Will the financial media adapt to the changing media landscape?

I originally wrote this post at Credit Writedowns under a different title yesterday. I have changed the title to more accurately reflect what I am driving at in the post. Otherwise the post is exactly the same. The question is: which media companies will find their revenue streams threatened by the shift in the financial media landscape?

I made the case I espoused in "A few thoughts on the difference between blogs and news" for collaborative filtering as the major source of authority in the blogosphere. Just to recap what I’m talking about, I wrote:

My last thought is on how blogs gain authority/notoriety.  When I began, I can tell you that no one knew me from Adam. I had zero authority, no readers, few connections. All I had was ideas, analysis and judgment…

And the same is true with pretty much every other econoblogger out there.  What I see is a collaborative filtering in which the blogging community weeds out the more spurious information and the better analyses flourish. This is the future of the Internet in my view, because collaborative filtering harnesses the talents of the entire web in a more decentralized and less-hierarchical way.

The immediate reaction from within the panel came from James Ledbetter of The Big Money site at Slate Magazine.  He said mine was a "stylized" view of the econoblogger ecosystem, which I think means I was overstating my case. Not all spurious information gets filtered out. Fair enough.

I want to make a few observations about this exchange.  First, it occurred to me in retrospect that, as opinionated as I am, I have a tendency to speak in direct, declarative statements. I can leave people with the impression that I am absolutely certain of everything I say. It’s as if I don’t consider alternative views, or, if I do, only to ridicule them. A perfect example of this is the post "The Germans will not bailout Greece" from February. After I had written it, I was horrified at the strident tone and added an addendum at the end to tone it down:

I see it as unlikely that any deal – bailout via the EU, IMF bailout or backdoor help via quasi-fiscal measures from the ECB – can be reached unless Greece agrees to austerity measures. While this is the Eurozone – and that makes a difference – countries like Latvia will be looking to determine if Greece gets differential treatment.  And Spain, Portugal or Ireland would then be next in line. Any agreement must take these factors into account.

Long story short: my goal in writing is to analyse and judge based on that analysis.  It is incumbent upon me in so doing that I point out alternate views to promote a better understanding of how these events affect our economy, investments, business planning and lives.  However, it is also incumbent upon you to read with some modicum of scepticism and provide pushback when I present you half-baked editorial of minimal value.  And I believe you do that.

But, Martin Wolf is not so sure if this is how Americans at large look at the media and business and political institutions.  During his segment, he indicated that Brits tend to be a sceptical lot. It’s as if they assume the media are lying or at least have an agenda. The same is true for how they approach the banks and politicians.Of course they are crooks, he might say. As with my views on the econoblogger ecosystem, this is a rather stylized point. But, it bears noting because a lot of the angst associated with this particular downturn comes from the loss of faith Americans have had in their institutions. The loss of faith makes the credit crisis the sociological equivalent of Watergate in my view.

So what does that mean for the financial media going forward? Honestly I haven’t a clue any more than any of the other pundits do (including Arianna Huffington, who opined on this issue). But my assumption is that the political news media are a template for what is to come in our sphere. There will be many fewer paid beat reporters and much more opinion. There will be more outsourcing via freelancing. And there will be a morphing of the blogosphere into the mainstream media. We see that via Reuters’ and the Wall Street Journal’s bloggers and FT Alphaville.

The question is whether the freshwater/saltwater ideological split amongst academics creates the same polarized environment we see in the U.S. political media. I hope not. But, I bet if you study links between top blogs you would see some of that already. This is something I fight against in my links.

I do think media outlets have lost a tremendous amount of credibility for cheerleading during the last two bubbles (you can see my reading list for some of the rare articles that showed an appropriate amount of scepticism). Ordinary citizens do not see the media as a neutral source of information. Rather, given the bailouts and record bonuses we have seen of late, increasingly the financial media is seen by the wider public as an organ of propaganda for the political and business elites.  Within the business and financial community, this is not the case. So, as Chrystia Freeland of Reuters explained, financial news targeted to those communities at places like Bloomberg and Reuters will take on increasing importance.

Who are the losers then?  The New York Times for one as they have the largest dependence on the general public to fund their business reporting.  The Wall Street Journal (News Corp) and the Financial Times (Pearson) may then come next. I see fewer problems for the likes of Washington Post, Gannett, Hearst or any of the other big chains because they simply are not geared to the business sector.

