Simple economics can explain why the traditional news business model is falling apart. That’s what Stuart McFayden, a University of Alberta business professor and co-author of a book on media economics, convinced me.
What’s happening, he said, is that news is becoming more and more of what economics refers to as a “public good.” A public good has two unusual characteristics:
- It’s not rival in consumption, that is, I can read the news and you can read the news and it doesn’t get used up. A car is rival: if I buy it, you can’t.
- It’s not excludable. Reading the news has become free, so people cannot be excluded from it. A printed paper is excludable – you might not be able to afford to buy it.
The fundamental shift that’s happening is that the internet is pushing the news more and more into the sphere of a public good. That makes its provision by private companies more and more difficult, McFayden argues, which is why the news needs a new business model. And so the nub of the issue is, who is going to produce content?
There’s also the question of external benefits. Even if I never read a newspaper, I benefit from the fact other people do: they monitor my government for me. So perhaps it makes sense for me to fund a news source even if I never directly make use of it.
McFayden was largely opposed to the idea of news delivered by not-for-profits. In such organizations, profits are dissipated or go back to those involved. The market system is needed to provide discipline, he argued.
And he added that perhaps, instead of trying to reimagine the existing newspaper, we should look at organizations that function well and imagine them providing print news. He suggested that the BBC, which is already set up as a government-funded entity and already has a tradition of robust news coverage, might start providing more print news, presumably on the internet.