Manuel Puppis: Libertarians’ Quest to Put the Media at Risk

The following transcript is from Manuel Puppis’ colloquium on Libertarians’ Quest to Put the Media at Risk: The Swiss Referendum on the Abolishment of Public Service Broadcasting and the Future of Media Policy hosted by the Center for Media at Risk. He spoke on April 4, 2018 at the Annenberg School for Communication, University of Pennsylvania.

Exactly one month ago, on March 4, 2018, Switzerland held a popular vote on the so-called “No Billag” initiative, a proposal to abolish the license fee funding of public service broadcasting and to prohibit any public funding of media.

Billag is the organization currently in charge of collecting the license fee. The initiative was started by young libertarians who believe that an unregulated market will provide sufficient media content. Later on, they were supported by the association of small- and medium-sized businesses and the right-wing Swiss people’s party.

It was argued that the public broadcaster SRG got too big and that the license fee is a forced levy unsuitable for a freedom-loving society. Opponents made clear that an acceptance of this initiative would lead to the closure of the public service broadcaster and that media diversity in this small multilingual country would be heavily diminished. Especially the smaller language regions were worried that following an acceptance of the initiative they would lose their main TV, radio and online media outlets. Cultural, educational and sports associations together with most parties and civil society organizations thus fought the initiative. Early polls last fall showed a surprising majority for this extreme proposal. Luckily, the final result was a very clear verdict: 71.6% of voters and every single state rejected the initiative.

So public service broadcasting in Switzerland is safe for now. But why should you care about what is going on in a small European country?

The “No Billag” initiative is the perfect embodiment of libertarian media policy. It denies the necessity of regulation in the public interest and fundamentally questions the role of media in democratic societies. Starting from the Swiss example, this talk attempts to touch upon strategies for future media policy that counter libertarians’ quest for free market solutions that put free and diverse media at risk.

In the following, I will first shortly talk about libertarian views on media policy. I will then show why a free market solution that is proposed by libertarians does not lead to a free marketplace of ideas. I will thirdly focus on ideas for media policy reform, before ending with the question of what we as scholars can do to prevent a dismantling of media policy in the public interest and to advance media policy reform.

Let me start by discussing libertarian media policy. According to Boaz, libertarianism is a political philosophy that considers individual liberty to be the primary political value. Consequently, the authority of government is strictly limited. Any form of market intervention is perceived as unjustified and there is a belief that the operation of a free market will lead to prosperity for all individuals. In this view, societal problems are not the result of free markets but rather of inefficient regulation.

Applied to the media, this would mean that there is no need for any regulation of media structure, media conduct and media performance. The well-known “Four Theories of the Press” by Siebert, Peterson & Schramm contains the earliest formulation of a libertarian model of media systems. Their libertarian model is characterized by an unregulated media market that nonetheless allows the media not only to sell copy and to entertain but also to inform objectively, help discover truth and to check on government. As Humphreys noted, this perspective has a key economic component with media activity considered to be open to anyone with the necessary means. In other words, press freedom was basically conceptualized as a property right which has significant implications for press freedom. After all, privately owned media are controlled by a restricted number of owners. In sum, a libertarian model of media systems advocates a laissez-faire free market operation of the media.

Using the term “corporate libertarianism,” Pickard calls this form of market fundamentalism the dominant paradigm in US media policy-making. Employing the argument of individual liberties, corporate libertarianism has increased the influence of media organizations in media policy-making. As a consequence, media regulation has shifted to primarily serve private interests of the regulated industry, fundamentally changing the media landscape and the possibilities of individual citizens to use and make use of the media.

Interestingly, in political debates it is often argued that a libertarian media policy is without alternative. Yet obviously there always is an alternative to political decisions. Media systems do not emerge naturally but are politically created, as McChesney reminds us. It is misleading to argue that we have a choice between government regulation and free markets. All media systems are the result of explicit media policies and regulations. The question only is whether these policies and regulations are in the public interest or not.

