The Washington Post has just fired one third of its journalists. We can, if we wish, look at this as a vile hollowing out of that essential counterparty to democracy, a free press. We can even — as varied American politicians have been — demand that as Jeff Bezos, the owner, is vastly rich then he should just keep swallowing the losses and stop complaining.
It’s also possible to look at the underlying economics here and suggest that Bezos hasn’t fired enough journalists.
I know, this isn’t something anyone else is saying, but then none of us who make our living in journalism like to see fewer of us being employed.
The uncomfortable truth is that the underlying economics does, over time, determine everything. American newspapers are a good example of this.
Back in history, newspapers were monopolies. The sheer size of the country, the slowness of the transport system, meant that each really big city had its own paper. Which dominated its hinterland, as far as the lorries could get the one day’s printing before it was time to turn around and get back for the next day’s. The railway system is for freight, not passengers, so national distribution was impossible.
As local monopolies, the newspapers controlled the revenue from the classified ads, display ads and, of course, the revenues from people buying the paper itself.
Each amounted to about one third of revenues and it was the classifieds that really made the profit. The sale of the newspaper itself really just covered the cost of printing and distributing it.
Then the internet arrives. Facebook and Google make lesser inroads to display advertising. And of course no one is paying for the newspaper any more — it’s all online. The geographic monopolies have been broken because, well, geography doesn’t matter on the internet.
The whole business has changed. Sure, there will still be big national newspapers. But they’re not monopolies any more. So papers cannot be run on the basis of being monopolies, with huge numbers of unproductive staff just because they can be there. Competition is acting like it always does on former monopolies. Gutting them of the fat and inefficiency that monopoly allows.
What is going to happen to the US newspaper industry is what has happened everywhere else that national competition has happened. Lean organizations — like this one you’re reading now, or like the UK newspaper industry from a century back when the railways were the national distribution system — and only 10 or 12 of them too.
Instead of a monopoly by area, there will be those many fewer competing with each other. The competition demands both the many fewer and the greater efficiency of those that remain.
Now, we can say that this is not desirable. We can insist that we’d prefer it some other way. But because the underlying economics was as it was, is now as it is, that’s the way it’s going to be.
I’ve written for the Washington Post, someone I used to work with has just been hired as a columnist there, someone I greatly admire and have copied has been a columnist there for some years. I even used to read the paper religiously when I lived in Washington DC.
But none of those change the basic and important point here. The economics underlying American newspapers have changed. Therefore American newspapers have to change.
This also isn’t a point just about newspapers. When the underlying economics changes, then every organisation that was formerly sitting atop them then those organizations have to change too. American newspapers are merely an example of this.
Tim Worstall is a senior fellow at the Adam Smith Institute in London.
