Information rules (Part 9: The economics of content)

Information rules (Part 9: The economics of content)

Phuah Eng Chye (27 February 2021)

At first glance, the newspaper industry appears an unlikely victim of information disruption. Earlier innovations of radio and television combined to substantially boost the reach of content and underpin the expansion of the newspaper industry. But this occurred when the environment was low-information. The experience was not repeated with internet and social media. While the shift from print to digital amplified the power of content, at the same time it dealt a near-fatal blow to the traditional newspaper business model. Despite experimenting with different models such as paywalls (subscriptions and pay-per article fees), hybrids (combining different revenue streams) and collaborations (with other news organisations), most newspapers were unable to stem the erosion in their franchise value. In line with the broader trend of information disruption, content intermediaries (such as platforms) consolidated their power at the expense of content producers and distributors.

Formulating appropriate policies requires an understanding of the economic forces at work in the content industry. I have attempted a conceptual outline of the economics of content and generalised the framework across a broad range of content – articles, video, music, social media (messages, bulletin boards, memes), spam, disclosures, research, search, ratings (rankings and likes), advertisements, marketing, education (knowledge) and machine (IOT[1]) content – although it is noted specific differences exist.

Economics of content

The economics of content is a subset of the economics of information. The information effects[2] are prominent. Digitalisation makes print obsolete by converting the physical into intangible and underpin abundance. Physical (e.g. print) content represents a much-shrunken slice of a vastly enlarged content pie. In the past, media content used to be unique because it was timely and topical. Speed, transparency and size have commoditised the value of media.

Digitalisation has expanded the functionalities[3] of content and affected consumption patterns. Steve Olenski points out “the fact that aggregator sites are among the most popular online news destinations is a difficult reality for news organizations that makes their product more of a commodity and less of a part of a package of stories that is put together by a team of editors with a special branded character”.

Russell Smith relates that with print “every article somewhere” would be read, but with handphones “you scroll through what’s been selected for you. And that selection likely reflects a ruthless narrowing of editorial values and priorities”. Analytics are used to sideline articles with low engagement while those with high engagement received support to keep engagement up. “In practice, this ensures the less read become even less read. It creates what one might call popularity polarization: a few pieces rise to the top, leaving the rest to fend for themselves”. “I worry about analytics driving editorial decisions” as it will diminish “the newspaper’s role as arbiter”. Hence, limited attention and content abundance promotes behaviours such as browsing or scanning. Information overload increases the ability of algorithms to influence content selection.

Valuation of content is difficult due to the features of information. Charles Goldfinger explains: “information cannot be sold as a discrete and homogeneous good. It is always sold as a joint product, content and support and often sold in bulk. Pricing mechanisms are often determined by the supply considerations, the ease of capture of the physical support or the ease of delivery. A price of a book is not a function of its content but of the cost of its production. And yet, the value of information bears little relationship to the cost of producing it. Willingness to pay is very difficult to establish, not only because the value of information changes constantly over time but because of extensive externalities. Opportunities for freeloading are numerous and their cost is low. Conversely costs of controlling and policing the freeloaders are very high and often superior to the revenue generated…Even when payment actually takes place, different pricing arrangements can apply to similar information artifacts. In the information market, give-aways, subsidies (through advertising), cross-subsidies, indirect (third-party) payments, composite or bundled prices are a rule rather than exception”.

Broadly, various factors can be considered to have an influence on the pricing of content. On the supply side, the abundance of content puts downward pressure on content prices. Digitalisation lowered entry barriers to producing, distributing and earning income from content (e.g. blogs and social media). Increasingly, content production is algorithm-driven. Nicholas Diakopoulos notes “data mining systems alert reporters to potential news stories, while newsbots offer new ways for audiences to explore information. Automated writing systems generate financial, sports and elections coverage”. Influencers and bot farms generate content as part of overload and complexity-related strategies to reinforce or counter a narrative, sow confusion or simply to obstruct.

The value of content can be sensitive or insensitive to time. Time-sensitive content is valuable because of potential returns from early-mover advantage; e.g. corporate developments (profits from insider trading), trading (front-running) and timeliness[4]. However, the value of time-sensitive content decays (like an option price) when the information becomes more widely disseminated.

