Getting what you deserve

"Journalists deserve low pay,'' Robert Picard, media economics professor at Jonkoping University, Sweden, opined provocatively. "Wages are compensation for value creation and journalists simply aren't creating much value these days.''

Picard, the author of The Economics and Financing of Media Companies, was speaking at Oxford University, where he was a visiting fellow at the Reuters Institute.

His subject  the economic viability of journalism, particularly print journalism  is of keen interest to me and my employers, and should be to the wider public too.

In New Zealand, media companies have had regular purges of staff during the past few years  to bring costs in line with ever-diminishing advertising revenue. Some firms, magazine publisher 3Media, for instance, have gone to the wall.

The situation is worse overseas. As David Warsh, publisher of online economics weekly commentary economicprincipals.com, notes, "doubts about the future of newspapers are thick in the air. Most are losing money. Some have crashed''.

The alarming disappearance of papers and  journalists (27,000 have lost their jobs in the US alone in the last 18 months) is, Picard argues, a result of  loss of control of content. Journalism did provide economic benefits to readers, but it is not only useful, practical information and ideas that persuade people to buy newspapers. Intangible benefits, such as a sense of belonging to a community, are also part  of newspapers' value creation. Media also provide a forum for people to express a view, for their opinions to be validated by publication or by subsequent news coverage.

"These benefits used to produce significant economic benefit,'' Picard says. ''That additional value is gone because a far wider range of sources of news and information exists.''

Picard believes skilled journalists are not like skilled plumbers. Their skill is the distribution of other people's knowledge. Now, that knowledge is disseminated online at little cost, and control of the saleable commodity has disappeared. "The primary value created today comes from the basic underlying value of the labour of journalists. Unfortunately that value is now near zero.''

What to do? Many commentators and some media executives believe the answer lies in creating not-for-profit charitable trusts similar to the ownership structure of Britain's Guardian newspaper.

For these people, the problem of falling advertising is exacerbated by the highly leveraged balance sheets of media companies and the demands of shareholders for a decent return.

Others are trying to wrest back control of content from internet publishers such as Google by restricting access to paid subscribers.

Rupert Murdoch, so often cast as the scourge of journalism, is shaping up as a  white knight. His  News Corp is to start charging for  website content. News Corp's flagship  is the Wall St Journal.  It also owns Fox News, The UK Times, The Australian and, closer to home, 44 per cent of Sky Television.  His determination to wrest control of content and ensure payment is significant. The Financial Times followed  last week with its own iTunes-inspired pay model. Fairfax Media, Australia-based publisher of The Independent, is also said to be considering joining the pay-per-read campaign.

If both follow through, every daily Australian newspaper, save the West Australian, will charge for at least some  online reading.

Fairfax chief executive Brian McCarthy's comments that digital delivery must be monetised will cheer Barry Colman, publisher of the National Business Review, the only New Zealand website to charge a fee.

Colman says a pay-per-view model is the only way to stop further newspaper losses and the erosion of quality. "One of the great outcomes from to the move to charge for online copy is going to be that every time a journalist writes a story, they will be conscious it has to be good enough for someone to pay for it,'' he  contends.

"This whole new era has now brought an accountability that will upgrade the quality of journalism.''

He is urging APN and Fairfax to follow suit and charge for  content.

Co-ordinated action by New Zealand media companies to address falling revenue and a subsequent drop in writing quality at all papers, including, by implication, his own, is needed, Colman says. "Until newspapers can protect their ownership of what their journalists are writing, the situation will continue to be hopeless. Someone has to stand up and say that if we've written this copy, it belongs to us and people cannot steal it and use it for themselves.'' Colman believes the recession and advertising drop are ''forcing a reality on everyone who operates a professional newsroom''.

Advertising has always subsidised journalism and the migration of classified advertisements to online is now unstoppable. It means, he says, that journalism must survive by being good and interesting enough that people will pay to read it.

"This is the ultimate litmus test  asking your customer to pay.'' Will it work? ''I'll have a better idea in 12 months.''