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The News Funding Model Is Broken – But This Would Fix It
Jul
Last week’s announcement that Newshub will be closed was not the “canary in the coal mine” as some have suggested – it was a blast. If it is not to be the first of many, Recent Zealand needs a modern model for its fourth estate.
The fate of Newshub and today planned job cuts in TVNZ editorial offices threaten to leave a significant gap in the information sector, especially in television. But beyond that, the causes and solutions are highly debatable.
There are both specific institutional factors at work in the television and news sector, as well as deeper structural trends. A Newshub a complicated financial history serves as a reminder of the dangers of foreign ownership of strategic media assets.
But beyond the changing fortunes of one company, the local news ecology has faced broader structural challenges. The imminent loss of so many working news producers and journalists makes finding workable solutions all the more urgent.
Audience Fragmentation
Over the last 25 years, the television sector’s share of the advertising market has about halffrom 34.3% in 1999 to just 17.7% in 2022.
The takeover of advertising revenue by Google and Meta (the parent company of Facebook and Instagram) played a key role. Today, Google alone is responsible for almost two thirds of the approximately NZ$1.8 billion spent on digital advertising in Recent Zealand.
Read more: The end of Newshub has sent journalism and democracy in Recent Zealand on an even steeper slope
But the decline in TV revenues is also linked to audience fragmentation as viewers move to modern on-demand services. TV3’s daily audience reach for its linear services dropped by almost 50%from 35% in 2014 to 17% in 2023
It should come as no surprise then that the collapse of Newshub has intensified calls from across the news sector for a speed bump Fair News Digital draft bill on negotiationsThis would require online platforms to negotiate payments to news providers for hosting, linking and sharing news content.
Some estimates suggest this could be worth $30-50 million per year to the news sector. At first glance, this may seem like a logical solution – but it’s not that uncomplicated.
Faulty bill
There are a number of problems with the proposed bill. Fundamentally misdiagnoses the market relationship between platforms and news media.
The takeover of the digital advertising market by technology platforms is not driven by the takeover of information content, but by the mass collection of audience data (enabling ad targeting) and algorithmic influence on content search.
The Act also does not provide for fixed reference points for payments. And the arbitration process in the event of a disagreement is potentially very complicated, because different media will have different relationships with each platform.
Read more: Facebook will no longer pay Australian media for their content. Are we facing another news ban?
The formation of these agreements will depend on the goodwill of the platforms. However, arbitration may well determine what benefits the platforms provide to news providers (by increasing their visibility and driving traffic to their sites) outweigh the commercial benefits to the platforms from hosting or sharing news content.
Indeed, Meta’s resistance to the information negotiation framework in Australia AND Canada highlights the risk that the platform could exempt itself from its negotiating obligations by prohibiting the hosting and sharing of news.
News media that rely on platform payments may also be motivated to provide content that maximizes value for platforms—for example, populist or controversial content that is more likely to be shared—and may be less likely to critically examine issues affecting their benefactors.
Ultimately, there is no guarantee that any payments made through the platforms will actually be invested in news production, let alone commercially unattractive genres such as local or regional government coverage.
Getty photos
A modern form of financing
There is no realistic possibility that the government will aid Newshub or any other individual news station.
While the role of news media in sustaining democratic processes and holding governments accountable remains crucial, this does not mean that market competition and pluralism are sufficient to maintain it.
In fact, it was the introduction of commercial competition for audience attention and advertising that was the driving force measurable decreases in the length and content of television news programmes in the 1990s
Read more: Breaking news: Forcing Google and Facebook to pay Recent Zealand media for content may yield less than expected
Democracy cannot thrive if the fourth estate is in a commercial race to the bottom. It requires a diversity of perspectives and competition for content that treats its audience as citizens, not just fodder for advertisers.
This requires a modern form of funding and a modern institutional arrangement. One way to achieve this would be to introduce a diminutive tax on digital advertising spend and potentially other commercial revenues, such as internet and streaming services. The revenues would be reinvested in news content through an independent agency on a contested basis.
There are various possible mechanisms, but the initial model could apply a tax on digital ad spend across the entire media sector. This would mean that ad spend currently directed to Google and Meta would generate the majority of revenue.
While spending on other media would also in principle be subject to the tax, there could be relief for local content producers. News operators would in any case be the recipients of the journalism funding that the tax enables.
Even a 1% tax on the $1.8 billion spent on digital advertising would generate as much revenue as the (currently defunct) Public Interest Journalism FundThe 3% tax would be in line with higher estimates of what the proposed Fair News Digital Negotiations Act will bring.
Collaboration in sharing news
Having the tax levied by an independent agency (possibly NZ On Air) would aid ensure that the tax supports news that is guided by public service principles – including investigative, local government, regional and minority reporting – and that a wide range of news activities are supported.
There also needs to be some kind of collaborative model for sharing news. RNZ already shares its news content, and there have been proposals regional information network to address local issues often overlooked by the mainstream.
An independent, multiplatform news publisher model could underpin such an initiative. It would operate across broadcast, print and online media, allowing members to apply any of the shared content on their own channels or websites.
A fee-charging mechanism and a public news publisher model would provide a much better basis for saving Recent Zealand’s Fourth Estate than throwing crumbs from Large Tech’s table to the news media.
