Monday, May 02, 2005

Can the Media be so Liberal? The Economics of Media Bias Can the Media be so Liberal? The Economics of Media Bias

Cato has an interesting article today titled "Can the Media be so Liberal? The Economics of Media Bias". It asks how can profit maximizing companies show (liberal) bias, while still ostensibly persuing profits?

The first thing to note is that the MainStream Media (MSM) is a collection of oligopolies. In the case of newspapers, most large cities today have one. I should note that Denver still has two (with a joint operating agreement, but still..) and it shows. This is typically a function of economics of scale. Broadcast TV has three statisions, with potentially a fourth, PBS. Some of you will remember Red Lion and the FCC Scarcity Doctrine - which, BTW, was the primary basis for the Fairness Doctrine. Magazines however do not thave these barriers to entry, and, not surprisingly, show a much more varied political outlook.

The problem, of course, with an oligopoly, or worse, a monopoly, is that it is comfortable. Competitive pressures are, to a very great extent, reduced.

One of the interesting points in the article somewhat answers the question on why, despite this, it may still be economic to hire and retain biased journalists. First, the author posits that the cost of hiring more liberal reporters, etc. may be lower, due to their apparent preference for changing the world this way. As some wag pointed out, their conservative counterparts are busy trying to run General Motors. Thus, liberal reporters may be willing to take less money.

Secondly, supervision of reporters and the like is hard. Their craft is very subjective. Indeed, to a very great extent, their employer has to trust their judgement in how and what gets reported. The alternative would be unreasonably high suprevision costs. Add to this that in many, if not most, cases, their supervisors are almost as liberal as the reporters are.

One of the points not covered in the article is the idea that the economic emphasis in the broadcast networks is not their news divisions, but rather, their entertainment divisions. They live and die on what their creative talents can bring to the air. News is, to a very great extent, a cost center. This means that the concentration of any owners, or potential owners, on a broadcast network is invariably on the entertainment potential. Losing a news viewer here or there is not that important in the scheme of things, if the CEO of the network makes the right decisions on the entertainment side. Thus, it is not unreasonable, from an economic point of view, if a network CEO pretty much lets his news organization run as it will, even if it loses some viewers because of its (liberal) bias.

I should note that the corrolary of this is that in a situation where ease of entry is relatively lower, but where there is a concentration on the news, as opposed to entertainment, economics has resulted in a more rational division of political product, i.e. cable news. Currently, we have CNN to the left, and Fox somewhat to the right, with (MS)NBC trying to find a viable market niche. I think that you can expand this to Talk Radio, where, with the demise of the "Fairness Doctrine", stations have been free to go wherever they think they can find a market - and, arguably, many have found a market catering to conservatives frustrated by the perceived liberal bias of the MSM.


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