Date: June 21, 2012
Author: Grady College
Contact: Ann Hollifield, Lee Becker, annholli@uga.edu, lbbecker@uga.edu

A team of Grady College researchers studying the effects of competition on news quality is seeing its predictions becoming reality in the U.S. newspaper industry.

Over the past decade, Grady professors Drs. Ann Hollifield, Lee Becker and Tudor Vlad, in collaboration with Swedish research partners Dr. Adam Jacobsson and Eva-Maria Jacobsson, have published a series of studies on the effects of the hypercompetition in news media markets. The research has examined the impact of increased competition and declining profits among news media companies on the quality of news coverage and on the independence of news organizations.

Those studies predicted that in communities where news media became unprofitable, monied interests might buy failing news organizations to use to promote personal business or political interests.

In the past year, observers charge that exactly that has started to happen in the United States.

Since November 2011, the sales of at least two U.S. newspapers have raised alarms among journalists and observers about the future of independent journalism.  According to reports in The New York Times, journalists associated with the former San Diego Union-Tribune and the Pulitzer Prize-winning The Philadelphia Inquirer have protested the sales of those struggling newspapers to local businessmen with apparent political and financial agendas. 

In November 2011, the U-T San Diego was sold to Douglas F. Manchester, a local developer, who the Times described as politically conservative and determined to use his newspaper as “a brochure for his various interests.”

In April 2012, as part of its bankruptcy settlement, The Philadelphia Inquirer was sold to a consortium of powerful political and business leaders that initially included former Philadelphia Mayor and Pennsylvania Governor Edward Rendell and still includes other Democratic and Republican power-brokers and powerful local businessmen.

Dr. Adam Jacobsson and Eva-Maria Jacobsson

So strong was the backlash by the Inquirer‘s editorial staff about the potential conflicts of interest represented by the new owners that Rendell eventually stepped back from the ownership group.  However, in February 2012, two months before the Inquirer‘s sale had closed, The New York Times reported charges by the Inquirer‘s journalists that the new owners were interfering in the paper’s editorial coverage of the pending sale.

Hollifield, Becker and Vlad’s research on media hypercompetition began more than a decade ago as part of the team’s work on media development projects.

“As we talked with journalists and media executives in nations going through political and economic transitions, we heard the same stories over and over,” said Hollifield, Dowden Professor of Media Research and Head of the Department of Telecommunications.  “The story was too many media competing for too few readers and advertisers.  We finally started systematically gathering data on market conditions and journalistic outcomes in countries going through political and economic transitions to see if we could identify any consistent relationships.”

Eventually, that pilot study included interviews with executives in newspaper and radio and television broadcast companies in Eastern Europe, Africa, Asia, South America and the Middle East.

The study showed that in many cases the sales and the advertising revenues were insufficient to cover the production costs and the journalists’ salaries. In many situations, the ownership of the media outlet was far from transparent, and the organizations were surviving on subsidies from sources that were not made public.

“What we had heard anecdotally about the adverse effects of high levels of competition were confirmed by these more systematic interviews,” Becker said.

Becker is director of the Grady College’s James M. Cox Jr. Center for International Mass Communication Training and Research. Vlad is associate director of the Center, which does international training projects around the world.

The findings from the first stage of research were disseminated by Hollifield, Vlad and Becker through several international conferences and an edited proceedings.

Simultaneously, Dr. Adam Jacobsson, assistant professor of Economics at the University of Stockholm, Sweden, and Eva-Maria Jacobsson, researcher at the Royal Institute of Technology in Stockholm, were modeling the relationship between competition and media organizational independence.  Their model suggested that high levels of competition in media markets would financially weaken media companies, making them vulnerable to outside influence.

After meeting at an international research conference, the two research teams agreed to collaborate on further work.

In 2006, Hollifield published a model that predicted the effects of hypercompetition on the quality of journalism in the peer-reviewed International Journal on Media Management.  The model used economic and management theory, including the Jacobssons’ model, to explain the effects observed in the pilot study of media in transitional nations. 

The model predicted that low-to-moderate competition in news markets would improve the quality of journalism provided to the community.

High levels of competition, however, would force news organizations to cut editorial budgets, layoff staff, particularly their most experienced journalists, and make news organizations vulnerable to paid outside influences. Excessive competition also was projected to increase the likelihood that news organizations would differentiate their news products by political, religious or ethnic ideology as a way of capturing audience loyalty. 

