Feb 3, 2024 - Economy

The newspaper savior complex

Illustration of a punctured life preserver made of hundred dollar bills.

Illustration: Shoshana Gordon/Axios

Deep reservoirs of individual and philanthropic wealth are being tapped in an attempt to save or rebuild the news industry. In reality, however, large amounts of up-front liquidity never seem to be the solution to the problem.

Driving the news: The demise of The Messenger this week is just the latest in a stream of headlines about small or fast news-media implosions. Its founder, Jimmy Finkelstein, wrote this in his note to staff:

Over the past few weeks, literally until earlier today, we exhausted every option available and have endeavored to raise sufficient capital to reach profitability.

Between the lines: Finkelstein, here, is saying explicitly that investing money in a news business is a way of making it profitable. In reality, however, that's almost never the case.

Why it matters: Ever since the bottom fell out of the news industry around 2008, some variation on the benign billionaire has been many analysts' savior of choice.

  • Ultra-wealthy entrepreneurs — including Patrick Soon-Shiong at the LA Times and Jeff Bezos at the Washington Post — have a lifetime of experience of investing money, using that investment to drive growth, and then seeing profits roll in once enough scale has been achieved.
  • When it comes to the news business, however, spending a lot of money generally only seems to to end up only making losses bigger.

How it works: Digital news is not an an arena where the larger the initial investment, the larger the potential return.

  • Once upon a time, Rupert Murdoch could make a huge investment in a new printing plant at Wapping, in East London, with an entirely justified expectation that his significant capital investment would pay off in the form of higher long-term profits.
  • In today's news industry, by contrast, there are precious few capital investments to be made. Nearly all investment is in recurring expenses, mostly salaries for humans, whether those humans are journalists or ad-sales folk or coders or product managers.
  • As a result, the investments made by Soon-Shiong and Bezos have caused their respective newspapers to lose more money last year than they ever did pre-acquisition. Similarly, the Messenger's breakneck pace of hiring simply meant it burned through the $50 million it raised in record time.

Meanwhile: Philanthropies like MacArthur and Knight similarly believe that with enough goodwill and cash, they can turn the industry around.

The bottom line: The amount of money available for bold, growth-oriented bets will always dwarf the amount of money available to simply subsidize a good but money-losing existing product. Even when the latter is much more desperately needed.

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