Friday, January 21, 2005

WOTM FAQ, Part 2

Some real questions I have answered from time to time, often from students writing papers who e-mail me for some primary research points.

How ethical is it for corporations who own media to try to make a profit?

Ethical? Ethical? Profit is not a matter of ethics. A newspaper never went out of business for lack of content, but only for lack of revenue to pay a staff an acceptable wage, mainatin its plant, and produce a return that is higher than putting the invested capital in a safe U.S. Savings Bond. Profit is what provides jobs, income, and the wherewithal for government to raise money by taxes—on profits. Ethical? It would be unethical not to seek a profit. Compare the performance and efficiency (and pay) of the U.S. Postal Service to the performance and service (and pay scales) to that of UPS or Fed Ex! (Not to criticize the people who work at USPS. It's a different environment, with different organizational structure, incentives and mission. But that's the point).

The Critical Role of Private Enterprise on Free Expression

A.J. Liebling was the outspoken press critic of his day. Yet he had a pragmatic insight into why the ownership structure of the media—primarily newspapers then —was a positive influence on content. In 1947, in The Wayward Pressman he wrote:

The profit system, while it insures the predominant conservative coloration of our press, also guarantees that there will always be a certain amount of dissidence. The American press has never been monolithic, like that of an authoritarian state. One reason is that there is always money to be made in journalism by standing up for the underdog…. His wife buys girdles and baking powder and Literary Guild selections, and the advertiser has to reach her.”

At the time he wrote this the Hearst newspaper chain controlled more local circulation than any newspaper company does today.

Liebling’s insights are actually more relevant today than in 1947. Profit, not ideology, means that whether one wants to focus on the 10 largest conglomerates or the 50 largest players or whatever number, the content of the media is not determined by what the chief executive officer wants but what the various editors, producers, publishers and local operating managers determine is best for the audience they are trying to reach. It is why Big Business and business executives, even the media industry, are regularly made the villains in major film and TV productions that are produced by the big business media companies (see “The China Syndrome,” “Erin Brockovich,” “Broadcast News” or the 2004 version of “Manchurian Candidate” among many).

Take Michael Moore. Please.

The example of director Michael Moore’s propaganda film, “Fahrenheit 9/11” released in summer 2004, is a recent case on point. It was financed by Miramax, a studio owned by Walt Disney Co. Disney management told the Miramax executives before the film was made that they did not want to distribute the film – the kind of decision film studios make daily for artistic, financial, or image reasons. Disney did agree to sell its rights (Miramax had gone ahead and invested Disney money in the project) to the top executives at Miramax. They in turned made distribution arrangements with Lions Gate Entertainment, a small media conglomerate with interests in the production and distribution of motion pictures, home entertainment, television programming, animation and video-on-demand content. The film received extensive distribution and became the highest grossing film of its type in history.

Why is this case a good example of the vibrancy of the media? First, the film got financing and got produced, despite—or because of – its controversial viewpoint. Second, it got national distribution even though one of the largest studios decided not to be the distributor. Third, the ultimate distributor was a large, publicly-owned, New York Stock Exchange listed company for whom potential profit was more important than any ideological viewpoints held by management or the stockholders.

Although Disney was criticized in some quarters for trying to “censor” Moore and one U.S. Senator demanded a hearing on the matter, there was little or no public comment on the passion of Bob and Harvey Weinstein, the former owners and still top managers of Miramax, for using their own funds to repay the Disney money they had allotted to fund the project. In announcing that they would donate any profits they made on the film to charity, there is the implication that the film expressed a viewpoint they felt comfortable with. That is, they were interested at least as much in the politics of the film as the profits. A recent article in the New York Times Magazine notes that Miramax “has enjoyed a name recognition, and a notoriety, nearly unique in today’s streamlined and standardized movie industry.” The article also notes that the Weinsteins’ maverick approach was not solely for profit or to cultivate the public’s taste for exotic or adventurous films, “but rather to revive the tradition of prestige filmmaking that the studios had allowed to languish in their pursuit of franchisable blockbusters, overseas receipts and cross-media synergy.” Although only speculation, it lends credence to the notion that smaller, personally run and nonpublicly accountable media firms (as seen in the research on newspaper owners) are more likely to be driven by ideology than large, public media conglomerates run by professional managers.

In fact, the many quaint notions that local owners of newspapers or the TV or radio stations are inherently “better” than a large corporation have no standing in the real world. Some of the most biased newspapers in recent history—McCormick’s Chicago Tribune, Annenberg’s Philadelphia Inquirer, Loeb’s Manchester Union-Leader—were the creation of local ownership. Local owners are more likely than removed corporate owners to have ties into the local political and business establishment. Local owners may not have the economic resources to withstand a local boycott of real estate or banking or similar interests should they risk some criticism of the local industry. Large chains, on the other hand, are far less affected economically by a short-term downturn in any one community. And it is less likely that the publisher is a prep school buddy of the mayor.

It is not likely to matter much (and indeed experience shows it does not) whether a local TV station is owned by a company headquartered in another city. The editorial qualities and decisions for news and information need to be made locally if they want to attract their share of the audience—all driven by the profit motive.

Publicly-owned companies are frequently criticized for being too driven by quarterly earnings needs. It is a fair criticism. So it is again ironic that the poster child for the evils of media conglomerates, News Corp., is probably the least driven by short term profits and quarterly earnings. Though publicly owned, working control and ownership has been retained by its chairman, Rupert Murdoch, and his family. The company has invested hundreds of millions of dollars in its groundbreaking efforts in creating the Fox Network and then a viable second all-news cable network; in creating direct broadcast satellite service covering parts of the Third World as well as developed countries that did not have the advantage of a multichannel cable infrastructure.

There is a very positive side to profit-driven public ownership. The stocks of these companies are widely held, by teacher’s pension funds, by mutual funds, by individuals and 401k plans. The chief executives of these companies have a fiduciary responsibility to their stockholders. They take that seriously. Restricting their coverage, their range of films or magazine titles or news shows is not what the big companies are about. They seek to reach the mass market when they can and niche markets when they spot them. Given the vast diversity of interests in a nation the size of the United States there is potential profit in reaching the right wing as well as the left wing, in programming for Spanish speakers a well as English, in publishing books for escapism and for self help, in investigative reporting that is critical of government as well as editorials that may be supportive. And if the big guys don’t provide it, some small publisher or producer does.

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