In the Stocks! An Economic Case for Media Responsibility

May 24, 2013 • Ethics and Quality, Media Economics • by

Media managers and journalists are not good at dealing with criticism. They demand accountability and transparency from others, but do not see why they should hold themselves up to similar scrutiny. This study argues that the media industry is wrong to be wary of measures that make it more accountable and that it will benefit financially by becoming more accountable and responsive in its work.

This report starts with an assumption that the media is powerful, and that power in democracy needs to be controlled and counterbalanced. It also assumes that press freedom is a basic prerequisite for a democracy and plays a vital role in creating an informed citizenry. 


In Britain, the media has been brought into disrepute by the actions of some.
The Leveson Report into Britain’s News of the World scandal, where reporters at the now defunct Sunday newspaper hacked the private phone messages of a murder victim and bribed the police, exposed some of the worst excesses of the tabloid media, while the Jimmy Saville case highlighted the way a popular television presenter was able to have inappropriate contact with young women and children while working for the BBC, a well-respected public service broadcaster.

At the core, there are three highly interrelated areas of media accountability to be mentioned. They are the “three Cs”: corrections policies, complaints management and coverage of journalism and media by the media.

Focusing on the U.S., the U.K., Germany, Switzerland and Italy, we will try to explain the extent to which “rational economic” behavior can be found in this specific field of self-inspection, how “predictably irrational” media owners, media managers and journalists make decisions, and how cultural norms and behavior patterns influence media accountability and the processing of “unethical” or unprofessional behavior.

As the Swiss partner within the framework of the large, EU-funded MediaACT-project comprised of 12 research partners, spent more than three years analyzing how the media handles accountability. It recently published a booklet outlining some best practice examples and is currently evaluating more empirical data.
The results of the study show that media owners, media managers and editors-in-chief pay little attention to the “three Cs.” It is worth probing into why this might be the case.

From a precursory business perspective, media executives should invest in processes that promote media accountability. Media accountability is not at all costly – in fact, it is rather cheap. Corrections columns take up some newsroom resources, but the costs can easily be absorbed into the existing editorial budget. Costs for press councils are usually shared by many media companies, and they are negligible in budgets. In most media outlets an ombudsman will hold a part-time position, which might even be an honorary, unsalaried role. Only media journalists are expensive. However, they need not necessarily be added to an existing newsroom. Costs for media journalism can be kept low if the beat is created by shifting resources within the newsroom. Top editors might dedicate existing space, reporters and editors to such a beat and offset the cost of it by reducing covering of another beat, such as politics or sport.

Media accountability also pays off, in that it promises returns: Ombudsmen and press councils can be considered an excellent insurance policy against more costly, time absorbing risks, reducing the costs for legal advice and legal battles. If they communicate effectively with the public, this should foster relationships with readers, increase journalism’s credibility, and educate journalists and the public about the media. With improved media literacy and quality consciousness, recipients should therefore increase their willingness to pay for high quality journalism.

The upper and the lower quality segment

To understand why media executives don’t engage in more media accountability we need to delve deeper. We may have to differentiate and add to the assumption that each media system can be divided into a lower and an upper quality segment, concerning the journalism being offered. Concerning media accountability, there exists a built-in conflict of interest between the lower and the upper market segments: The lower segment will likely serve audiences with lower levels of education and media literacy. It will be more advertiser-driven and less dependent on generating revenues from recipients. By contrast, the business success in the upper segment depends more on the public’s willingness to pay and on increasing the number of subscribers interested in credible, high quality journalism.

So, if media executives in the upper quality segment were rational, self-interested actors primarily concerned with the economic wellbeing of the media institutions and newsrooms they are responsible for, they would “invest” considerably more in media accountability than they have done so far to maintain their credibility and reputation for quality. So why are such investments rare? The following four answers may help solve the puzzle.

First, there is a second and potentially more intriguing conflict of interest between the institutional and the personal self-interests of media executives. For media companies, more accountability and transparency may be essential, but top managers are frightened of being criticized by press councils, ombudsmen, and media journalists. Media executives are certainly aware of what they are doing to others when they report on the misdemeanors of politicians, chief executives and celebrities – and they simply may not want their own lives exposed in a similar way.

Top managers and editors therefore mistrust press councils, ombudsmen, and media journalists – it is the typical case of a principal-agent relationship. As “principals,” media executives depend on the mediating skills and the expertise of ombudsmen, press councils or media journalists serving the industry as “agents” but they never know whether the agents might abuse their positions, power and knowledge for self-serving interests.

