Press companies choose very different economic models, ranging from free to full subscription. But whatever economic model is chosen, the purpose of the press is to be one of the key players in the production of ideas. Business models and the production of ideas are closely linked: this is what makes the newspaper business a business that requires special attention.
The press sector has been in crisis for several years. The crisis in the print media is not new, but it persists. The entire sector, which was about 1% of French GDP in the 1970s and 1980s, has fallen below 0.5% since 2010.
In total, the turnover of the French written press, which was €7.5 billion in 2015, is down by more than 3% in its eighth consecutive decline, according to Senator Michel Laugier’s press report1, based on data from the DGMIC (Direction générale des médias et des industries culturelles). In 2015, sales fell again, but advertising fell even further.
Indeed, advertising investments in the press are having difficulty breaking out of the downward spiral. Although net media advertising revenues recovered for the second consecutive year in 2017 (+1.2% to €13.7 billion), the press continues to suffer a decline, according to the annual advertising market barometer conducted by Irep, France Pub and Kantar Media (2018).
Investments in the press fell by 7.4% in 2017 to €2.1 billion. A slightly stronger decline than that recorded in 2016 (–6.7%) or 2015 (–5.9%).
Most press families are at half-mast. Investments in national newspapers fell by more than 8%, while the regional press held up slightly better (–4.6%). Magazines suffered the largest drop (–11.4%) in their advertising revenues. “The press, more than any other historical media, is suffering from the shift from advertising to the Internet”. Michel Laugier pointed out in his report at the end of 2017, highlighting that the press has seen its advertising turnover fall by more than 50% in 10 years.
All the analyses over a long period of time are, in this respect, quite appalling. In the space of two decades, GAFA have destroyed the historical media, and particularly the press. According to a report published in the summer of 2018 by BearingPoint for the Ministry of Culture and the Audiovisual Council (Dahan et al. 2018)2, between 2000 and 2017, revenues from historical media (television, press, radio, billboard, cinema) in France fell by 43% to €6.7 billion. At the same time, the share of Internet advertising revenues – mainly Google and Facebook – rose from almost 0% to 35%, to €3.6 billion.
The press was the most affected. Since 2000, net advertising revenues on print have fallen by 71% to €1.5 billion, and Zenith estimates predict a further 22% decline by 2020. Over the same period, press distribution also plummeted.
However, it is difficult for the press to ignore advertising. Even though the proportion of advertising has decreased and varies according to the type of publication, it still represents a little more than 30% of the turnover of the “publisher” press in 2015. Specifically, 28% for the national press for general and political information and 46% for the technical and professional press in 2015 (Ministère de la culture et de la communication 2015).
In order to avoid dependence on advertising, some media have chosen to be without advertisement. The inclination towards no ads has flourished. Le 1, a French newspaper launched in the spring of 2014 by Eric Fottorino, former director of the newspaper Le Monde, was built on an advertising-free economic model:
“Le 1 is not dependent on any financial or advertising group. In order to guarantee you reliable information, far from any pressure, we have chosen to be independent and advertising-free” (https://le1hebdo.fr).
In the online press, several media have chosen an advertising-free model. This is the case of one of the pioneers called MediaPart, who embarked on an economic model in 2008 that was relatively original at the time – the paid subscription:
“Financing through advertising means giving advertisers an increasingly intrusive place that displeases readers. It prohibits a strong editorial identity and, in the process, the creation of a loyal and invested readership. It does not allow the development of strong journalistic skills and the production of reference information. The so-called “free” sites on the Internet are obviously not so. However, a newspaper whose funding entirely depends on advertising revenues cannot claim, economically, to remain permanently independent. Current advertising revenues on the Internet are primarily calculated for millions of visitors, thus for content that attracts a general public audience that is not compatible with the requirements of a quality and reference press” (MediaPart 2008).
Explicite, the medium created by iTélé alumni (renamed CNews), also chose a subscription-based, advertising-free model:
“Our first choice and first bet was to believe in the virtues of subscription, rather than rely on an economic model based on com, advertising and uncertain distribution on Facebook and Twitter. To think that we only wanted to be accountable to subscribers and that many of you would join” (Ravanello 2016).
