The High Cost of Media Efficiency

Mr. Gimbel (or was it Mr. Macy) famously said that he knew that half of his advertising was wasted but he didn’t know which half. That inefficiency funded a wide array of magazines, television and radio stations, and newspapers. It made it possible to field teams of investigative reporters to keep an eye on government and corporate malfeasance. It funded the publishing of essays and fiction and poetry; new voices, quirky voices, defiant voices. It allowed us to see and better understand the world around us.

The richness of those days is soon behind us. Yes, the Web has brought us even more content and greater choices. But the hyper-efficiency of measuring activity on the Internet means that the successors to Mr. Gimbel and Mr. Macy know exactly what they are buying with each dollar of advertising. They know which half of their advertising is wasted and they do something about it.

Publishers are trading analog dollars for digital pennies as the economics of off-line media collapse. The actions of the advertisers are perfectly rational and the consequences for publishers easily predictable. This is an example of classic market behavior where the actions of buyers and sellers drive out inefficiency.

What we are missing, however, is a way to calculate the cost of the lost benefit of the original inefficiency to the society as a whole. We benefited – as consumers, as citizens, and simply as human beings – from the abundance of the inefficient mass media. It as if a farmer planted a wide range of crops in all of his fields because he didn’t know which would provide get him the highest price that season and, as a result, the people around him could feast on everything from asparagus to yams. Then, through better forecasting tools, the farmer learned how to plant just the crops that would be in highest demand and in quantities that would maximize his return. Does the farmer benefit? Certainly. Are the people around him poorer for it? Absolutely.

As newspapers, then magazines, radio, movies, and television came on the scene, they expanded and enriched the dialogue in the public square. Despite predictions that each would kill its predecessors, they complemented each other because they were relatively equally inefficient in terms of measurability by the advertisers that supported them. The Internet, however, is the game-changing killer app that can obliterate it predecessors simply by allowing capitalists to do what they do best: make rational microeconomic decisions.

The macroeconomic costs will be paid and it may be too late to do anything about it by the time that the check arrives on the table. Who would have uncovered the disgraceful conditions at Walter Read Army Hospital besides journalists given time and resources to pursue a story over time? Which on-line news organization has reporters in Darfur, Iraq, and other global hot spots? How many bloggers are covering the Supreme Court effectively? How many Web sites have fact-checking departments? The heavily lifting to get us all the information we need – information we can trust and on which we can base decisions -- is still being done by the AP, the New York Times, the BBC, NPR, CNN, and the rest of the much maligned “mainstream media.” The Internet has democratized publishing and shrunk the costs of distribution to near zero. That’s wonderful. It has not produced any viable model to allow the workhorses of content generation to thrive or new peers to emerge.

The technology has been abetted by regulators who encourage media consolidation. As corporate ownership of media has grown – more capitalists making rational microeconomic decisions – so too has the need to produce profits. Gone are the iconoclast publishers and broadcasters who valued voice over shareholder value. Dying are the journalists able to tell truth to power from a position of strength. Dwindling are the muckrakers willing to take on industry or government with only determination and a broadsheet.

There is a high cost to media efficiency that we’ll all have to pay. Unfortunately, no one is watching the tab.