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Symposium
Member, Texas Tech University System The Princeton Review - 373 Best Colleges, 2011 Edition

Market Threats to Press Freedom

by C. Edwin Baker

Surely a free press should honestly inform the nation about matters as vital as war and peace. In 1991, the eyes of most Americans were glued to televised reports of the Gulf War where the United States had attacked Iraq. But advertisers thought that war did not provide an appealing emotional context to connect with their products. Most deserted the network's news specials, with the result that several networks reduced coverage. Even more disturbingly, in response to advertisers' concern with the right mood, ABC offered to change its war coverage, providing upbeat, patriotic images as lead-ins to commercials. Essentially, in order to attract advertisers, the network offered to present a happy war brought to you by your sponsor.

Surely a free press should expose corporate maleficence. However in 1979, Les Brown reported that NBC had not "produced a documentary on a controversial domestic issue involving an important advertiser since" 1970. Why? In 1970, Coca-Cola had pressured NBC not to show the way a Coke subsidiary mistreated farm workers in the Florida citrus industry. When NBC refused, Coke withdrew millions of dollars of advertising revenue. NBC learned its lesson.

Surely a free press should report the news wanted by the people in the community. But when asked why the Los Angeles Times did not report more on minority issues in Los Angeles, Otis Chandler, then the Times' publisher, responded that it would not make sense financially. The problem was that the coverage would lead members of the minority community to purchase the paper, but the paper company loses money on each sale of a copy of the paper unless the company can sell the audience member to advertisers. The Times' advertisers, however, did not value the minority poor, primarily because of their lack of purchasing power.

Government censorship endangers a free press. This danger is real. In some countries today, governments acting at the direction of clerics close papers that do not hue a proper sectarian line. In other countries, governments close papers that criticize the political elites. Editors and reporters who expose wrong doing by the government or by private elites are found murdered. The First Amendment symbolizes this country's refusal to accept these forms of government censorship.

However, my thesis is that, today, the greatest threat of censorship in this country comes not from the government, but from advertisers and, more generally, from the failure of free markets to provide either the news and entertainment that we want or that we need. I will look at advertising and the market in turn.

Advertising

The power of advertisers should be no surprise (1). Sellers normally try to satisfy the demands of purchasers. The theory is that those who pay the bills, call the shots. The media sells to two purchasers - advertisers and audiences - with advertisers often being the primary direct source of revenue. Advertisers have been with us since the beginning of the country. Moreover, the portion of the media's revenue that comes from advertising has been steadily increasing at least since the late nineteenth century. As advertising revenue increases, it is predictable that the press will increasingly supply the content that advertisers want. In part this content is the advertising itself, with all its consequences in stimulating an individualist, materialist culture of consumption. But advertisers also have concerns about the non-advertising content -- what I will call "editorial content -- and the media responds to theft desires.

Of course, if advertisers and the audiences wanted the same thing, advertising might pose no problem -- by paying some of the costs, advertising would merely make that media more cheaply available. Certainly, there is a significant overlap between the desires of audiences and advertisers in relation to editorial content. A primary concern of advertisers is to obtain an audience and audiences appear when the media offers them the content they want. To this extent, advertisers want the same as audiences. But there are at least three ways in which the interests of advertisers and audiences diverge.

First, as NBC's farm worker documentary illustrates, advertisers do not want content that criticizes their company, their product, or their political agenda. Popular magazines long ignored the health dangers of smoking to avoid losing support of one of their largest advertisers, the tobacco companies. Local newspapers regularly ignore the scandalously low property tax assessments of downtown retailers to avoid offending these crucial advertisers. Proctor and Gamble used to require its advertising dollars only support programs or magazine issues where characters "reflect recognition and acceptance of the world situation" and contain no material suggesting that business is "cold [or] ruthless." The accounts can be multiplied.

Second, as the Gulf War example illustrates, advertisers want media content that puts people in product friendly orientation, preferably in a buying mood. The president of Estee

Lauder told Gloria Steinem, then the head of Ms magazine, that his company would not advertise in Ms because "Estee Lauder is selling 'a kept-woman mentality.'" Similarly, years of trying to win a Revlon advertising account were undone when Ms published an award winning story on underground feminists in the Soviet Union. The problem, from Revlon's point of view, was that the Soviet feminists pictured on the cover were not wearing make-up. More mundanely, the need to create the right advertising environment explains the increasing number of soft news sections that litter major newspapers; and it lead to the practice of including a soft news feature at the end of television's national news programs. The constant repetition of these types of soft content, however, communicates notions of what is important, what counts. In my current hometown, the New York Times, fashion, cars, restaurants, and real estate rank up there with war and famine and may be more important issues than poverty, unemployment, and the environment.