According to media sociologist Jean-Marie Charon:
“This reflects the expectations of a number of readers who do not want to receive advertisements. However, not having advertising also means having an audience that is willing to pay more for their newspaper. It is the press of culturally rich people and bourgeois bohemians, but also teachers etc., and all those who want to have an impact on society” (Alcaraz 2018a).
The trend, however, is not just a recent one. The century-old newspaper Le Canard enchaîné also chose the advertising-free route, and successfully so, seeing as the newspaper makes a profit.
Some examples of pressure from advertisers on newspapers have been widely reported in the media.
Let us take the example of the Daily Telegraph in Britain, in 2015. Editor-in-chief Peter Oborne left the newspaper with a bang, pointing his finger at management, saying that it had given in to the pressure of advertising in the SwissLeaks affair. Specifically, he accused the newspaper’s management of deceiving readers on the subject of revelations about tax evasion orchestrated by HSBC Bank. He said that executives removed articles on the case and limited coverage of the scandal, in order to avoid risking offending one of its main advertisers, HSBC, which was widely covered by other newspapers.
In an open letter published on the OpenDemocracy website, Peter Oborne details the case at length (Oborne 2015). The bank reportedly cut advertising budgets following the publication of articles on offshore accounts. Oborne also called for an independent investigation into HSBC’s possible influence on the Telegraph’s editorial line in recent years. For its part, the Telegraph denied “these staggering and groundless attacks”, via a spokesman interviewed by the BBC. “The clear distinction between advertising and our editorial treatment has always been fundamental to our newspaper”.
Another major British newspaper, The Guardian, rebounded on the case, saying HSBC had put its advertising account “on hold”.
In France, several cases have also been revealed. In the summer of 2018, the editor of Le Monde, Luc Bronner, spoke about the pressure his newspaper faced at the International Journalism Festival in Couthures-sur-Garonne. When asked by a member of the public about the subject, he replied:
“Sometimes we go through difficult times. For example, when we work on Panama or the Paradise Papers, and we say that a fairly powerful company in France called LVMH – at least, important people in this company in terms of shareholding – has limited practices, we are immediately punished because there is the temptation for this company to cut advertisers’ budgets. We take responsibility and we manage to make it known. That’s why they come back after. And we won: we did our information work, they applied some form of pressure and in the end, they came back” (de Rochegonde 2018).
Le Canard Enchaîné had mentioned a significant loss of advertising revenue in Le Monde a few months earlier, following the revelations of the newspaper about Bernard Arnault – the CEO of LVMH – regarding the so-called “Paradise papers” case. However, the French luxury giant denied having cut its advertising budgets in Le Monde, indicating that it was considering its media investments.
In January, many editorial offices and journalists’ collectives signed a platform to denounce the methods of Vincent Bolloré and his group, who were accused of putting pressure on the media investigating the businessman’s African activities. The Bolloré group and its commercial partner, the Luxembourg holding company Socfin, have thus launched some 20 defamation proceedings against the media, journalists and independent organizations over the past decade.
Advertising blockers (adblockers) are increasingly being used by online information readers. Out of a desire for reading comfort or irritation with advertising that is considered intrusive, readers download software that, once installed on a computer or mobile phone, blocks a large part of online advertising. According to the Adblocks barometer conducted by IPSOS Connect for the IAB in France, 36% of French users had installed this type of tool on their machines at the end of 2016, 20% higher than in January 2016 (Gilbert 2016). The study shows that although the whole population is involved, young people use advertising blockers more significantly: 55% of 16–24 year-olds and 45% of 25–34 year-olds.
The rejection of online advertising, if legitimate, is a problem for sites that live partially or totally from advertising. Freeing oneself from advertising by an apparently harmless act weakens the media, who see a decrease in their revenues. More and more newspapers are trying to circumvent the phenomenon by encouraging Internet users to watch advertising. Some sites are not visible if you have an adblockers. For example, TF1 cut off access to Internet users who were using advertising blockers during the 2014 World Cup.
Some media also take creative initiatives by offering the choice between watching or not watching spots. For example, in 2016, the Swiss newspaper Le Temps launched an article-based payment solution after the reader reaches the paywall (the free limit ranging from one to five articles). The idea is to give the reader a choice: either he/she watches an advertising video to access the article or buys it.
