It’s a Scientific Fact: Cheap Journalism Is Expensive

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The Rivard Report staff works in their new office at 126 Gonzales St. in St. Paul Square.

Bonnie Arbittier / Rivard Report

The Rivard Report staff works in its new offices at 126 Gonzales St. in St. Paul Square.

This column is, without apology, preaching to the choir. Readers of a local news website clearly are involved citizens. Ones that read local news on a day marked heavily by hangovers and football games are doubly devoted.

So on this day I am comfortable writing on a paper published in October by three finance professors – one from Notre Dame and two from the University of Illinois at Chicago. It quantifies one small multimillion-dollar cost of the shrinkage of local journalism in the nation’s towns and cities.

It’s a simple concept embodied in a definition of “conscience” authored by the acerbic Sage of Baltimore, the late H.L. Mencken. He wrote, “Conscience is the inner voice that warns us somebody may be looking.” It explains why journalism is important.

What these three scholars – Dermot Murphy, Pengjie Gao, and Chang Joo Lee – did was to measure a set of direct costs to the taxpayers when a local newspaper closes. And they offer evidence as to why.

The title of their paper plays off the slogan of The Washington Post, “Democracy Dies in Darkness.” Their paper is titled: “Financing Dies in Darkness? The Impact of Newspaper Closures on Public Finance.” If you want to read its entire 70 pages, complete with multiple tables of regression analysis, you can read it here.

The title is a bit of a stretch. Their research indicates that borrowing money through municipal bonds becomes more expensive for local governments after local newspapers close. Financing of new roads, parks, and other infrastructure doesn’t die. It just costs more.

According to the authors’ research, the costs of selling bonds goes up about .06 percent on average after a local newspaper closes.

That doesn’t sound like a lot of money, but it becomes substantial when you talk about something like the bond packages San Antonio voters approved last year.

At $850 million, the extra cost would be nearly $5 million over 10 years. To find the reasons, the authors looked at what happens to city management when there is less concern, in Mencken’s words, that “somebody may be looking.” They found “increased government inefficiencies that result from the loss of a government watchdog after a newspaper closure.”

They found that government wages increase on average 1.3 percent higher than the wages of the local workforce as a whole. In addition, they found that the local government workforce grows by about four persons per 100,000 residents in the three years after a newspaper closes.

In addition to these inefficiencies, the authors were able to test the role of what they call “informational friction” on bond buyers. The more institutional buyers are able to learn about the operations of a local government, the more confidence they have in the bonds. When a newspaper closes, it makes it more difficult and expensive for bond rating agencies to conduct the research necessary to give bond purchasers reassurance.

What they didn’t measure was corruption in the selection and payment of bond advisors and underwriters when nobody is looking.

Because both the closing of newspapers and the costs of municipal bonds are so well-documented, the authors were able to study the impact of the former on the latter. But it is likely that shrinking newspapers have a similar if not as easily measured impact.

When I began my career in San Antonio we had three newspapers. The morning Express and evening News were owned by the same company, but they were staffed separately. In 1984, we were reduced to two papers, the Express-News and the Light. In 1993, the Hearst Corp. closed the Light and bought the Express-News from Rupert Murdoch’s News Corp.

A couple of Express-News reporters were exulting over their perceived victory and the profits that did surge for a period. I asked them if they thought the economic forces that took us from three papers to two and then to one in less than a decade had stopped. They clearly haven’t.

According to the federal Bureau of Labor Statistics, the total number of newsroom employees in the eroding number of U.S. newspapers shrank nearly by half between 2004 and 2017 to about 39,000. Locally, the Express-News has suffered a series of staff layoffs, something it now partially masks by running more Houston Chronicle stories and tagging their reporters’ bylines with the label “staff writer.”

Newspapers face a number of financial problems, but the biggest one is the loss of advertising revenue, which used to count for more than two-thirds of a daily’s revenues, enabling newspaper delivery to your home for less than you would pay for a cup of Starbucks coffee. But that economic model is fast dying. Nationally, newspaper advertising revenue shrank from just under $50 billion in 2004 to less than $17 billion in 2017.

The reason is that the internet and other technologies have given advertisers more choices. Newspapers used to make huge profits from classified ads, for example. Craigslist wiped that out by offering free online listings until your item is sold, while avoiding the costs of printing, paper, telephone salespeople, and delivery.

Now newspaper listings that used to fill an entire section take up less than a page.

The consequences for those of us who thrive on local news are alarming. The local newspaper remains the big player in town. The Express-News still does some excellent reporting, but its long-term prospects are suspect. Meanwhile, the explosion of cable stations has decimated the impact of local TV news. The leading news station at 10 p.m. reaches only about 7 percent of the market, and the actual news it delivers takes up about 12 minutes a night after you back out sports, weather, and commercials from the 30-minute time slot.

We can hope that a thirst for local news will lead to a profitable economic model based on the new technology. Meanwhile, what you might call the public radio voluntary membership model is the only one that is expanding. National Public Radio has joined The Washington Post, The Wall Street Journal, and The New York Times as a leading national and world news source.

The online-only Texas Tribune has won national acclaim and millions of dollars in funding as it builds the most comprehensive coverage of state affairs in Texas. Locally, both Texas Public Radio and the nonprofit Rivard Report have increased their news staffs to more than 15 and aspire to more growth.

As we look for that new economic model, it’s crucial that we support what we have.

Good journalism isn’t cheap, choir members. Please do your part. Tithe and sing to the congregation.

3 thoughts on “It’s a Scientific Fact: Cheap Journalism Is Expensive

  1. Being a regular newspaper reader since the late 50’s I am saddened to see the number of column inches of news offered by our Express-News shrinking. Furthermore the few reports presented are much longer — I suppose that means that fewer reporters have to try to fill up more column inches . What happened to the approach of giving the “meat” of the report in the first paragraph? And finally the local paper could be accused of being the “lite” version of very liberal slanted papers like the NewYork Times and the Washington Post with some many of their articles reprinted by the local paper.

  2. I am equally terrified we might lose our daily paper. The Rivard Report is a great and accurate news source but not as extensive as the daily newspaper. KLRN was a great source of local issues with the Rick Casey show. However that was dropped for “financial reasons” which was a great loss of accurate local info. We apparently have an information tectonic plate shift that is going to take out me and my dinosaur paper reading friends. Will probably also take out that “fake news” climate change concept.

  3. Having subscribed to the Express-News since moving back home to San Antonio in 1979, I have yet to read about or participate in any focus group to find out what readers really want in the newspaper. I continue to subscribe for the local news. It baffles me to see articles that run for 2-3-4 full pages. In a pressed-for-time world, I personally want to read the gist of real news and move on. I do recall seeing surveys on selecting new comic strips, but beyond that, nothing to let the publisher know what we want. Sadly, today it takes me about twenty minutes to read the daily version and less than an hour on Sundays. Content just keeps shrinking while keeping ridiculous items such as letters to the editor. If you look at those over time, you see the same names appearing on a regular basis–I could rattle off a bunch–and know they are on the same rant with no facts to substantiate what they are ranting about.
    Enough of my rant here. Thanks to the RP for your efforts.

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