Changing advertising from the inside vs. breaking down the system

After reading Bettig and Hall's chapter, I found myself wondering what they would think of Jarvis' approach to advertising. What I mean is, in some ways, Jarvis is advocating an overhaul of the current advertising system -- he wants something smaller, more open, more led by the people who are using products than the giant advertising agencies.

Several of those changes would seem to correspond well with the criticisms leveled at the industry by Bettig and Hall: It dictates public values and structures power in the hands of a few, all in the name of making more money.

So would Bettig and Hall see Jarvis' vision of advertising innovation as something that would incorporate the types of changes they're calling for? I don't think so. I think they'd see it as an incremental improvement over the current advertising ideology, but still one that was fatally flawed in its subservience to the basic principles of that ideology.

Jarvis' ends are just as capitalistic as the traditional advertising ideology Bettig and Hall described - his whole purpose is telling people to more money by getting other people to consume more goods. That's exactly what Bettig and Hall found as the problem in their chapter. And even if Jarvis is letting the people lead his advertising campaigns, he's still co-opting them -- he only wants them to help tell others to buy his clients' products, not to actually empower themselves or to operate out of any paradigm that's outside of consumer capitalism.

So Jarvis' philosophy would probably be more effective and more open than the current advertising system, but there's a limit to its innovation -- it still works from within the system, and it's the system itself that Bettig and Hall have a problem with.

Media Stock Compeition

Each one of you would get $10,000 (virtual money) to invest in 2-3 publicly-listed media companies. Happy?

Set up your preliminary media stock portfolio on Yahoo. Example:

http://my.yahoo.com/

Preliminary research: Evaluate their products and analyze their competitive advantage against the state of the market.

Track news of these media companies regularly. 

Study the financial info of the media companies you're interested in.

A very nice online tutorial:
http://businessjournalism.org/2010/07/26/understanding-financial-statements-self-guided-webinar/
Pay attention to industry-level as well as company-level variables (e.g., demand, competition, strategy, etc.

Set up your portfolio and present it in class next Monday (Oct. 1) and justify your pick. Be convincing!

The "Employee Turnover" indicator

One of the indicators of finance and economic health of media firm is “Employee Turnover” which may not be applicable today. Today, people who can write sentences and use a digital camera could be reporters. Some media operators tend to hire young people because they are cheaper and more obedient. The characteristics of an accomplished reporter may be different today. A senior journalist might not be as important to a media firm because readers don’t care or unable to discriminate between good and bad news. Besides, due to the emphasis of the visual effect in new media, many audiences choose a media only by the visual cues, such as a beautiful face. Therefore, young people could be more successful than senior employees. That is why this indicator could be inaccurate for a lot of media operators today.

Wish list stalker

I have never read so much about financing in my life. I really don't have anything to respond to the readings by Picard, so I will talk about an article I just read.

Wanderful Media is a response to make sure advertisers don't leave newspapers all together. It brings the circular ads to the digital world. The website list its goal as:

"To help newspapers grab back some of the revenues that were lost as readership shifted from print to the Web. Smith says it is comparable to the way that big media companies teamed up to fund websites that digitized local classified ads that for cars and jobs."

Instead of ripping ads out of the sunday circular, readers will be able to make wish lists, which will connect to your phone and alert you when your close to the store with the special. Sounds to me kind of like Google Wallet's alert system. 

I talked in class about the risk of advertisers leaving newspapers because they can advertise cheaper and in an interactive fashion in different mediums. I think it is good for advertisers, but newspapers are not going to be able to charge them a ridiculous amount of money using a digital circular. 

We shall see. 
http://upstart.bizjournals.com/companies/media/2012/09/25/wanderful-media-reinvents-the-circular.html

Everybody's got something to hide (except me and my media firm)

It was simultaneously frustrating and encouraging reading from Picard about indicators of success for media companies -- encouraging to see how many of the indicators of financial and economic health are publicly available, but also frustrating to see how many of them aren't. It's always fun to tell reporting students how much they can find out about companies they're covering from their 10-Q's and 10-K's (if they're publicly traded) -- revenues, profits, debt, major projects, major ongoing lawsuits, percentage of the business that's in various markets or products, and so on.

But there's also so much that's hidden from those balance sheets, so much that could really give us a true sense of how that company is actually operating. I sometimes wonder if the accountants preparing those statements are snickering as they're writing about all the things they're not telling us ("If they only knew...").