Newspapers also offer digital subscriptions that make it possible to eliminate all advertising, just like what exists on other platforms in music or video. In 2016, the New York Times announced the launch of such an offer. More recently, Les Echos has set up a premium digital first offer, with exclusive preview information, conferences and debates with journalists and editorial management, etc. as well as the “comfort of browsing without advertising”.
Research has studied the effect of adblockers. Benjamin Shiller, Joel Waldfogel and Johnny Ryan (Shiller et al. 2018) show that the impact of this software is substantial, given that an additional 1% of Internet users using an adblockers generates a traffic reduction of 0.67%, and a 1.5% reduction in overall resources. Adblockers are therefore a considerable problem given the economic model of many sites that are highly dependent on advertising revenues, as Laurent Benzoni, a professor of economics at Paris 2, and Sara Clignet point out (Benzoni and Clignet 2017). The latter also remind us that in 2015, for the first time in Europe, total online advertising revenues (€36.4 billion) exceeded television advertising revenues (€33.3 billion).
The impact of advertising revenues on press content is a recurring topic. According to its analysis, economic research does not provide a clear answer, but it does give several indications.
First of all, there is a whole trend showing that advertising leads to homogenization. From the work of Jean Gabszewicz, Didier Laussel and Nathalie Sonnac (Gabszewicz et al. 2001; Gabszewicz et al. 2002), we have seen that optimizing advertiser revenues can lead the media to seek consensus, that is, to adopt a particular form of bias that consists of having a neutral position. Neutrality is seen here in a negative way, in the sense that it is the opposite of the plurality of opinions and it does not contribute to the debate of ideas.
Following a similar approach, Matthew Ellman and Fabricio Germano, researchers at the University of Pompeu Fabra in Barcelona, show that if the advertising market is very active and represents an important source of income for the press, then this leads to a reduction in the ideological bias that is linked to an increase in competition to broaden readership (Ellman and Germano 2009).
However, broadening the readership involves capturing its attention in a world where the reader’s or Internet user’s attention is highly solicited and becomes a rare commodity.
Simone Galperti and Isabel Trevino, researchers at the University of San Diego, are developing a theoretical model in which the reader’s attention plays a pivotal role (Galperti and Trevino 2017). The authors develop a model in which producers compete for the attention of individuals. The result of the model is that competition for attention leads to a homogenization of information, even when consumers are seeking heterogeneity.
Yi Xiang, a professor at the University of Hong Kong, and Miklos Savary, the University of Insead, Fontainebleau, analyze the informational bias by taking the experience of readers into account (Xiang and Savary 2007). The latter have been consuming information from a variety of sources for a long time. They have thus acquired a bias filtering ability. They are seeking multiple biases, in other words, competition between biases, in order to compare them and build their opinion. These readers thus have a preference for multiple and competitive biases rather than a single bias, even if it is neutral.
On the contrary, in an article published in 2012 (Petrova 2012), Maria Petrova shows that ideological bias even persists in a context where media are looking for important sources of income through advertising. Indeed, if the audience can be finely segmented, and if the audience segments give significant importance to an ideological bias, the search for advertising revenue can lead the media to adopt an ideological bias in order to capture as many readers as possible in a market segment. The idea here is to contrast niche markets, whose size may vary with all or most of the market. The effect of advertising on content is therefore not systematic and can vary.
The impact of advertising market segmentation is particularly well analyzed by Ester Gal-Or, Tansev Giliani and Tuba Pinar Yildirim in an article that was also published in 2012 (Gal-Or et al. 2012). Here, reader profiles are at the heart of the model as advertisers are looking for a readership that is potentially interested in their products or message. The authors demonstrate that advertising can serve as a polarizing or moderating force, depending on the degree of heterogeneity of advertisers that are seeking to attract readers with different political preferences.
Advertising can therefore have two opposite effects. If a newspaper’s strategy is to target the widest possible readership, then it must display minimal bias. If the advertiser chooses to invest in a single newspaper, then the newspapers are in strong competition with each other to win the advertising market. They then seek to differentiate themselves. One way to differentiate is to display an ideological bias.