Third, as the Otis Chandler's comments illustrate, the media often design their content to serve the audience's valued by advertisers. They often have to do this to survive. James Curran reports that in England, the Daily Herald, a working class oriented newspaper with huge circulation, serious content, and great popularity among its targeted audience, went under due to lack of advertising support. Bloomingdale's reportedly explained not buying ads in the New York Post, despite circulation that exceeded the New York Times, on the ground that the Times "readers are our customers, your readers are our shoplifters." Newspapers fight to increase circulation - both by direct marketing efforts and by creating content that audiences want - but only for the comparatively affluent portions of their circulation area. Today, a popular practice designed to increase newspaper profits is to shed discrete groups of readers, sometimes because these readers are expensive to serve but more often because they are not valued by the newspaper's advertisers. A New York Times marketing executive explained that "we make no effort to sell to the mob."

Ignoring or shedding poor and often minority readers amounts to an informational disenfranchisement of substantial portions of the public. In fact, given the correlation of newspaper reading and voting, this influence of advertising can be charged with helping suppress the vote of the poor and minorities.

Moreover, it is not just newspapers. Networks furiously pander to attract the right audience. They have dropped classics, such as Gunsmoke, while still high in audience ratings apparently because the show's audience came primarily from rural and older audiences less valued by advertisers. Likewise, media conglomerates design magazines to attract particular audiences on the basis of their value to advertisers. The net result is the creation of a culture that largely ignores those interests and those people who cannot be profitably be packaged to connect to a marketing strategy.

So far I have described ways in which the media directly design its content and engage in self-censorship to provide for the interests of advertisers, its chief pay-master. Possibly more important than these overt types of influence, advertising also indirectly but profoundly influences the nature of the country's media. Tracing this indirect impact is complicated, and I will only touch on some key aspects.

When newspapers received their revenue primarily from their audience, their economic incentive was to provide the product that the audience most wanted. The diversity in the audiences meant that they could be best served by different, competing papers. Those were the days both of the partisan press and of most towns have competing daily newspapers. In 1880, Leadville, Colorado, a town of 15,000 people, could support six competing daily newspapers. However, when advertisers become the dominant source of revenue, the incentive became less in serving unique audiences and more in serving advertisers. From the advertisers point of view, audiences were not diverse (as long as they were potential purchasers). While previously a paper could profit most by selling a unique product to a particular audience, now it could profit most by a undifferentiated audience to advertisers. Partisanship, as trade journals in the late nineteenth century pointed out, runs the risk of alienating a large portions of the potential audience and inviting a competing paper to serve that alienated portion. "Objectivity" is the name of the journalistic style best designed to alienate no one even if objective journalism pleased most people less than the partisan papers had. Thus, objective journalism is the obvious solution for a paper that wanted to monopolize a diverse population in a given locale. Since objectivity decreased product differentiation, communities found less need for more than one paper. Thus, beginning late in the nineteenth century, as advertising began steadily to increase as a source of revenue, the number town's with competitively owned and operated daily newspapers began a long decline, from 689 in 1910 to around two dozen now. Today, there are no Leadvilles.

At least some of the social consequences of the rise of objectivity as the ruling journalistic style and the decline in daily newspapers competition are troublesome. For example, some observers suggest that the objective style makes politics less accessible, the right answer less clear, the competing parties and candidates less different, and the importance of the choice more difficult to discern. These effects make it unsurprising that there would be a decline in voting in this country as competition and partisanship declined and objectivity became the ruling norm. This consequence may seem even more objectionable to the extent the change in the newspaper industry is traced not to people's desires but to the increased role of advertising.

The Market

Kicking advertising has long been a popular sport among both academics and journalists, but I want to turn to another issue. The battle cry of conservatives is that people should have the media they want, which is the media that the free market gives them (2).This view that lead to deregulation of broadcasting in the 1980s and to a major conservative challenge to public broadcasting and other liberal media-related projects. In this view, liberal interventionists are at best misguided do-gooders; and more likely, they are paternalistic elitists. This account has widespread appeal. Surely, people should be allowed to choose to read or watch what they want.

However, I challenge the widely accepted assumption that the market gives people the media content they want. I see three problems that apply especially to markets in media products. The first relates to externalities and the mis-pricing of media products; the second to the "public good" aspect of media products; and the third questions whether the market appropriately identifies and measures what of people want.

Externalities

The popular claim is that markets provide people with what they want -- in this context, provide audiences with the media they want. However, even if you would prefer a BMW to a Honda Civic, a hardback to the paperback copy of the book, a Broadway to a local production of a play, a vacation in Paris or Hawaii to one at Fort Concho and Lake Nasworthy, the market would not give it to you unless you were able and willing to pay the extra cost. So the actual claim of the market is that it provides people with things given the item's cost and people's ability to pay.