In this kind of environment, will the quality of the news struggle?  It seems likely. But, given the lapses we have witnessed on the credit crisis, quality has already taken a hit.

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About Edward Harrison

I am a banking and finance specialist at the economic consultancy Global Macro Advisors. Previously, I worked at Deutsche Bank, Bain, the Corporate Executive Board and Yahoo. I have a BA in Economics from Dartmouth College and an MBA in Finance from Columbia University. As to ideology, I would call myself a libertarian realist - believer in the primacy of markets over a statist approach. However, I am no ideologue who believes that markets can solve all problems. Having lived in a lot of different places, I tend to take a global approach to economics and politics. I started my career as a diplomat in the foreign service and speak German, Dutch, Swedish, Spanish and French as well as English and can read a number of other European languages. I enjoy a good debate on these issues and I hope you enjoy my blogs. Please do sign up for the Email and RSS feeds on my blog pages. Cheers. Edward http://www.creditwritedowns.com


  1. jbmoore

    We are seeing two forces at work:

    1. The gutting of traditional news in favor of entertainment and fluff pieces. Why because it’s cheap and everything is profit driven. News corporations aren’t required to offer the news as a public service in return for getting spectrum (TV, radio, and satellite), and newspapers are losing ad revenue to Craigslist. Top-down journalism is being strangled or subverted by the people paying for it (the advertisers).

    2. Bottom-up journalism is thriving thanks to the Internet, Google/Blogger.com, and cheap high quality video cameras. One guy is trying to get the BBC to use citizen journalists who use a $4000 Sony HD camcorder and Apple’s video editing software.

    I haven’t seen any real change in the media coverage after two years. It’s a sad day when Jon Stewart educates us about the news through laughter better than Murrow’s and Cronkite’s successors’ through broadcast television news outlets. TV news has been going downhill since at least 1992. Print journalism has gotten worse since 2001. Financial media seems even more tainted than TV and print. We’ve been cheered on through the dot.bomb and now the Housing bomb, and more bloggers warned us than MSM of problems unfolding. The financial media bias could be partially explained by the use of neoclassical academic and banking economists as experts. Since 99 per cent of economists got blindsided by the GFC, it wouldn’t be hard to see the financial MSM miss the Housing Bubble either. Unfortunately, they are likely still using the same people as experts. Also, Dean Baker had a theory that if you spout conventional wisdom as a journalist and you get it wrong, the risk to your career is minimal whereas if you go out on a limb and predict something that’s against the current group think, your career could be ruined. Bloggers only have to worry about losing their livelihood if they write something their employers don’t like on their blogs. If they are self-employed, then their freedom of speech is not hindered by an employer.

  2. Wayne Martin

    For folks interested in this issue, the following provide good insight:

    Frontline Club, London, UK (90:00 mins)

    How Could 9,000 Business Reporters Blow It?:

    Both of these items are dated now, but given that the Mainstream Media (MSM) still doesn’t “get it”, both of these items are useful.

    There is virtually nothing in any print media at the regional/local level. Luckily, we have Blogs, so people can get access to information about the issues.

  3. K Ackermann

    Media news isn’t even news. I’d spray my face with a machine gun if I had to sit behind a desk and lie like a dirty rug to my audience day in, and day out. They must get to the point where they hate people for even watching them.

    Of course, those are just the pretty faces. The journalists… some know better, but have no outlet, and no power. Many don’t know better. Many graduate from Columbia where they are taught that lapping the hand that feeds you is what makes for good journalism now.

    When I saw Colin Powell hold up a vial of air in front of the U.N., and literally ask us to imagine it contained something deadly… and not a single news network pointed out that he was only holding a vial of air, then I knew for certain the fix was in.

    The media and the politicians have a very cozy arrangement right now, and that is to keep divisivness front and center, because they know that if most Americans get on the same page and realize that the “left” and “right” are boogeymen used to placate our own “beliefs” and pet our fragile egos, then we might wake up and take a good look around, and decide we don’t like what we see at all.

    You know who doesn’t seem to have a difficult time finding interesting background for his stories? Michael Moore. There is somebody who manages to overcome the fact that people run and hide when they see him coming, and he doesn’t appear to suck up to sponsors, yet he delivers a wallop.

    Of course, he’s one of the “fringe” lefties, and not to be believed because he doesn’t jive with certain worldviews.