For us as researchers, it's tempting to simply avoid asking some questions because we know the data needed to answer them would be so difficult to get our hands on. I read someone on Twitter a few weeks ago saying that we could solve the paywall debate in 2-3 years, tops, if everyone would just open up all their data on it for everyone to study and learn from. That's unrealistic, obviously, and it shouldn't stop us from trying to answer the parts of the question that we can get our hands on, and find more creative ways to get at the rest of it.

Sharing your ownership with employees!

I assume that newspaper corporations face an issue with their financial flows largely due to their inventory. Today’s newspaper edition naturally turns into a piece of garbage tomorrow. In addition, the demand for today’s paper fluctuates by the day’s news value. Even though newspapers secure a predictable demand through subscriptions, it is difficult to avoid high amount of inventory. While private firms file their inventories as an asset on their financial statement, I doubt that newspapers can record yesterdays’ papers as an asset on the statement the same way. Therefore, it is becoming more critical for the newspapers to take account of the high amount of inventories when producing news contents. 

In addition to the inventory issues, newspapers are sensitive to the economic cycle, especially since news became much accessible with the help of internet. Economic downturn makes people cut unnecessary expenses, and the news consumption is considered one of them. From this perspective, news consumption can be regarded as a luxury good. Therefore, in order to keep the business afloat, high level of liquidity should be guaranteed.

Nowadays, many newspaper corporations try to get funded by private equity firms. However, it is doubtful that those investments can ensure sustainable growth for the newspapers since the private equity firms are usually under pressure to generate short term profits. Frequent ownership change was seen in the newspapers whose ownership belongs to private equity firms. Those unstable financial sources may affect the performances of editorial departments in negative ways because the high quality of editorial work is not linearly related to the short term investment.

One possible answer to the cash flow problem will be an adaptation of more employee stock ownership plan. In an exchange of ownership, newspaper corporations will have more stabilized cash flow from employees who can be loyal to the company even in an economic downturn. Moreover, newspapers can sell their stocks to local residents at a discounted price through public offering. Since many local newspapers in the U.S. are bound to narrow geographical boundaries, it is important for readers and employees to have a certain level of ownership, in order for newspapers to serve their community in a stable way.

Bits and pieces

1. I struggle with not knowing how to comment on the readings for 9/26...  There is a lot of new information from these chapters for me to learn, but I am afraid I am still at the stage of not knowing how to put the bits and pieces together.  

2. Re: The "Why?" on p. 161 ("A magazine company may find that it obtains the bulk of its advertising revenue in two months during the spring and two months during the fall...")

I can be wrong, but at least for fashion magazines, I believe it has to do with the timing of when the new clothing collections come out (which is typically in the spring and fall). Especially for high-end brands, most of their customers who read those kinds of magazines would probably be more inclined to make purchases while things are 'fresh off the runway' than otherwise... Just a wild guess!

How to measure the productivity of journalists?

In fact, when I worked for a broadcasting company, I would wonder about what was the productivity of my colleagues and me. That is because most of broadcasting companies in South Korea seem to earn much more money compared to the time and efforts that journalists are putting. They tend to deem their productivity different properties from that of other industries and think that it is hard to measure their own productivity. The company for which I’d worked also tried to appraise the productivity of individual journalists, but stopped doing it.

It is evidently clear that the ability of personnel to carry out their tasks is a critical factor in the success of media companies as well. But how can we calculate the productivity of journalists - with how many hours they work?, how many stories they produce? or how many exclusive news they publish? What about a simple measurement; total operating revenue divided by full-time equivalent employees? In addition, what if the news is neither a good nor a service?

Picard (1998) looked at the disadvantages of using productivity measurements for individual journalists and newsroom performance appraisals and suggested the 'measuring journalistic quality through output production by journalists' along with seven categories of time use, saying “but it is possible to indirectly measure journalistic quality and productivity by thinking of them as the result of a variety of activities carried out by journalists.”

Picard: Measuring and interpreting productivity of journalists 

 

How to define news, economically -- Part III

If news doesn't fit perfectly into a market for either goods or services, where does it belong? So far the only thing I've thought of is that it belongs in the same place as government.