The value of news content was higher when transmission was manual and slow. In a sense, slow transmission affords the news industry some protection against copying. Faster speed reduces values quickly and today’s real-time speeds coupled with digitalisation removes the buffers against aggregation or distribution.

The value of non-time-sensitive content tends to be sensitive to popularity or eyeballs. Its value is more durable and is enhanced by content and ownership rights (books, films) or brand (advertising and merchandising income). Content businesses (books, music, video) are generally prone to bootlegging[5] (piracy, copying) but this has been mitigated by digital audit trails. However, even where IP rights are protected by contracts, it may not be honored, particularly by large corporations that may find loopholes or simply choose to ignore the rights of individual authors[6].

Content can be pull or push. Pull content refers generally to passive content – searched for, pulled and paid for by customers. This would include news and independent commentaries and research. Push content refers generally to aggressive content that are sponsored, directly or indirectly, to influence the public narrative or consumer choice. This would cover advertisements; government, political and corporate-sponsored communications; spam and fake news. The value of such content is based on the sponsors’ perceptions of its effectiveness in enhancing the standing of persons, firms, politicians or policies or mitigating adverse effects, as may be the case.

The decline of the traditional newspaper industry reflects the gaps or a widening in the bid-offer spread in the pull content ecosystem. On one hand, bid prices for pull content are pressured downwards by weak demand for “quality” news (due to changing consumption patterns) and the availability of cheap substitutes (desktop and AI-generated content). On the other hand, the offer prices for journalists and, to a lesser extent, freelancers are sticky downwards. The outcome is rationing; e.g. shortages of pull content due to the lack of journalists willing to cover the news at the low offer prices.

In contrast, the push content ecosystem (comprising influencers, political and corporate-sponsored communications, cyber warriors, fake news and spam) is thriving. There are similarities to Gresham’s law[7] in that bad content will drive out good content. In this regard, misinformation is both a push problem in that the supply of “bad” content keeps expanding because of funding from sponsors (to influence the public narrative); and a pull problem in that the supply of “good” content keeps contracting due to rationing. These effects are complemented on the demand side where the flourishing of misinformation (such as conspiracy theories) suggests demand for “bad” content is strong. In contrast, demand for “good” content suffers from a combination of information overload and attention limitations. Thus, demand and supply forces work towards unbalancing the content ecosystem.

Natali Helberger notes “platforms often sell their power to persuade to the highest bidder, whether advertisers, governments and/or political parties, which have come to rely on the infrastructure of platforms to communicate with their customers, citizens and/or voters. Perhaps even more concerning are situations in which platforms use that power to turn users into voters, such as in Google’s attempt to activate users against new copyright law initiatives, or supporting marriage equality legislation, or the way Uber and Airbnb mobilize their users to protest against new government laws aiming to regulate these platforms. Most importantly, however, is that alongside immediate communication power (such as networking, networked and network-making power), social media also has what I call systemic opinion power, which is the power to create dependences and influence other players in a democracy. In so doing, these platforms change the very structure and balance of the media market, and thereby directly and permanently impact the pluralistic public sphere”.

Traditional media are not immune from these pressures. Matt Taibbi suggests “it is also incorrect to blame the decline of the traditional media industry for the current public mistrust because the mainstream media are part of the malaise. Matt Taibbi points out trust in the media is falling with “the Edelman survey showed overall faith in the press dropping to 46%…56% of respondents believing journalists are purposely trying to mislead people, or 58% thinking that most news organizations are more concerned with supporting an ideology… than with informing the public”. He points out newspapers are also guilty of behaving like “echo chambers”. This includes newspaper coverage “hyping a threat for a news cycle or two, then moving to the next panic as the basis for the first one dissipates. How many headlines were aimed at our outrage centers in the last four years that were quietly memory-holed, once they’d outlived their political utility?… audiences were asked for a time to care about certain things as if their lives depended on it, then just as quickly asked to forget the issues ever came up. And they wonder why people feel manipulated?” Matt Taibbi argues “competing voices and critics who’ll keep your newsroom at least theoretically honest are important, which is why the mass-deletions of alternative media accounts are so upsetting: it hugely enhances the likelihood of errors and cheap caricatures, as well as the belief in one’s infallibility. The fact that pundits and reporters are leading the charge for an ever-purer monoculture is beyond creepy”.