Media executives also find themselves in a prisoner’s dilemma. If they implement the three Cs and competitors don’t follow, they risk compromising themselves. The costs will be due immediately, while the full benefits of the more costly accountability policies (ombudsmen, media journalists) will only materialize if they are shared among other media operating in the upper market segment. In particular, media journalism has a credibility problem, if a journalist is dealing with his or her own employer or the immediate competitor. This is why it is important that all media in the upper quality segment report fairly and continuously on media and journalism.

Similarly, corrections policies fail due to the prisoners’ dilemma: No journalist wants to be publicly criticized, particularly not if reporters at other newspapers might successfully hide their errors and thus avoid such treatment. This is why editors in chief must work hard to persuade staffs that corrections columns are an important way to regain credibility. Usually, they shy away from such efforts.

Most frequently, the sheer power of large media conglomerates hinder media accountability. In many cases, the cash cows of these companies are in the lower segment, perhaps even subsidizing the flagships in the upper market segment. The overarching institutional interests of the conglomerate will outweigh the institutional interests of the media in the upper market segment. Under such conditions, it becomes difficult for the flagships to “independently” support policies of media accountability.

Predictably irrational decisions

All these are plausible arguments, but they only partially explain the underinvestment in media accountability. By rationalizing indecisiveness and underinvestment, media executives may also become victims of errors in reasoning. According to insights from behavioral economics, some of them are “predictably irrational,” as Dan Ariely has pointed out. Bestselling author Rolf Dobelli also describes these errors in a most entertaining way.**

In particular, selective perception and cognitive dissonance may be the cause if the work of press councils or ombudsmen is impeded or if media sections are abolished and if there are no longer specialized media journalists in the newsrooms (as occurred at the Tages-Anzeiger in Switzerland, Die Zeit in Germany and Il Sole-24 ore in Italy). Media executives fear negative coverage, but such anxieties are based on neglect of probability: Very few media owners are as powerful as Rupert Murdoch or Silvio Berlusconi and are unlikely to come attack from media journalists.

Zero cost craze is another trap in which media executives may also fall prey – just like all of us. As behavioral economist Dan Ariely pointed out, all of us tend to behave irrationally if we can get hold of a “freebie.” This is why marketing experts as well as publishers seduce us again and again with “free” bargains or free newspapers. And this is also why media executives are lured into not investing in media accountability, as this seemingly implies “zero cost.” Yet there are hidden costs occurring in tandem with freebies which only become visible later – often in the form of expensive law suits and long-term losses of credibility which can be difficult to measure, but reduce the willingness of the public to pay for journalism.

If top editors resist the institutionalization of ombudsmen and press councils, they will also likely become victims of the overconfidence effect. This means that editors are unaware of their own limits in handling errors and conflicts adequately and with a certain “distance,” and that they underestimate the time needed for mediating and problem solving in cases of conflict about media coverage, but also in coaching their own staff. Media executives may become very lonely at the top of the hierarchy and become victims of the so-called control illusion.

Cultural Differences

Last but not least, media executives in journalism and in the media industries can be caught in herd behavior. This may help explain significant cultural differences existing even among highly developed Western countries in handling media accountability. For example, the strongly institutionalized ombudsmen and the appearance of corrections columns in the U.S. may be explained in part by the New York Times serving as a trailblazing cheerleader for openness in journalism in the Anglo-Saxon world.

Similarly, the negligible interest in media accountability in Italy and in Eastern and Southeastern European countries needs to be seen in a wider context: Wherever the legal system is rotten, where mafia-like activities surpass the government and penetrate the economic system, where you find little appreciation for the public interest and even less conscientiousness for public space, it is unlikely that media executives will discover the benefits of media accountability.

As different forms of media converge, with a wide array of blogs and social media promoting increased interactivity and linking options, traditional mainstream media has lost their “monopoly” over news distribution and agenda setting, and is rapidly losing control over media accountability procedures. Susanne Fengler, director of the MediaACT project, recently coined the term “crowd-sourced media accountability.” As traditional mainstream media have stubbornly failed to provide transparency, she believes that this very transparency will be provided by the Internet, by blogs and social networks. Media executives working in high quality media are therefore well advised to take care of media accountability before they lose complete control over it.


Article translated from the original German “Rechenschaftspflicht: Medien am Pranger” by the author. 

A shorter, German version of this article has been published in “Neue Zürcher Zeitung”, May 7, 2013.

* All my gratitude to the Research Unit Media Convergence of the University of Mainz which provided me as a Gutenberg Fellow the research environment to contribute further to the “convergence” of media research and behavioral economics.

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