-Jun 09). The quality of the reporting might suffer; graphics might not be as well thought-out; typos and errors may increase. But the audience still gets the same quantity of news, and the advertisers still get the same audience.

When a recession ends, a car manufacturer can’t sell more cars unless it hires back workers to increase production. But a newspaper can see advertising revenues increase at the end of a recession regardless of whether it puts more people back into the newsroom. That’s why financial and spreadsheet types like investing in media; the correlation between employment and profit is indirect enough that they can choose to ignore it.

This can go on for a long time, and it has. Eventually, people start saying things like, “That newspaper is just a shadow of its former self.” And any rational explanation about declining profitability should include the long-term effect of decreasing quality and comprehensiveness.

But that’s simply not the entire reason newspapers, magazines, radio and TV are struggling; I’d argue it’s not even a major factor — just a bad symptom.

The real reason is competition. Years ago, a major metropolitan morning newspaper’s only competition was the afternoon paper. (Remember, the competition isn’t for readers; it’s for advertising revenue). Then came radio, television, cable television, city magazines, alternative weeklies, etc. They may all serve readers differently, but their money comes from the same pot of regional advertisers. More recently, add Google Ad Words,  online magazines such as Slate and Huffington Post, bloggers like Matt Drudge,  social networking like Facebook and Twitter, and dozens of other business models I can’t even think of. The one thing all of these have in common is that they demand a piece of the same marketing budgets that are the financial foundation of newspapers.

Many of these newer organizations pay journalists — but none pay as much for as many journalists as did the old-line media. So not only do newspapers have more competition, journalists have more competition.

All of which is a roundabout way of saying I’m not patient enough to calculate the actual economic value of a journalist. But the following items seem clear:

1. Economic value and social value are separate issues.
2. Traditional media still seem to be experiencing declining economic value of their journalists. For example:
   Effect of mass layoffs at newspapers
   New news models
   Bloodletting in the newsroom
   Layoff tracker
3. Meanwhile, types of businesses that didn’t previously value journalists now seem to be the places where the value of journalists is growing. For example:
   This is what you get when you pay for reporters
   The growth of brand journalism
   Best job in the world
   Attention corporations: Hire a journalist
   Winery hires lifestyle correspondent
4. Entire business models that do away with the cost of journalists are emerging — and starting to attract big money. For example:
   Examiner.com buys NowPublic for $25 million
   www.heightsobserver.org
   www.printcasting.com
5. Old business models are trying to revive the value of journalists by finding other revenue streams to pay for them. For example:
   How newspapers that charge for content are faring
   Murdoch charges for content
   Electronic newspaper update
   Non-profit newspapers
   AP battles with news aggregators
6. Old-line business models that see the industry’s decline as merely a function of journalism’s decline somehow seem angry and not very realistic.
   Our Hometown News, Strongsville, OH
7. The decline in value is related to the recession; when recovery starts in earnest, the decline will flatten out.
   Cox Enterprises hopes for positive earnings
8. But the decline in value wasn’t caused by the recession; it was caused by huge disruption of traditional business models that involve journalists. For example:
   what-b2b-advertisers-really-want-from-media
   are-magazines-really-that-important
9. Journalists may be unwilling participants in the dizzying changes taking place. But those who are determined to make themselves valuable will succeed — whether or not it’s through a traditional channel.
   What journalism students need today
   Listen up, old-school journalists
   The future of news is scarcity
10. I’m pretty sure the economic value of journalists isn’t declining; it’s declined among media that follow traditional business models, but that’s being offset by new models and innovations that are only now starting to emerge.