    Some people can’t handle the truth.

  4. Hugh

    “Not all spurious information gets filtered out.”

    This is a standard canard the MSM levels against the blogosphere and is based on a deliberate misunderstanding of it. The blogosphere reflects the needs and interests of its audiences, and it has multiple audiences. For those that are looking for sophisticated, cutting edge analysis and often excellent original reporting, then yes, you can find them, or if they aren’t there yet, you can help create them. How those sites come into being and grow is precisely the weeding out described. There is also a lot of pruning and cultivating that go with them as well. The best sites evolve. They not only become better but they keep up with events.

    There are also many sites on the internet that flourish, not because of the quality of their product, but its tone. Almost all of the right wing side of the blogosphere (that worshipped Bush) and a substantial chunk of the left side of it (that adores Obama) fall into this category.

    Even sites that have a definite viewpoint to them, and most do, can have the topnotch analysis and news finding that I mentioned above. What is different is that in the blogosphere bloggers are open about what their leanings are. In the MSM, the slants are there as well. They are still often denied. The NYT is dreadfully neocon in its view of the world. Its financial reporting remains fairly credulous toward Wall Street. And yes, I know there are the occasional exceptions to this rule. The Washington Post is little more than a Village gossip sheet. Cable financial reporting is a circus. So is the news side but it is the one place where open partisan bias has become its major selling point. There you can find a whole assortment of right wing nutcases as well as Establishment liberals like Keith Olbermann and Rachel Maddow. Progressives not so much. Public broadcasting like NPR and the NewsHour have become staid purveyors of the Conventional Wisdom and the status quo. The idea that the MSM is more professional and objective than the blogosphere is in most cases simply untrue.

    There is a real double standard at work here. All blogs are lumped together. The weaknesses of any become the defects of all. It is like taking the National Enquirer or the Star and using them to judge the MSM. It is silly but this is exactly what a lot the MSM criticism of the blogosphere amounts to. Well that and that when we are describing shit we are likely to use the word shit.

    One other point I wished to touch on. The MSM always wraps itself up in this myth of the investigative reporter breaking Watergate stories right and left. They then say that this is something that the blogospshere can’t do. It lacks the resources and the training. First, this kind of journalism seldom takes place anymore in the MSM. Even when it does it can be held up by politically minded editors as happened with the Risen/Lichtblau piece on domestic wiretapping under Bush. It can be completely fraudulent as with Judy Miller’s Iraq WMD pieces. Or it can be simply left unreported for long periods, Dana Priest’s article on shabby conditions for wounded soldiers at Walter Reed is a prime example. It was a great story but it could have and should have been reported on at least a year or two earlier. In fact, it was but the MSM ignored it until Priest rebroke the story.

    There is also the relationship of the government to bloggers. MSM types love to point to the fact that only the MSM could have news bureaus in places like Baghdad. Actually very few of them did. (Undercutting this argument even further was the recent decision of the WaPo to close most of its news bureaus even in this country.) But even if bloggers had wanted to go, would the US military have allowed them in country, especially if they were critical of the military and US policy. Curiously, MSM that were in Iraq had very little contact with ordinary Iraqis. It was too dangerous. On the other hand, Iraqi bloggers and the bloggers outside the country that worked with them were a conduit for a very different perspective on the invasion and occupation. The MSM ignored them. The likes of John Burns and Michael Gordon preferred their access to their Pentagon sources and the much different view of the war they represented.

    I have also mentioned in the past how the MSM is becoming increasingly reliant on the wire services for their news. This can be dangerous. Take Ron Fournier, the Washington bureau chief, during the last Presidential election. He was strongly pro-John McCain. Think about how that has the potential to skew the news. Yes, Virginia, the wire services do have their own agendas.

    Finally, it should be noted that the MSM because they are the MSM often get reports ahead of their public release. This gives them an advantage in the newsbreaking department, but it is only one of a few hours. And when you compare their analyses to those in the blogosphere that show up a few hours later, you really begin to see the discrepancy in quality, in favor of the blogosphere. Yes, the MSM reporters are writing on deadline but the bloggers too are trying to get out an analysis as fast as possible and so they are writing under similar time constraints. Then too we see government document dumps. Reports running into the hundreds of pages, raw documents running into the thousands. The MSM don’t have the staff for this anymore. For the really big dumps, they never did. But as TPM showed in the US Attorneys scandal, these can be put online and going through them can be disseminated across hundreds of bloggers.

