The economic crisis of the media system

There are several possible strands that we can follow when studying the crisis of the media system. However, in my analysis it is basically a crisis of traditional media economy: the traditional business models did not function any more – both politically, as they could not provide any more the socio–political stability and cohesion, as was the case in the reconstruction period after the WW II; and economically, as people’s consumption patterns changed at the same time as the costs in media production started spiralling. For this reason, I will limit my focus here on the general description of the economic decline in the traditional media industries, newspapers and television.⁶

Before the 2000s

1. The crisis of the media system in Europe can be divided in two (or three) main phases.

As stated above, my starting point here is that it is basically an economic crisis which has significant reflections on the political and cultural levels too. The sources for this are at least twofold: 1) on one hand, as the media was, as a result of the more general

5 See http://www.bbc.co.uk/news/world–us–canada–23768248.

6 I try to analyze the political implications of the crisis elsewhere.

125

shifts in the capitalist economy (described above), now taken as an industry among other industries, it was expected to generate significant profits. For a number of years this was the case: in Finland, the rate of profit in media industries (especially the newspaper industry) was steadily between 15 and 25 per cent. 2) On the other hand, because of increasing free time and cultural consumption combined with the higher education level, the media consumption – in its different forms – kept rising. Thus for example the newspaper circulation in Finland was its all times highest in 1989: 824 copies per 1000 inhabitants (in 2011 the figure was 509). Daily average television viewing time in 1990 was 109 minutes (in 2012 it was 183).

2. However, from the late 1980s and early 1990s onward changes in people’s free time activities and consumption patterns led to a decline in the traditional business models of media industries. People – especially the youth – began to look other sources for information and entertainment. In the early 1990s, the circulation of newspapers began their long and steady decline. Although radio listening has remained popular, it has declined clearly among the younger age groups; the same goes with television watching.

Especially the newspaper market has become more and more competitive as the companies are fighting over fewer and fewer readers. Both traditional sources of newspapers’

became endangered: the number of subscriptions (and single copy sales, which in Finland were only some 8 per cent of total sales) declined from year to year; the income from advertisements decreased as advertisers paid less for having an access to the dwindling number of readers. In 2000, the advertising income of the dailies was 528 € million; n 2012 it has dropped to 404 € million.⁷

3. In the rapidly developing European electronic communication (television and radio) business competition has been as hard. As European television industry was, to a great extent, privatized and deregulated in the 1980s and 1990s, new businesses entered the market in great numbers – especially in the fields of cable and satellite television.

Although the governments attempted to regulate the market by imposing obligatory licensing for an access to radio frequencies (in terrestrial broadcasting), in the satellite

7 Finnish Mass Media 2011; http://www.mainostajat.fi/mliitto/sivut/Mainosvuosi2012lehdistotiedote.pdf.

126

and cable transmission the competition was practically all but unregulated.⁸ One of the results was a strive for controlling the market by (cross–)ownership concentration, leading in many countries to the formation of big media houses, some of which expanded soon to major transnational actors (such as Fininvest, Bertelsmann, News International, Vivendi).

4. Increasing competition influenced directly media contents, too. As described above, commercial values started to be emphasized more in news selection and news framing, leading to a major change in how the relationship between journalism and reading audiences was conceived. This has been characterized as a shift from citizen–oriented to customer–oriented journalism. As concluded above, this has naturally meant also a major change in how the role of the media used to be understood in democracy.⁹

After 2000

1. Although these two long-term developments – the financial decline of the traditional media and the commercialization of their contents – started already in the 1980s, they were much intensified by the introduction of digital media technology (ICT) in the 1990s and 2000s. On one hand, new ICT opened up new opportunities for developing and improving the production processes in many ways (computerization and automatisation of manual tasks); on the other, as it soon came out, together with the advent of the Internet, the traditional strengths of the ‘old’ media (fastness, connectivity, engagement) were now captured and accelerated by different forms of new media.

2. The challenge of the new media to the traditional media comes at least from two directions: first, from the free delivery of news and information services; and second, from the increasing popularity of the social media platforms.

1) Firstly: as the Internet was able to deliver the news and other traditional newspaper contents 24/7 and as the online services were ‘free’, compared to the subscription or single copy fees, the Internet news sites gathered increasing number of audiences or

8 In satellite transmission, however, the TVWF directive stipulated the ’country of origin’ principle which functioned as a guiding principle.

9 See e.g.Curran 2011; Nieminen & Trappel 2011; Nielsen 2010.

127

‘users’. This led the advertisers to navigate to the Internet, too, with the effect that the negative income spiral of newspapers got worse: the decrease in the number of readers was aggravated by the loss of advertising money.

With the digitalization of television, the same challenge was met by traditional television companies. Audience was shifting in great numbers first to the competing niche channels, leading to the decline in advertising money. First, it was attempted to counter with pay channels (movies, sports, life style) but it did not bloc audiences from shifting to the Internet and its

‘free’ offering.

2) Secondly: from the viewpoint of the traditional media, the problem with the social media (Facebook, YouTube, and the like) is that they offer much more effective channels to advertisers to target their desired consumer groups, thus diverting advertising money from newspapers, both in their print and online forms.

3. The traditional media companies are still struggling to change their business models profitable in the online environment. Newspapers are experiencing with different ways to make money from their online versions – both by ‘personified’ advertising and by experimenting forms of ‘pay walls’ – but at least by now, without a sustainable financial solution.

Television companies have a different problem: despite the total audience figures keeping constant or even slightly increasing,¹⁰ because the audiences are spread to a number of smaller (digital) channels,¹¹ traditional channels are losing advertisers. As a counter tactic, the companies are developing their pay–online services, but have realized that they must compete with specialized ‘OTT service’ companies (such as Netflix, HBO, Hulu).

4. For newspapers, the solution has been to continue the commercialization of their ways of operation on the cost of traditional journalism. The costs of production must be brought down by any means; each unit of the ‘output’ must be able to create income.

The whole culture is oriented to making money. The smaller number of journalists must

10 See Nordicom statistics,

http://www.nordicom.gu.se/eng.php?portal=mt&main=showStatTranslate.php&me=1&media=Television&type

=media&translation=Television.

11 In four Nordic countries (Finland, Iceland, Norway, Sweden, there were in 2001 together 36 national tv–

channels. In 2011, they were 103. See Nordicom,

http://www.nordicom.gu.se/eng.php?portal=mt&main=showStatTranslate.php&me=1&media=Television&type

=media&translation=Television.

128

produce more ‘output’. The ‘new’ journalism is lighter, more opionated and personified, less edited, aimed at being interesting and gathering attention.¹²

5. From the economic point of view, who are the winners and who are the losers? The winners include 1) the internet operators, both the connection suppliers (telecoms and cable companies) and the content service operators; 2) the equipment industry (smart phones, tablets, mobile computers, ‘connected’ TVs). The losers or the crisis industries are 1) the newspaper industry, 2) traditional terrestrial television, 3) traditional audiovisual industry (cd, DVD). From the viewpoint of traditional representative democracy, with the demise of the traditional news and information services and in the lack of corrective news and information provision, the ultimate loser is the informed citizenry.