Libertarian demands in media policy remain important or even gain traction. There is a push for deregulation and more market solutions in the media sector following digitization, a call to trust in technology for solving problems of media markets, and there are attempts at dismantling public service broadcasting all over the place. To name only a few:

  • In Switzerland, despite the referendum, the attacks on the public broadcaster SRG continue. Commercial media and political parties demand cost savings and a restriction of the public broadcaster’s online activities.
  • In Denmark, a right-wing government just decided to cut the budget of public broadcasting by 20% and to abandon the license fee funding system, making Danmarks Radio more dependent on the state.
  • In Austria, right-wing government members attack the ORF regularly, also trying to abolish the license fee. The vice-chancellor attacked the anchorman of the most important TV news program on Facebook and basically called him a liar.

The question then is: Why is libertarian media policy not working, that is, why do free and unregulated media markets fail to deliver the kind of media content that we normatively assume to be important for democratic societies? There is an economic and a cultural argument.

First, the economic argument, which is market failure. In neoclassical economics it is common to distinguish four types of market failure: public goods, externalities, information asymmetries and subadditivity. And for each of them we can ask whether they apply to media and, if yes, whether this is still the case in the digital era.

Public goods are characterized by non-rivalry in consumption and by non-excludability from consumption. With respect to media, media content is clearly characterized by non-rivalry. And digitization does not change that. Yet digitization makes it easier to exclude non-paying users, enabling media companies to restrict access to their products and charge a price. However, exclusion from information itself remains difficult.

Externalities refer to costs or benefits that affect third parties. At best, media content offers a number of positive externalities, e.g. better-informed citizens, mutual understanding between different cultural groups, or social integration. And digitization is not changing anything about these positive externalities. Yet in the digital era it cannot be assumed that individuals actually use content that is believed to have such externalities.

Information asymmetries refer to the fact that it can be difficult for consumers to assess the quality of products before purchase. With respect to media, assessing their quality is difficult for consumers. And it is not getting any easier in the digital worlds. Just think about the algorithms behind search engines, news recommender systems and social networks.

Finally, subadditivity describes a situation in which a good is produced in the most cost-effective way by a monopoly and not by several competing companies – so-called economies of scale and scope. In the media, fixed costs are traditionally high. While digitization lowered the fixed costs of media production, producing original content remains expensive. Moreover, economies of scope are also important and allow for the reuse of content in different media or different geographical markets.

What, then, are the implications of these different types of market failure for media in the digital era?

First, given the insufficient willingness to pay of consumers for journalism, with respect to media that are public goods, because of positive externalities, and because it is difficult to assess quality: commercial media organizations need another source of revenue. Traditionally, this has been advertising. Yet advertising is shifting to new players on the internet like search engines, social networks or online classifieds that do not produce content themselves. If we look at the net advertising revenues of US newspapers, there is a growth in digital ad revenues from USD 1.5 bn in 2004 to USD 3.5 bn in 2014. However, during the same time span the print ad revenues plummeted from USD 46.7 bn to USD 16.4 bn. Given this massive drop in revenue, it does not come as a surprise that the newspaper industry is in crisis.

In a study for Swiss Technology Assessment, we analyzed how media companies respond to these challenges:

  • In light of decreasing revenues, media companies try to enhance productivity by realizing synergies between their different outlets which leads to significant cuts in editorial offices and decreasing diversity.
  • Media outlets that try to extend their reach and implement new forms of advertising in order to maximize advertising revenues admit that this strategy might lead to a bias towards content that attracts large audiences and to a blurring distinction between editorial content and advertising.
  • Companies that pursue diversification strategies consider journalism as a tool to increase the reach of their transaction-based businesses and do not aim at cross-subsidizing their news business.
  • While relying on new intermediaries like social networks to reach potential users, the analyzed media companies struggle to find a business model for this new environment.

Second, digitization makes it easier to exclude non-paying users by way of decryption and paywalls. Yet, even if that should prove to become a viable option for funding journalism, in light of the positive externalities that are expected from the use of certain content, excluding users from media content is economically not desirable. After all, for forming an opinion and making informed choices as many persons as possible should use high-quality media content. Moreover, media products are only commercially viable if they cater for audiences that are big and affluent enough.

Third, while fixed costs for audiovisual production and digital journalism are lower than in the past, they remain relatively high. Economies of scale and scope favor ownership concentration in local and national press and broadcasting markets. And the markets for distribution, social networks and search engines are also heavily concentrated.