    I could go on with leaks and access journalism but I will stop here and just say that access journalims is more of a weakness of the MSM than a strength. As for leaks, insiders increasingly use the MSM for them; whistleblowers, as the recent wikileaks Iraq video shows, go to the net.

  5. RHS

    Working at a rating agency, I am getting less and less from NYT and WSJ and more from blogs. Although I do have to sort through alot of bad analysis and agendas/potential book talking to get to something useful. FT is the exception.

    The reason for this has to do with availablity of information from government agencies on the net. In the olden days, the papers were useful in collecting that information up, but now I just go the the web site of the agency. Papers also had a lock on access to former policy makers and insiders, now they all have blogs or talk to FT.

    What matters most to me is understanding why certain actions are being taken, why certain people think certain things, why the markets are bahaving in a certain way and potential market scenarios. All this information requires industry knowledge, indepth analysis and some speculation that MSM sources can not provide and genrally do not have experienced people that are not hacks to do it.

    That said the econoblogshpere has its own problems in that the more popular sites are the least useful and are generally catering to emotions of a particular audiance and not dedicated to truth seeking IMO. It really needs more poeple like Yves that has extensive experience in the industry and who want to know the truth. Sadly, like the MSM, I do not think the truth is where the money is for blogs. So I expect a large portion of the econoblogsphere will be ecotainment with a few sites that provide information useful to professionals. NC seems to bridge the this divide rather well.

  6. Sid Finster

    I am not so sure that Americans are so much more trusting of media sources as much as the atmosphere in the United States from 2003-2008 was one of a free party and easy money.

    You could see your loser brother-in-law go from being your loser brother-in-law to being your loser brother-in-law who flips houses for big cash and rolls around in a leased Hummer. Overnight.

    It is hard kicking against the pricks. Even if it all looks too good to be true, when you kick the Emperor’s New Hummer the pain in your foot does sure seem to be real.

    What I personally always found hard, pre-crisis, was that the only people who sensed that something was wrong were the extreme nut-fringe. The far-out space cadets, the people babbling semi-coherently about the Bilderbergs team up with the Masons to manipulate silver prices or whatever were the only people that seemed to sense that the Emperor was naked.

    Meanwhile, the calm, educated voices of reason, the bankers, the well-informed employees of financial institutions who are supposed to be the experts, paid vast sums to be experts on finance and money – they insist that His Highness is in fact wearing a Zegna suit, of a conservative pinstripe.

    And here I am in the bleachers counting what sure look to me like the pimples on the Imperial hinder next to some bug-eyed kook who spittles to anyone who will listen about how Jewish banking families are trying to destroy America.

  7. fresno dan

    First, let me say how much I enjoy “Credit Writedowns” – I have learned a great deal from your site and I enjoy it greatly.

    With regard to your insights on the media – there information may not be “spurious” but it is often so lacking in context as to render it almost deceptive. Last night the increases in retail sales were reported as if we were in an economic boom! No context that the large percentage increases were due to the even more devastating decreases of a year ago.

    Finally, the word “spurious” itself is problematic – were the people yelling “housing bubble” in 2005 spurious? The MSM is in trouble because of too much conventional wisdom, and too little effort expended into getting facts.

  8. NS

    Exactly Fresno Dan: MSM has become superficial in reporting. Editorial staff frequently leave out important stories while buffing up others to shine not revealing they really are rotten fruit. I much prefer the unvarnished facts thank you.

    Blogs which are long on facts that are validated by way of the authors education and experience provide more than just a 5 minute segment of pundits yelling at each other. Material presented by serious blog to back up their analysis garners much more attention as opinion news abandoned factual reporting long ago-either leaving out important parts or simply slanting a story through what they think are opaque ways.

    I appreciate blogs like this that are directed including the style of direct statements over flowery and unnecessary language dancing around a point. I also find the wealth of information in comment sections from those generous enough to share, to be illuminating, often providing a perspective, facts or ‘reporting’ one would not otherwise find.

    The media buys its own BS about the abilities of their viewers/readers to digest information. A recent article in the business section of the NYT on the FCIC hearings characterized the American public as ‘befuddled’ regarding the causes of the economic meltdown. If the media wants its credibility/readers/viewers back, a paradigm shift in their models, their attitudes and very serious introspection is required.

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