This caveat makes clear that the market will only properly give people what they want if items are properly priced, based on their real cost. If priced too high, the market will not supply people with as much as it should. If priced too low, the market will provide too much of the item. Thus, the claim, on behalf of the market depends on media products being priced at their real cost. Are they?

Production or consumption of many items affects people other than producers and purchasers, thereby creating what economists call positive or negative externalities. If a person other than the purchaser of an item would pay, if she had a chance to have a transaction but, in reality, has no opportunity to pay, the result is a positive externality. If the non-purchaser would pay to have the item not produced or sold, the actual production or sale creates a negative externality - a cost not born by the seller or producer. If you would like, even be willing to pay a little, to see the forest not cut down, the owner's decision not to log creates a positive externality. In contrast, industrial pollution is probably the most common example of a negative externality -- the pollution imposes a cost on people who neither produce nor buy the product. In economic terms, externalities are costs or benefits that are not brought to bear on the entity producing the item. Products that create negative externalities can be sold for less than their real social cost. Those creating positive externalities are sold for more than the true social cost. Given the economic maxim that a lower price generates purchases, people will purchase more products that create negative externalities and fewer products that create positive externalities.

The media produces exceptionally large externalities - both positive and negative. On the positive side, people may benefit tremendously if a newspaper's reputation for investigative reporting deters misconduct by government officials or corporate executives. Effective deterrence, however, means that the newspaper has no story to sell. The paper receives nothing for this valuable product. Even when an investigative reporter exposes spectacular misconduct and publication leads to reform, most people receive the benefit of reform without needing to buy or read the paper reporting on the corruption. Similarly, even if you do not buy or read a newspaper, biography, or novel, you can reap a reward from those who do consume these media products if the other people's consumption leads them to be wiser voters who help maintain a better government. You can also benefit if the people with whom you socialize consume media that helps make them be more interesting people. In general, you benefit if people around you act more wisely, more capably, more compassionately. In each respect, these benefits can be partly the positive externality of their media consumption.

In contrast, another person's media consumption can hurt you if it leads to unwise voting, a boring personality, or damage to your material or cultural environment. You can be hurt by stories that injure your reputation. Most dramatically, you are hurt by another person's media consumption if their consumption is a crucial factor in a causal chain that leads that person to murder, rape, or rob you. Less noticed, but maybe more common, you may be badly hurt by others' media consumption if it leads them to become so fearful and insensitive that they do not come to your aid when you are in immediate peril. The magnitude of these and similar effects can, collectively, be immense. They merely reflect that no one is an island. Once they are all counted, most of the benefit or cost of media consumption -- especially the media products that are socially beneficial or harmful -- may go to those who are not its immediate consumers. Since publishers cannot "internalize" these costs and benefits, they cannot price their products at their true social cost.

These externalities are the basis of my first claim that the market fails to give people the media they want. Their presence means that a media enterprise must charge a price that is often dramatically different than a product's real cost. The result is that people get much more of the media products that produce negative externalities and fewer of those with positive externalities than they would want if charged the real cost of products. Of course, the quality and contribution of different media products is regularly contested -- sometimes along age, class, gender, or ethnic lines. Even with such controversy, however, it can generally be said that "good" media products are overpriced and the market provides us with less of these products than we would want if they were priced at their real cost, and those products that are generally considered bad are priced too low so the market gives us more of these than we would want if they were properly priced.

Public Good

A second failure of the market is related to the fact that many people can consume the same media content. Economists refer to things that multiple people can consume without using it up, without interfering with other people's use of the same item, as "public goods." National defense is a public good in this sense. Roads or public parks are common examples of items that have significant public good attributes. Unlike typical private goods such as tofu, toasters, or trousers, a large part of the cost of a media product -- writing or scripting, investigations needed for news stories, video production costs -- occurs in producing the "first copy." Once a media enterprise creates the product for the first consumer, only minimal additional "copy" expenses are necessary to supply additional consumers. Innumerable individuals can see the same show or read the same investigative report without reducing its availability to the first consumer.

This public good attribute of media products creates distinctive economic consequences. As long as the media enterprise is unable to sell the same media product to different consumers at different prices, in order to recover the "first copy costs," the enterprise must sell the media product at a price higher than the copy cost of supplying an additional consumer. This higher price will deny the media product to some people who want it and would be willing to pay the copy cost. The result is that markets under produce these goods. It fails to provide some people with a media product even though those people would be willing to pay the cost of their receiving the product. Possibly worse, the need to spread the first copy cost over numerous consumers causes many desired media products not to be produced at all. Even though summing the amount that each potential audience member is willing to pay generates a total greater then the cost of providing them the good, there may be no single price at which the product can be sold profitably. The result is that no one will get it.