A similar situation exists for finance-related content where content is generally paid for sponsors rather than by end-investors. As a result, conflicts of interest problems are endemic in equity research and credit ratings; with content largely favouring sponsors. Regulators have sought to promote the independence of content with policies to unbundle research from trading commissions, build Chinese wall separations, and impose risk governance requirements. Generally, these measures are not deemed to be effective and, in the case of equity research, is thought to have the perverse effect of shrinking the supply of equity research or coverage of stocks.

Changing cost structures. The costs of producing, storing and distributing content have fallen drastically due to digitalisation, AI and fissure (the use of free lancers to replace high-cost employees). But these cost-savings are offset by cost increases related to quality and reputation risk controls.

In this context, D. Wilding, P. Fray, S. Molitorisz and E McKewon point out “the traditional journalistic model of verification is being replaced by a new model of assertion. The verification model was based on the overarching journalistic value of accuracy…the new model of assertion is driven by the 24/7 news cycle in which the primary imperative is disseminating the news as fast as possible…The haste with which the digital editions are written up provokes all kinds of errors, relaxes quality controls and accelerates the elaboration process of the news. All this has repercussions on the quality of the end product…concern that the reporting of reliable facts is increasingly being replaced with less reliable information as publishers rush to push content online…In some (but by no means all) online journalism, the approach has been to publish now, correct later, the idea being that the wisdom of crowds or crowdsourced fact-checking can easily correct errors in this medium…But online corrections…are often not transparent, and few newsrooms offer their audience the opportunity to correct errors…questions of defining, assessing and ensuring journalistic quality apply not only to traditional news media and journalism but also to online commentary about news and the blogosphere. Problems have arisen concerning the quality of digital content, which is a direct result of the hypertextuality, multimodality and interactivity of online communication, the general data explosion and the uneven distribution of internet access”.

Information overload (high volumes and speed) has thus increased quality control costs due to expenses for filtering, revising or refuting “offending” content. In tandem with this, reputation risk control costs have increased substantially due to the increased legal and enforcement risks and costs of adverse public reactions (boycotts, attacks).

Concentration-fragmentation. Information disruption induces structural change. The traditional newspaper industry was vertically integrated and handled content generation, production and distribution (via vendors) themselves. However, digitalisation disrupted the vertical chains of newspaper firms. Platforms, by capturing control of data, were able to separate newspaper firms from their customers (subscribers and advertisers). Platforms further disintermediated newspapers aggregating and distributing their content on a real-time basis. There are common experiences in intangible businesses.

Though the newspaper industry has been described as undergoing consolidation with the closure of many newspaper firms, it is more accurate to attribute the industry decline to fragmentation with the emergence of supply long-tails. The long-tail effect represents the elongation of supply because digitalisation dramatically lowers the costs of production, storage and distribution. Fragmentation is acute in terms of the expansion of products and venues due to the emergence of non-traditional players (bloggers, citizen reporters). Fragmentation is accompanied by concentration of intermediation.

The features of the content intermediation will likely be similar to those for intangible products such as the financial markets. Charles Goldfinger describes financial markets as “autonomous, markets are self-centered and incestuous: the bulk of transactions in financial markets are carried out between financial intermediaries rather than between these and non-financial clients”. “Under information market approach, the main reason for this incestuousness is that financial institutions are simultaneously largest producers and consumers of financial information. This means that they are simultaneously buyers and sellers”. Intermediation domination is particularly evident in terms of the capture of advertising revenues. The global platforms are able to capture a large market share because global and even small domestic firms want the ability to reach a global audience. Concentration-fragmentation is reinforced by the Winner-Take-All (WTA) effects where the lottery pay-off structures concentrate rewards among a few winners.


Anti-trust remedies are unlikely to reverse the decline of the newspaper industry. This is because the lack of bargaining power is a symptom rather than a cause. Hence, anti-trust remedies such as forcing platforms to pay publishers will be a band-aid but will be insufficient to restore newspapers to their former glory.