Yet there is not only an economic but also a cultural argument why libertarian media policy is not working. Instead of market failure, it focuses on the social, cultural and political importance of media for society. Media have an influence on social and cultural life, they contribute to the dissemination of values, norms and knowledge. Media create a public sphere, cover the main events, topics and opinions, and they offer a forum for political debate. Yet commercial media need to produce content that they can refinance on advertising or audience markets. This means that even in absence of market failure, media content might not live up to the role we normatively ascribe to media.

Digitization does not change anything about such a cultural argument. But it raises additional questions. Media organizations are not only confronted with the challenge of how to fund journalism but also of how to get their content to users. Due to the growing importance of new internet platforms and changing media use, the production of high-quality content does not guarantee its discoverability and use anymore.

Given the severe limitations of market solutions in the media sector, an active media policy going beyond a libertarian approach is warranted. There is need for an “infrastructure program” for journalism on order to sustain a viable media system. Following Schejter and Tirosh, such a program should also focus on the participation and capabilities of citizens.

Regarding the political process, increasing participation essentially means democratizing media policy-making. So far, policy-making in the media sector is dominated by powerful elites, including the regulated media companies themselves that use both lobbying and coverage of media policy in their own outlets to exert influence. To reinforce participation, it would be possible to incorporate the public in media policy institutions, to invite citizens and civil society groups to participate in consultations and to require regulators to give reasons for not considering certain input.

Moving to media policy itself, aside from providing access to media, an infrastructure program for journalism should deal with media production, media distribution and media consumption.

With respect to media production, the performance of media organizations – whether online or offline – create conditions for citizens to participate in life and in democracy. Via their news and entertainment products media can be seen not just as content providers but as enablers that help people to form a political opinion and to live their lives in a way they see fit. To safeguard the production of journalism despite the media crisis, maintaining a strong public service media organization, at least in the European context, and introducing technology-neutral subsidies for private media seem more pressing then ever. Yet media policy can also strengthen content-related and structural participation in the media, as Carpentier called it – for instance by supporting community media, by incentivizing alternative forms of ownership and by incorporating citizens in decision-making processes within media organizations.

Regarding media distribution, especially among the younger population, new intermediaries are increasingly used to access information and entertainment. Yet these companies provide little transparency on why certain content is displayed or recommended based on algorithmic selection. In light of the growing power of platforms in media distribution and political communication, we need to think about a governance of algorithms. Given the global reach of these companies, international cooperation and combinations of public and private forms of regulation will be necessary.

Finally, focusing on media use, participation can be promoted by giving individuals the capabilities to use media in ways they see as productive for their lives. Or in Garnham’s words: by distributing the social resources that make access usable. This implies an understanding of media literacy that goes beyond the ability to use a device. A broad conceptualization of media literacy encompasses not only the ability to critically scrutinize sources but also knowing how to become involved in media production and in media policy-making. Thus, it is not limited to a critical use of media content. Rather, it enables citizens to make their own voice heard and to have their interests represented in political decision-making about future media landscapes.

With this, we come to the essential questions of how do we get there and what is our role as scholars?

For many years scholars complained that communication studies in general and communication policy research in particular had failed to inform media policy-making. For this to change, it is a prerequisite that scholars actually want to become involved. As a first step, it is necessary to reinvigorate the research field. As Just and I argue elsewhere, this requires not only doing research on subjects that matter but also advancing our theoretical foundations and methodological skills However, doing and publishing research is not enough to be noticed – let alone to be taken into consideration – by politicians.

Thus, the second step is to translate theories and research results into a form that will be easily understood by those involved in policy-making, for instance policy briefs or newspaper articles. In addition to producing knowledge about the media system and media policy, Freedman and Obar call for a third step, namely media policy activism. Scholars can contribute to consultations and cooperate with social movements or political parties.

Given the opposition by media and platforms against a new media policy and libertarians’ attempts to put the media at risk, I am convinced that media scholars cannot remain silent but need to become involved in policy-making. The current media crisis and the changing media landscape increase the demand for research. This should be seen as a chance to reform the media system. It is up to scholars to take these chances for adding alternative perspectives to the policy-making process and to compel all actors to at least acknowledge and reject ideas for a different media system.

I hope that this call to media policy action is a good starting point for discussion.