Most
journalism firms produce news and information to attract an audience that
advertisers want to reach. Advertisers then pay the firm for access to the audience. Sometimes
these firms also sell subscriptions to generate additional revenue. So the production of news that audiences consider
credible or entertaining is essential to the economic survival of such firms.
Suppose
a firm relies on a non-journalistic business to produce the majority of its
revenue and profits. Suppose the firm also produces some news stories, but they
only generate a fraction of the firm’s revenue. The firm’s non-journalistic business
is essential to its economic survival. But journalism’s role is more ambiguous
because the firm cannot afford to publish news that substantially reduces the amount of revenue
generated by its non-journalistic business.
Bloomberg offers an example of what can happen when there is a conflict between a non-journalistic business that generates most of a firm’s revenue and a secondary business that produces news.
Bloomberg has about 15,000
employees who provide data and information to stockbrokers, bankers and other
financial professionals around the world. About 16 percent of Bloomberg’s
employees work for Bloomberg News.
The
news service was created to help sell subscriptions to special computer
terminals that generate the majority of Bloomberg’s revenue. The terminals give
subscribers access to a wealth of valuable data and other information, and
subscriptions cost an estimated $20,000 to $24,000 a year. Bloomberg’s revenue
was estimated to be $7.9 billion in
2012,
and most of that was generated by approximately 315,000 subscriptions to
Bloomberg terminals.
So
Bloomberg fits the model of a company where the majority of revenue comes from a
non-journalistic businesses. Even if the news service is not directly
subsidized, the news service could not exist independently from Bloomberg’s
other lines of business.
Bloomberg’s
news service is focused on daily coverage of business and economic news. The
stories are intended to help people who subscribe to the company’s terminals
make informed business decisions. The news service also produces investigative
stories and other distinguished
journalism.
However, Bloomberg’s reliance on revenue from its terminals creates a potential for conflict if news stories threaten that revenue source.
A conflict over news coverage of China
A
conflict between revenue and news appears to be the reason that three
Bloomberg journalists
have quit after internal disagreements about two investigative
stories that were never published. One unpublished story examined foreign banks that
employed the children of powerful Chinese leaders. Another unpublished story
examined a wealthy Chinese businessman and his relationships with China’s
leaders.
About
15 months before executives decided to withhold the stories, Bloomberg had
allowed its journalists to publish a different series of
stories
that critically examined the wealth of China’s elite.
The
publication of those stories prompted the Chinese government to deny visa
requests from Bloomberg journalists, keeping them out of the country. Sales of subscriptions
to Bloomberg terminals in China slowed after the stories were published. These
consequences probably influenced Bloomberg’s decision to withhold subsequent
stories that were critical of China’s elite.
After
Bloomberg’s decision to withhold the stories became public, the company’s
chairman said that Bloomberg should reconsider the
publication of articles that “wander away a little bit” from its core
coverage of “the local business and economic environment.”
He did not specify which articles should be reconsidered, but he did say the articles could jeopardize the sale of subscriptions to Bloomberg terminals in China. The company was also concerned it might lose access to financial data from China, data that Bloomberg subscribers need to make money.
Withholding investigative news stories can damage a news
organization’s credibility.
But
at Bloomberg that concern was reversed. This was a case where publication of investigative stories might have damaged the company's credibility and potentially harmed its subscribers.
Bloomberg’s economic self-interest
Why would publication of the stories have such counter-intuitive effects at Bloomberg?
Publishing
stories about foreign firms that hire the children of powerful Chinese officials
might force the foreign firms to end those arrangements, costing them business
and profits. Publication of the stories might also lead to investigations or
new regulations that make it difficult for firms entering China to gain an
advantage by hiring the children of powerful officials.
So the business people who subscribe to Bloomberg’s terminals might regard withholding the stories as a sensible decision that helps business.
Publication
could also put at
risk the profits Chinese officials gain from their relationship with a wealthy
businessman. The stories could also put at risk future profits and jobs at
foreign firms for Chinese officials’ children.
So Bloomberg,
the company’s customers, and Chinese officials all have self-interested reasons
to oppose publication of the stories. Bloomberg journalists favored publication,
but their contribution to the company’s revenue was too small to win the
argument.
Bloomberg’s executives probably withheld publication because they had learned
from publishing the earlier stories that critical reporting in China can damage
Bloomberg’s economic interests. And responsible executives should put their
company’s economic interests first, that is the very essence of their job.
The advantage of a traditional model for
funding news
The controversy became public knowledge because The
New York Times published stories about what happened at Bloomberg. The Times
has also published its own critical stories about China, including reports on U.S.
firms that hired the children of Chinese officials. Those stories did indeed result in an investigation
of one major U.S. bank. Chinese officials have also banned
or threatened to ban
Times reporters from working in China.
Why does the Times publish these stories when Bloomberg did not?
The
Times is a much smaller company than Bloomberg, it only had about $1.59 billion in revenue in 2012. However, the Times doesn’t have the kind of
internal economic conflicts that created problems for Bloomberg. The Times uses
a traditional model for funding journalism, and most of its revenue comes from
circulation and advertising. Journalism is essential to the company’s economic
survival.
Publishing critical stories about China does not harm an important revenue source at the Times. Instead, these stories might have the opposite effect.
The
stories add to the newspaper’s reputation as a trustworthy source of news. That
reputation is critical for attracting the audience that advertisers pay to
reach. The Times is also generating increasing amounts of revenue from selling subscriptions,
and some readers might consider investigative stories valuable enough to pay for.
Does
this mean the Times would never allow its economic interests to conflict with its
journalism? Of course not.
But the reliance
on credible journalism at the Times means the paper must focus on stories that
its readers and advertisers prefer. This creates incentives to publish stories,
not to withhold them. However, the Times will still shy away from stories that violate
the preferences of its readers and advertisers.
Bloomberg
is a large company with enormous resources and a history of supporting
journalism. But Bloomberg had no choice when confronted with the possibility that
some news stories could substantially harm its core business. The
company had to withhold the harmful stories.
Those
who argue that non-journalistic businesses should be used to finance
journalism should rethink their argument. There will always be a potential for
economic conflicts in these cases, conflicts that can damage the journalistic
enterprise.
Journalists
should not look to other businesses to help support what they do. The journalism business will function best
when it has to pay its own way.
