Are Perverse Incentives Destroying News?

I’m sure you’ve been following the New Zealand economy extremely closely lately. Who hasn’t? Dairy is booming and billions of dollars are being spent on the rebuild of earthquake-shattered Christchurch. The financial outlook is so strong that, in March, it became the first developed nation to raise interest rates from record lows -- and it raised them again this week. It’s hard to deny that things are looking good for the tiny nation.

Hard, but not impossible. Last week, Forbes contributor and bubble-ologist Jesse Colombo wrote about New Zealand’s impending economic disaster. Interest rates are still too low, he says, and property prices too high. The finance sector represents too big a share of the economy and the country has a debt problem. Crisis looms.

He said, she said, so he had to say again. The New Zealand government promptly denounced Colombo’s analysis, and Fairfax columnist Pattrick Smellie tore apart Colombo’s modus operandi: “First, he predicts a bubble in [your country here], which will burst - at some stage. Then the local news media pick it up. Then it gets to social media and, if he's lucky, to national television news… [W]ithin a week, a follow-up post crows about the official denial along with web traffic statistics, the number of times the article was shared, and in many cases the TV appearance.”

Smellie goes on to question Colombo’s motive: “The reason [Colombo] can count those web stats so accurately is that the Forbes.com business model rewards contributors on a per unique view basis, and pays 10 times more for repeat visits. While some editorial vetting occurs to try and ensure quality, Forbes.com is an experiment in ‘incentive-based entrepreneurial journalism.’”

And therein lies the rub. Believe whatever you want about New Zealand’s economy, the fact is that Colombo is incentivized not to provide accurate reporting but to garner page visits.

Yes, this is extremely obvious. And, no, Forbes is not in any way alone here. Fox News (come on, you knew they were going to enter into this sooner or later) officially came under the "entertainment" category when News Corp split in two last year. They are not in the business of educating people. They are in the business of getting people to tune in.

Of course, one hopes is that there is some correlation between the quality of news reporting and the size of the audience. But it increasingly seems a vain hope, and locking individual compensation to popularity will make it vainer still. If the powers that be are pressuring journalists to be more shocking, more vulgar, or more titillating, a principled journalist can always resist, or take measures to ensure the veracity of the reporting. But if online journalists only get paid when people look at their posts, those principles are not likely to stand for long.

This is not to say informative and nuanced content ought to be boring; far from it. But the compensation scheme for news should be skewed towards that which is both compelling and meaningful. If you only reward one, the other will wither on the vine.

The bigger problem is that the news companies themselves have no motivation to provide meaningful content. They answer to shareholders and the answer is always money. Forbes, Fox, and others do not earn money by educating the populace. Any increase in public knowledge or understanding is merely a byproduct.

But clearly a more knowledgeable public serves the greater good, which is why organizations like NPR and TED play such a vital role. The increasing complexity of the world creates an increasing need for an informed citizenry, without which democracy is impossible. But it’s up to us to put the content we consume into perspective instead of swallowing it whole. If we don’t, we have no one to blame but ourselves.

Tags: journalism
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4 comments about "Are Perverse Incentives Destroying News?".
  1. Phillip Djwa from Agentic Communications Inc. , April 25, 2014 at 12:59 p.m.
    Fascinating article and a continued awareness of the complexity of news gathering. I did not know about how these journalists are being compensated. I'm not entirely convinced that titillating reporting now is new - even with newspapers, the "bleed it leads" has been the norm. But I think the view counts equalling journalist's pay creates the impression that a balanced approach will be sacrificed to drive visits. And that level of eroded trust is dangerous.
  2. Jonathan Hutter from Garrand , April 25, 2014 at 1:31 p.m.
    Hope springs eternal. How many people do NPR and TED actually reach?
  3. Paula Lynn from Who Else Unlimited , April 25, 2014 at 6:32 p.m.
    Follow the money. Follow the money to those who are profiteering. Not just follow the money to the top, but who are their bosses, the very few who want to control the hand of media/media messages for power, an all controlling power beyond media and beyond what can be bought. It sure is happening in the US. There was a series on ___(can't remember but probably cable) about one big conspiracy. It lasted one season maybe for coming to close to the truth in some ways. Remember Pogo's, "We have met the enemy. It is us."
  4. Kaila Colbin from Missing Link , April 27, 2014 at 2:12 a.m.
    Hi Jonathan, TED's got over 2 billion video views, but I take your point -- the reason entertainment makes more money than news is because we respond to it more. But that doesn't make the right to quality news any less essential. Should we just give up on unbiased, factual reporting because fewer people tune in?