Think of the police. What do we expect from them? Do we expect a good, as in a number of arrests or tickets? If so, that's faulty because then we're essentially creating crime by requiring a quota. Do we expect a service, as in protecting us from the bad guys? If so, we're going to be disappointed because it is impossible to predict when a crime will occur, and police cannot be omnipresent. And even when a crime is discovered, and sometimes even when the bad guy is identified, the criminal escapes or is never caught, and he gets away with his crime. And yet, despite not ever completely doing what we might expect them to do, nobody would say that we don't need police. And this is why police services are not bought and sold on the open market. We are charged taxes to pay for having police, and someone we elect makes decisions on how many police to have and how to deploy them. Public safety is a publicly funded, publicly run institution. A similar line of thinking goes for many other aspects of government.

Conclusion
So, IF we believe that timely information about current events is of value (perhaps the subject of debate for another three-part essay), then where does it belong, economically? Considering the ground I've covered so far, I see three options.

1. Leave it as is. The market for news will continue toward adverse selection, quantity over quality, with a few firms making guarantees to signal quality to the buyer. News organizations will continue to be trusted about as much as used car salesmen. But even then, profits aren't dependent on swindling people (as they are in used car sales) but on whether advertisers see any value in the dispersed, highly variable, fickle,  mistrusting, ad hoc audience that news tends to assemble. Prospects: Consumers aren't asked for much, so they're relatively happy, but the situation is not promising for news organizations.

2. Organize stronger public subsidies, but leave the news business in private hands. Similar to agriculture in the U.S. We want our news, so we'll subsidize you through the slow times on the understanding that you'll be a watchdog for us and kick into high gear when something big goes down. News organizations have quite a mixed track record in this regard. Prospects: News producers are much happier, but consumers aren't likely to think they're getting a good deal.

3. Make news public. Elect the editor in chief the way we elect the county sheriff. The news organization is owned by the government, yet expected to report on it, the way Congress appoints a portion of itself to investigate itself when it makes a mistake. Taxes pay journalists' salary, the budget it public just like for the city council or whatever. Prospects: News producers are most secure in this model, though they are likely to feel restrained. Consumers are now taxpayers, who have never quite been satisfied by how their tax dollars are spent, right?

There, finished. Anything I'm missing?

How to define news, economically -- Part II

What is news, in economic terms?

Is it a service?
"Man, it has been a while since I had my news done. Rhonda, I'll be back in an hour."
Maybe the collection of news is a service that is performed for others. You don't have time to go talk to all the lawmakers in the world about the health care bill, so we'll organize a team of specialists to do that for you, then write up an executive summary. The fact that the greatest majority of people are unwilling to pay for this service has until now been handled by selling whatever people use the service to advertisers. This is similar for many other services that are provided for free, like email, search engines, Facebook, Skype, and so on. So that's a fine idea: offer a free service to people, then sell whatever users you have to advertisers.

The problem is, journalists have no idea what services people actually want or, for that matter, who will want them, until the entire range of services has already been provided. I just saw an article that called this asymmetrical information, which seems to apply. (More information here.) In the news industry, this works in two ways. First, consumers have no idea what news will be produced on a given day. They must decide whether to buy access to the day's information without knowing whether they will be interested in it or whether it will be of any value to them. In other words, the choice to buy news is a choice to buy information you don't know you don't know (unless your friend on Facebook already told you that bin Laden was killed). And how can you possibly place a value on that? Second, news producers have little idea what will be interesting to people until after it is published, except in a few obvious cases. Journalists make value judgments all the time based solely on past experience, and the best appropriate analogy is stock traders. Past performance may not be a guarantee of future performance, but it is the only indicator one can use in making decisions for the future.

So economists say that, in markets where there is asymmetrical information (such as used cars - only the seller knows the car's quality; or home loans - only the borrower actually knows his ability and/or desire to repay), one of two things is likely to happen. In the worse case (1), the market may collapse. The agent on the side of the transaction that is lacking in information may decide that it's just not worth it, given the high likelihood that he's going to be swindled (sold a lemon, not repaid, or given a newspaper full of fluffy evergreen stories because news was slow that day). If the market doesn't collapse (2), it contracts into a market of adverse selection. This means that, because one side has such an information advantage in the transaction, the market is flooded with low-quality products. I think it would be easy to argue that this is now happening in the media market.

One way to resist this contraction is through signaling. Those on the side of the transaction with more information may choose to signal to those on the other side, either by volunteering some of that information or via guarantees or by building confidence in their brand. This is where media trust and credibility come in -- unfortunately, media are not doing such a hot job there either.

Coming in part III: The only serviceable analogy I can think of, and what it says about news.