Finally, the model also predicted that even if news organizations became unprofitable, many would continue to publish because owners would be willing to accept financial losses in order to use the media to promote personal economic, political and social agendas.

“The model was developed to try to understand what we had been observing in our media development work in other countries,” Hollifield said.  “But one afternoon I was sitting in my office reading media industry newsletters, and it hit me that the model also explained what we were seeing happen in the U.S. media.”

Hypercompetition in the U.S. has emerged in the past decade because of the development and widespread adoption of broadband Internet services to the home. That has allowed online distributors of news to compete directly with traditional news media for both audiences and advertisers. The economic downturn in 2008 increased the level of competition for revenue because advertisers sharply cut their marketing budgets.

Shortly after the model was published, the Grady-Stockholm research team gathered data on competition and journalism quality across a number of nations and tested the model.  The study found weak, but significant, support.

“The study highlights the complexity of media market organization and how excessive competition may not promote social welfare. There is a strong need for further research in this field to better understand the mechanisms that influence media independence and quality,” said Adam Jacobsson.

The study’s findings were somewhat controversial when published.  Mass communication scholars in the U.S. and Europe historically have been concerned about media concentration, not competition. Traditional economic theory also has argued that more competition is always better for the consumer because it creates more choices and lower prices.  Economic theory also has maintained that hypercompetition would be only a short-term problem for industries because producers will shut down, if they are not making a profit. 

The Grady-Stockholm research team argued, however, that unlike most products, with media there hypercompetition in news media markets hurts the quality of the journalism produced and that it can be a long-term product because there are non-monetary reasons to produce news and other content.

“Just look at all the people who create and upload content to Youtube, who write blogs, twitter and use other social medias,” said Eva-Maria Jacobsson. 

Many countries in Eastern Europe have continued to have extraordinary levels of competition such that few, if any, media organizations are making profit in many markets.  “That’s been the case now for more than 20 years,” noted Vlad,  “because some media owners find it worth their while to use their newspapers or broadcast companies to further other agendas.” 

The speed with which economic conditions in U.S. media markets has deteriorated over the past decade took the team by surprise, however.

“We realized seven years ago that U.S. media were starting to show signs of the same problems we had been seeing in Eastern European media markets and elsewhere,” Hollifield said, “but we didn’t expect it to accelerate so quickly to the level of layoffs and cutbacks that have happened in U.S. news organizations since 2008.  Certainly, none of us anticipated seeing so soon the kinds of questions about newspaper ownership in the U.S. that the Times stories raise.”

The research team is seeking research funding to extend their work.  The data used to test the model in their 2009 publication, while the best available, were not as specific as would be ideal The next step will be to gather data internationally that will more precisely measure resource competition in media markets and the progression of effects on journalistic quality.

“Media firms have traditionally been considered selling contents and advertising, a so called dual product. Clearly, the analysis needs a fuller model in order to explain empirical observations, one that comprises influence peddling, thereby creating a triple product,” said Adam Jacobsson.

The New York Times’ coverage of the sales of The Philadelphia Inquirer and The U-T San Diego can be found at www.NYTimes.com.  Research on hypercompetition published by the Grady-Stockholm research team includes the following:

Becker, L.B., Hollifield, C. A., Jacobsson, A., Jacobsson, E.M., & Vlad, T. (2009).  Is More Always Better? Examining the Adverse Effects of Competition on Media Performance.  Journalism Studies 10(3), 368-385.

Hollifield, C. A. (2006). News Media Performance in Hyper-Competitive Markets: An Extended Model of Effects. International Journal on Media Management, 8, 60-69.

Hollifield, C.A., Vlad, T. and Becker, L.B. (2004). Market, Organizational, and Strategic Factors Affecting Media Entrepreneurs in Emerging Economies. In Robert Picard, (ed.),  Proceedings from the International Conference on Strategic Responses to Media Market Changes; (pp. 133-153). (Jönköping, Sweden: Media Management and Transformation Centre, Jönköping International Business School, Jönköping University, Sweden

Jacobbson, A., & Jacobbson, E. M. (2004). Freedom of the press, economic development, and market concentration. Paper presented to the Global Media Economics Conference, Seattle, WA, July.