Alexander Dyck, Natalya Volchkova and Luigi Zingales do a fairly close study of the Russian press (Dyck et al. 2008) between 1999 and 2002. Likewise, Marco Gambarro and Riccardo Puglisi look into the Italian press in 2015 (Gambaro and Puglisi 2015). They measure the impact of an increase in space purchases by a company on the number of articles dedicated to it. The relationship is a positive one and the figures are enlightening: an increase in expenditure of €75,000 generates eight additional articles for one month. The study is conducted on six newspapers (Corriere della Sera, Repubblica, Stampa, Resto del Carlino, Mattino di Padova, Tirreno) and 13 companies (Campari, Edison, ENEL, ENI, FIAT, Finmeccanica, Geox, Indesit, Luxottica, Mediolanum, Telecom Italia, Tiscali and Tod’s). The choice of six newspapers includes three national newspapers and three local newspapers. As for companies, they are chosen because they have significant advertising expenses in the media (a minimum of €200,000). The period studied is 2006–2007. Here again, the correlation between space purchase and press coverage is verified.
For their part, Vincent Bignon and Antonio Miscio studied the case of France at the very beginning of the 20th Century (Bignon and Miscio 2009). They focus on the Panama Canal scandal. They highlight the expenses of the Panama Canal Company in the media: 13 million francs between 1880 and 1888. The authors identify these amounts as one of the causes of the lack of press vigilance in the Canal case. They did the same with another case: that of the banker Rochette, who also owned three financial newspapers. He was accused of spreading false information in his newspapers and was sentenced to three years in prison.
Another question in economic research concerns the impact of competition on content. In an article published in 2014, Matthew Gentzow and Jesse Shapiro, researchers at the University of Chicago, and Michael Sinkinson, a researcher at Wharton – the University of Pennsylvania – raised the issue of diversity and competition (Gentzkow et al. 2014). Does competition lead to a weakening of diversity? They propose an original approach, since it consists of analyzing the content of the U.S. daily press in 1924. The reason for this is that during this period, the number of newspapers present in each city was high, reflecting sustained competition between newspapers. In addition, the newspapers of the time either displayed a political affiliation or official support for a politician. Moreover, television was not yet present, which made it possible to analyze competition limited to the press. The authors design a game theory model with variables such as the number of newspapers, their editorial line, selling prices per issue and advertising space prices. The result of a complex statistical test using databases on all variables shows that newspapers choose clearly differentiated editorial lines in a situation of strong competition. The authors therefore suggest a strong link between diversity and competition.
Can a car magazine criticize a car brand that is its main advertiser? A recurring question for many press observers is whether a medium can say anything, even though it means angering its advertisers.
Gregory Miller, a Harvard researcher, studies the arbitration in media between reporting fraud (mainly exposing insider trading) and finding advertisers in the financial sector (Miller 2006). Being an effective medium for describing the functioning of financial markets and their possible excesses is seen as a way to improve the credibility of the newspaper and therefore its readership. The medium then anticipates an increase in single-issue sales or subscriptions from readers who are seduced by the quality of the information released. The question asked in the article regards the possible reaction of the advertisers implicated in the information released, and who could reduce their purchases of advertising space. The author examines the articles on 263 companies identified by the SEC (Securities and Exchange Commission), the U.S. stock exchange regulator, in the national press (Wall Street Journal, Business Week) and in the local press (LA Times, Miami Review). More so than the amount of advertising revenue, the quality of information is related to the diversification of advertisers.
Andrea Blasco, researcher at Harvard, Paolo Pin, researcher at Bocconi University in Milan, and Francesco Sobbrio, professor in the Department of Economics at the Free University of Rome (LUISS), study what happens when an advertiser finances advertising in a newspaper with information defending the qualities of its product, or denouncing the defects of its competitors’ products as a counterpart (Blasco et al. 2016). From their model, they deduce that competition in the product market does not necessarily prevent the appearance of a commercial bias in the media. The article shows that the commercial bias is not automatic and is linked with the quality of the advertiser’s product.
If the product is in a weak position compared to the competition, then the pressure from the advertiser will be high and vice versa. On the one hand, if advertisers have quality products, they will cooperate to eliminate negative information about them. On the other hand, if competition is between firms with quality products, as opposed to firms with poorer products, then the firm with quality products has no interest in collaborating to reduce negative information, quite the contrary. In the first case, it is in the interest of firms to finance the media in order to eliminate negative information, and not so in the second case. Let us reproduce here the example given by the three researchers.
