Market Failure
The tension between treating news as a market commodity and practicing journalism as a public service has been a central dilemma in journalism for over a century. Notably, advertising was first welcomed rather than criticized because it promised to end, or at least ease, the dependency of journalism on the political parties that used to finance newspapers. In the Utopian vision of ad-supported journalism, advertising would enable market forces to empower audiences, resulting in the production of news information that was even more useful to them. Conversely, others worried that market sensitivities would seed market-driven journalism characterized not by "all the news that’s fit to print" but rather "all the news that’s fit to sell."
Scholars have argued that quality journalism provides multiple fundamental benefits to a democratic society that the market fails to adequately compensate. For example, all members of a society benefit when voters are well-informed and thus able to choose wise leaders and reward good governance. Similarly, all members of a society benefit from the deterrence of corruption and abuse that results from an actively monitorial journalistic environment, as bad-faith actors weigh the costs of getting caught against the benefit of doing a bad thing. Yet, in a market-oriented system, not everyone pays for news. In fact, only a very small proportion of people do. This creates a free rider problem, where people can experience many of the benefits of a product without having to pay for it. Consequently, what is civically valuable but goes unrewarded in the marketplace — such as expensive public-service journalistic investigations — ends up being under-produced, since there’s no economic incentive for it.
Scholars have also found that the more responsive a newsroom is to market forces, the less it tends to serve the public interest through civic-minded efforts like 'watchdog' journalism. Again, this makes sense on multiple levels under rational-choice theories of economics. Rational managers and owners who seek to maximize their (or their investors') economic return should produce the least expensive content that can generate the largest audience of subscribers and/or consumers that are attractive to advertisers. Rational advertisers should seek the largest audience of potential customers at the lowest cost while favoring outlets that produce softer, simpler stories that leave potential consumers in a positive emotional state. And, audiences are not themselves paragons of rational self-interest. They do not always financially reward the content that benefits them the most in the long run.
The confluence of these factors results in what economists call market failure, where there is inefficient production and distribution of goods and services within a free market resulting from the fact that the individual incentives for rational behavior do not lead to the best outcomes for a group (or society). This has become especially apparent as the economic underpinnings for commercial journalism in many parts of the world, including the United States, have been significantly challenged by sociotechnical disruptions.
For example, the newspaper advertising market enjoyed robust growth from 1950 to 2000, and then declined to the 1950 levels in the next 12 years alone. Consequently, newsroom employment in the United States declined by 51% between 2008 and 2019. Additionally, hundreds of small community newspapers in the United States have been forced to close, creating a situation where in 2019, almost half of U.S. counties had a single local newspaper (that was often only published weekly). The coronavirus pandemic of 2020 only increased those economic pressures: A third of U.S. newspapers experienced layoffs that year, with large-circulation newspapers being most affected.
This has required commercial newsrooms to significantly rethink how to serve their civic objectives while remaining economically viable — efforts that have, at least recently, guided them toward further diversifying their revenue models in order to make up for drastic losses in advertising. Even among local and national television journalism outlets, which have been less affected by those trends, there are more intense economic (and political) pressures to move away from expensive public-service journalism. There have been many calls to address the market failures within journalism, but the challenge has persisted.