In effect, the competition deficiencies in the newspaper industry are a symptom of information disruption that has unbalanced the ecosystem. First, market failures occur mainly in the pull content ecosystem where bid-offer spreads have widened; leading to the domination of content markets by push content and a shortfall in pull content. Anti-trust remedies do not address the debasement in content quality. Second, concentration-fragmentation effects result in the concentration of intermediation power and fragmentation of producers. The shift in intermediation power affects the distribution of value from content. Traditional anti-trust remedies will likely have marginal effects on the redistribution of content value.

A radical reorganisation of the content ecosystem is likely needed to overcome the poor economics of the newspaper industry. In this regard, policy-makers should not distracted by the business aspects that caused the decline of the traditional newspaper industry but with the implications arising from a broad expansion of the information sphere.


Charles Goldfinger (4th quarter 2000) “Intangible economy and financial markets”. Communication & Strategies No. 40.;jsessionid=C4D6E97EB7C9D254292B4261405F5EAE?doi=

D. Wilding, P. Fray, S. Molitorisz, E McKewon (2018) “The impact of digital platforms on news and journalistic content”. University of Technology Sydney.

Ian Welsh (11 December 2020) “Disney setting a precedent for not paying writers”.

Matt Taibbi (23 January 2021) “The echo chamber era”. TK News.

Natali Helberger (7 July 2020) “The political power of platforms: How current attempts to regulate misinformation amplify opinion power”. Digital Journalism. Taylor & Francis Online.

Nicholas Diakopoulos (11 June 2019) “Artificial intelligence-enhanced journalism offers a glimpse of the future of the knowledge economy”. The Conversation.

Phuah Eng Chye (2015) Policy paradigms for the anorexic and financialised economy: Managing the transition to an information society.

Phuah Eng Chye (22 June 2019) “Policy conversations and the language of information”.

Phuah Eng Chye (7 November 2020) “Information rules (Part 1: Law, code and changing rules of the game)”.

Phuah Eng Chye (21 November 2020) “Information rules (Part 2: Capitalism, democracy and the path forward)”.

Phuah Eng Chye (5 December 2020) “Information rules (Part 3: Regulating platforms – Reviews, models and challenges)”.

Phuah Eng Chye (19 December 2020) “Information rules (Part 4: Regulating platforms – Paradigms for competition)”.

Phuah Eng Chye (2 January 2021) “Information rules (Part 5: The politicisation of content)”.

Phuah Eng Chye (16 January 2021) “Information rules (Part 6: Disinformation, transparency and democracy)”.

Phuah Eng Chye (30 January 2021) “Information rules (Part 7: Regulating the politics of content)”.

Phuah Eng Chye (13 February 2021) “Information rules (Part 8: The decline of the newspaper and publishing industries)”.

Russell Smith (September/October 2020) “How algorithms are changing what we read online”. The Walrus.

Steve Olenski (21 June 2017) “Why content will always be king”. Forbes.

[1] Steve Olenski points out “content can be found everywhere – from beacons, sensors, the Internet of Things, and everything in-between. We’re reaching a point where just about everything will be, or involve, content; from appliances and clothing to locations and vehicles…Marketers have already begun to collaborate with IT and product groups in an effort to create content based on the way people live their lives, what they do, and where they are when doing it…Content is quickly moving past marketing and is becoming a piece of the puzzle that is the way people interact with the world around them”.

[2] See Policy paradigms for the anorexic and financialised economy: Managing the transition to an information society.

[3] Steve Olenski notes “when you include the requests made by social media, thought leadership, sales, real-time marketing, customer service, and recruit teams, and you’ll see there’s never been more demand for the continued creation, refinement, repurposing, and reformatting of content. Content can be used to elevate a number of functions, such as diverting calls from call centers and social selling, to increasingly effective digital channels… Content marketing informs, entertains, educates, and offers utility”.

[4] For example, scoops can generate eyeballs which translate into subscriber or advertising revenues.

[5] Bootlegging is also becoming digitised.

[6] Ian Welsh notes Disney appears to have adopted the practice that when they purchase a piece of IP, they may not be bound by the original contract. He views that this practice as robbing authors and artists of the right to profit from their work.

[7] Gresham’s law is a monetary principle stating that “bad money drives out good”.