Monday, February 8, 2010

Why Profit Doesn't Work in the Media Business

Although I'm generally supportive of the profit incentive, I think the following clip shows one example of how it can go entirely wrong:

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The basic defense of the profit incentive is that you're almost always likely to getter better results when you incentivize good behavior than when you force it. Profit supposedly sets up an incentive system that induces businesses to serve the public interest as much as possible (of course, no system is perfect). Ideally, if a business makes a product that creates a lot of value for people, then that business makes a lot of profit, and investors come in to supply money to the company so that it can continue to finance its society-benefitting ways. Customers get what they want, and the business reaps the reward of going through all that effort. Everybody's happy.

Of course, this system isn't foolproof; for it to work, a couple key things must happen (at least). First, consumers need to be able to represent an effective check on business. If people in general can't tell that they're getting duped, or swindled, or cheated, or they have no alternatives (i.e. monopoly), then businesses can gain profits without actually benefitting the public. Second, it must be the case that if individual consumers are getting what they want, then society should also be better off. In other words, individual interest can't be opposed to a broader, collective interest.

The problem with profit in the media business is that neither of these criteria are satisfied. First of all, for the average American citizen getting blasted with a veritable fire hose of media all day, it's very hard to tell what's what. As David Foster Wallace puts it, in attempting to grapple with the Total Noise, we find ourselves "dealing with massive, high-entropy amounts of info and ambiguity and conflict and flux; [the alternative to narrow arrogance and pre-formed positions is] continually discovering new areas of personal ignorance and delusion. In sum, to really try to be informed and literate today is to feel stupid nearly all the time, and to need help." Because the facts can be so gray and ambiguous, and because everyone needs help figuring the truth out, news organizations have the opportunity to simultaneously pose as a guide through this media mess and produce a narrative of its own. Fox is especially good at this, which is one of the reasons why, as Mr. Ailes put it, Fox is "winning." Fox News runs such a weasely operation that it holds journalistic credibility with enough people to put the "Fair and Balanced" graphic on air with a straight face.

In a lot of cases, though, Fox News viewers know that they're hearing only what they want to hear. In fact, that's precisely why they watch it. It's called "infotainment." The problem is that in a democracy infotainment poses a serious externality. It results in polarization, passion-driven protests, and, worst of all, a crippling inability to have a serious discussion about hard choices. Our country is worse off—not better off—if millions of Americans decide they'll watch the version of the news they like the best.

Now comes the point where, after critiquing the existing system, I'm supposed to do the responsible thing and supply an alternative. Unfortunately, though, when the execs are so unapologetic about their business strategy there's not much you can do. I can't conceive of a system that would actually incentivize "fair and balanced" reporting, and companies will just find ways around regulation (which is subject to all the terrible terrible pitfalls described in Public Choice Theory). It seems that the only viable solution is to somehow effect a change of heart in the way the media execs see their business. Somehow someone has to convince them to temporarily forgo the large profits they gain from the status quo in order to change for the common good. We need a call for a higher standard, a call to service and stewardship and morality.

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