News Is Valuable, But Value And Price Are Two Separate Things
from the a-little-economics-lesson dept
This past weekend, David Simon, the executive producer of HBO’s The Wire, and a former newspaper reporter, had an opinion piece in the Washington Post decrying the state of the newspaper business, saying:
“Isn’t the news itself still valuable to anyone? In any format, through any medium — isn’t an understanding of the events of the day still a salable commodity? Or were we kidding ourselves? Was a newspaper a viable entity only so long as it had classifieds, comics and the latest sports scores? It’s hard to say that, even harder to think it. By that premise, what all of us pretended to regard as a viable commodity — indeed, as the source of all that was purposeful and heroic — was, in fact, an intellectual vanity.”
It’s a rather common refrain, but to understand the challenges the newspaper business faces, it’s important to dispel some of the myths that are a part of that refrain. The first is a concept that is quite important, but often gets lost: price and value are two separate things. They are not the same. Value drives demand — but price is set by the intersection of demand and supply. If supply is abundant, it’s not going to matter how valuable your product is, price will get pushed towards zero. So, Simon is incorrect in thinking that news isn’t valuable or that it was an “intellectual vanity” to think so. News and reporting are valuable. The problem, though, is that it’s quite abundant these days, and so the price that people are willing to pay gets pushed towards zero.
That’s not necessarily a bad thing. While Simon goes on to complain about the state of news coverage today, the problem isn’t that people don’t value the news, but that the people who run newspapers haven’t figured out how to properly adjust to the marketplace they’re facing. We’re seeing plenty of evidence that there’s lots of money to be made in the news business, for those who understand how the market is changing and how to embrace it. There are plenty of ways to provide news the way people want to consume (and interact with) the news, rather than doing it the same way it was done for decades. It’s not that news isn’t valuable. It’s that newspapers haven’t figured out how to adapt to the changing market.