Moral Hazard for Newspapers

There has been talk of bailing out newspapers for months.

But the newspapers have largely driven themselves into the ground with their never-ending drive for higher profits, which led to a reduction in news bureaus, investigation and real reporting, and an increase in reliance on government and corporate press releases.

The newspapers made a speculative gamble that reducing real reporting and replacing it with puff pieces would increase its profits, just as the giant banks made speculative gambles on subprime mortgages, derivatives, and other junk, and largely abandoned the boring, traditional business of depository banking.

Bailing out these newspapers would be a form of moral hazard equivalent to bailing out the giant banks. Instead, we should let the bad gamblers lose, and make room for companies that will actually serve a public need.

The banking industry has become more and more consolidated, which has decreased financial stability.

Likewise, Dan Rather points out that "roughly 80 percent" of the media is controlled by no more than six, and possibly as few as four, corporations. As I wrote in July:

This fact has been documented for years, as shown by the following must-see charts prepared by:

• Media Channel

• The Nation

• Free Press

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This image gives a sense of the decline in diversity in media ownership over the last couple of decades:

(Image by Unknown Owner)   Details   DMCA

If traditional newspaper companies are bailed out, they will be encouraged to continue their business-as-usual, and new, fresh media voices will face a handicap to competition (just as the small banks are now unable to compete fairly against the too big to fails).

We need more real reporting in this country, not less. Bailing out the traditional media will create more consolidation, just as it has in the banking industry.

The last thing we need is moral hazard in media.

What Do Readers Want?

As I wrote in September:

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