Here’s a prediction: Economic management will be the key new tool in the reinvigoration of newspaper media companies.
Newspapers for decades have used market research, focus groups, sales analysis, and accounting-styled business practices to micro-manage our companies; we drill deep into our audiences to find out what they like about what we do and to shape our businesses.
The result, however, has been an ever-tightening spiral of managing and incrementally improving what we’ve always done, while the world around us lured readers and advertisers elsewhere.
To bust out of our existing boxes to see the bigger picture, we now need tools that can model what is likely to happen next. Economics argues that the future is not unknowable and that the laws of supply and demand, combined with a solid dose of psychology, can help us predict the impact on our business.
Economics can match the demand for news consumption — across all media — to the price point that we can afford to supply it at, even if the price the market wants to pay is $0. Economics — unlike accounting — is where numbers and human behaviour meet.
Journalists, I believe, have a secret affinity for economists. This is odd because most journalists I know have an inherent fear of numbers and will run shrieking from the room if asked to calculate a basic percentage. But maybe we feel more comfortable with economists rather than accountants because of the global financial crisis, which gave us so many cracking opportunities to tell the stories of economics and markets in play.
Editorially, economists (such as behavourial economist Dan Ariely) are usually terribly obliging about giving us good quotes about markets in chaos and what is likely for the future, while accountants get hung up on verbose fine detail. Economists are constantly looking at the big picture, aligning it to the now and adjusting their estimates accordingly.
It was economists who enunciated “prospect theory” — a concept dear to the heart of every news editor, even if we have never known its official name. In 2002, Daniel Kahneman and Amos Tversky won a Nobel Prize for their discovery that people place a greater emphasis on “loss” than “gains.” Put simply, people respond more strongly to bad news than good news. Suddenly, centuries of news sales spiking during periods of “bad news” makes sense, while our forays into feel-good news have a new context.
Economists, like journalists, believe in implicit costs — even if, again, journalists have never heard them called that before. Implicit costs are the general costs and overheads that can’t be attributed to a single project, but are the cost of running the business. Without implicit costs, your inherent value is lost.
In news delivery, accountants will try and tell you journalism is an explicit cost, and output can and should be measured. They are only partly right. Sure, cutting back will ensure you hit this quarter’s numbers, but we all know where that leads — news desks full of junior reporters churning out an appropriate number of words and stories per day, resulting in a cheap but unappealing generic product. The real magic of quality journalism that differentiates us as a product (in print or online) is then lost, and our companies continue to sail south.
Understanding implicit costs doesn’t mean creating a hollow log to hide an entire superannuated news team. But it does mean the total value of the elements that makes a good media company is greater than the sum of its parts. And economics should be able to help us understand at what price point we can afford to deliver this and provide us with insights that can help drive our marketing and sales teams, as well as our journalism.
I’m not an economist. Like most journalists, I wouldn’t trust any calculation I did — even with a calculator. But I’m starting to get the theory. And there are much greater brains than mine out there that know this stuff inside out and can apply it — and deliver it in a language we understand.
To ensure journalism continues to thrive into the future, it’s time to get some economists into our businesses to help us see the connection between behaviour and our numbers.
To make sense of markets that seem overwhelmingly limitless, hug an economist today.