A simplified hypothetical can illustrate this effect. Consider a news report for which you would pay $9 and I would pay $5. If creating the first copy costs $10, and the second costs $1, the media company would lose money if it sold only to you for $9 or if it sold us each a copy for $5. In the first case, the $9 would not cover the $10 cost; in the second, the $10 the firm collects from the two of us would not cover the $11 it cost to create the first copy plus an additional one. Thus, the report would not be produced even though, between the two of us, we would be willing to pay $14 and it would cost only $11 to supply us both. The market fails to produce media products that audiences actually want and for which they would pay. This failure occurs most often in smaller markets and where the amount different potential consumers will pay varies greatly. The overall result is less diversity in media products than is economically justified.

Note that this failure of markets relates specifically to the public good aspect of media products. In some contexts, like roads, public parks or national defense, this type of failure justifies government provision or government subsidies, In others, public utilities for example, rate regulation is justified to enforce appropriate pricing. In any event, the point is that free markets lead to underproduction or failure to produce some media products that audiences want, especially products that would increase media diversity.

Identifying What People Want

A third quandary concerns the way markets identify and measure people's desire for media products. At best, markets give people what they want as indicated by money-backed preferences expressed in a market. This raises serious issues.

A purchase decision is only one way and one context in which people express preferences, and their expressions often change dramatically depending upon the context. For example, the content of people's expression after thoughtful discussions or after personal reflection often differs from their purchase decision at the mall. Likewise, a person acting in her capacity as a citizen often expresses different preferences than she does when acting as a consumer in the market. There is nothing neutral, right or objective about the market method of identifying preferences. We often use other methods, and there is no general reason to privilege market expressions, or to treat them as more real than people's other expressions of preferences. Sometimes market expressions seem especially acceptable, but in other contexts market expressions seem quite perverse. Few people today think market should determine your friends, your mate, your President, or even your homework assignment. Maybe market measures should not be trusted as a person's most real expression of preferences about some aspects of media consumption?

Also, the market measures preferences only on the basis of the money a person is willing and able to put behind them. This criterion is not one person one vote. It is one dollar one vote; a system that weights preferences of the wealthy more than those of the poor. Of course, this inequality is not in itself an objection to market measurement -- it is just a description of a market society . For many purposes, our society accepts that a person should only get what she can and does pay for. However, for some purposes, we don't. All democracies, including ours, conclude that some desires should be met independently of a person's ability to pay. In the United States, all states provide for a free basic education, a vote, rights to enjoy the streets and parks and to receive police protection. Desires for these goods are met without the person being required to express the desire in the market. The question is whether media products should fall into this category? I suggest the answer is, "sometimes."

After all, some media products are closely linked to two of the most important items distributed on an egalitarian bases -- the vote and basic education. Media products can be an important aspect of people's continuing education, and, like the opportunity to vote, access to information and discussion within the media can be crucial to a person's political participation. Possibly, those media products valued as pure entertainment should be distributed just like bowling balls and speed boats, but, arguably, society should fulfill people's desires for media products that are central to the person's democratic participation or continuing education on a more egalitarian basis . This treatment may require heavy subsidization of those public affairs-oriented or educationally relevant media products.

Conclusion

So what have I claimed? As for the media's primary paymasters -- the advertisers -- the claim is that they distort even the non-advertising content of the media in ways that diverge from what people want. Turning to markets, my claim is that they give us less good quality media content and more bad media content than we would want if we were charged the real cost of media products. The market fails to give people some media content that they want due to the public good attributes of media products. This is especially true of media content desired by smaller subgroups, with the result that the market gives us less diverse media than people want. Markets also give us more of the media wanted by the wealthy than the media wanted by the poor.

My primary point is that the possibility of a society having the media it needs is threatened not only by government censorship action but also is systematically undermined by private market forces. This second danger is unlikely to be effectively contested except by government actions. Therefore, there can be no expectation of having the media people want without intelligent government intervention in response to thoughtful political demands. Of course, specific governmental interventions are sometimes not only just plain stupid, they also create the danger of censorship. Fortunately, the First Amendment supports some political protection and the possibility of court invalidation creates some legal protection to block those government interventions that are censorious rather than expansive.

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(1) For more complete discussion of advertising, see C. Edwin Baker, Advertising and a Democratic Press (Princeton, NJ: Princeton University Press, 1994).

(2) More complete discussion of media markets is in C. Edwin Baker, "Giving the Audience What It Wants," Ohio State University Law Journal. 58: 3 11 (1997).