“Imagine a magazine specializing in computer products. The magazine offers readers articles in which it assesses the quality of computers. Let’s imagine two companies. The first one sells computers of poor quality. If the magazine is not primarily concerned about its reputation, it may agree to exchange its silence or a less critical article for purchases of advertising space. However, the firm that sells good quality products sees competition intensify because of items that are favorable to its competitor. It may therefore decide in turn to influence the media by raising the price of advertising space” (p. 252).
The authors conclude that even in the absence of pluralism (in their example, there is only one newspaper) or the media’s desire to have a good reputation, the information may ultimately be of good quality as a result of an increased advertising expenditure by competing companies. The quality of information and the reputation of the media are then consequences of competition between advertisers. However, this result is not always verified. In order to explain this, the authors take a second example:
“Gasoline-powered cars cause pollution problems, regardless of the brand or model. This is a general problem. But more information will be available on the deficiencies of a brand or model of car than on the general problem of pollution caused by traffic. Automobile companies have an interest in minimizing articles on pollution that can impact the sales of the entire economic sector, even if it means accepting unfavorable comparative articles between brands or models” (p. 259).
As another example, the authors also take the case of the pharmaceutical industry as a whole and the criticism of certain medicines. The nature of commercial bias depends on how product quality is correlated between companies. In the case of tobacco industries, the products are almost identical and it took a long time for information on the dangers of tobacco to increase. In the case of computer manufacturers, product quality is not correlated between firms because competition is strong and there is a wide variety of products, so the information on the worrying use of rare earths in batteries was quickly brought to light.
It can therefore be seen here that research on the consequences of partial or total funding of the press through advertising must be continued.
Subsequent articles focus on analyses based on the newspaper content. In 2006, Jonathan Reuter and Eric Zitzewitz analyzed a specific bias: that of financial information (Reuter and Zitzewitz 2006). They question the possible link between advertising that is financed by investment fund managing firms and reporting on these same firms in newspapers that have benefited from their advertising investments. They identify a positive link for financial newspapers specializing in personal wealth management (Smart Money, Money, Kiplinger’s Personal Finance). However, the link is not convincing for major newspapers such as the New York Times or the Wall Street Journal. The authors explain this difference by the weight of advertisers, which are more concentrated in the first case and more numerous in the second, and by the amount of advertising spending. The study examined the articles published between 1996 and 2002 in five newspapers, which were selected because they received the highest amounts of advertising revenue from investment funds3. These publications received 45.3% of the portfolio managers’ advertising expenditures between 1996 and 2002. For the Wall Street Journal, advertisers who manage funds represent 3.8% of advertising revenue, while for Kiplinger’s, they represent 28.2%. In other words, the more diverse the advertisers in a medium, the less sensitive it is to pressure.
There are few studies on tax measures for the press. When they are set up, they either provide financial assistance to the press when it encounters financial difficulties or give it the means to counterbalance the fluctuations of advertising revenues. Hans Kind and two other researchers from the University of Tübingen note that many countries grant tax measures that are favorable to the press (Kind et al. 2013). One of the most frequent is the VAT rate reduction, as in the case of France (the press benefits from a VAT rate called “super light”, or 2.1%4). This measure has three objectives, as defined by the European Commission: to lower the price of newspapers in order to improve their distribution and therefore the profitability of press companies; to allow greater investment; and to encourage more differentiation between newspapers, thus improving pluralism. The three researchers suggest verifying the validity of this virtuous chain of events. They develop a two-sided model to take the other press market into account, in other words, the advertisers’ market and the sale of advertising space. The VAT rate reduction should make newspapers financially secure and allow them not to compete for additional resources through advertisers. This should allow the press to focus its efforts on the reader and invest in qualitative journalism.
The authors review the study in order to show that research on two-sided markets does not incorporate reflection on taxation to this day, and that the study on direct taxation has not focused on two-sided markets. They conclude that this is a counterproductive measure depending on the size of the advertising market. If the advertising market includes many advertising space buyers, then the press offers a slightly different profile to have the largest number of readers in order to have the largest number of advertisers (the authors cite the English tabloids as an example). According to the authors, it is therefore not taxation that ensures pluralism, but the strategy of press groups in view of the size of the advertising market.