The New York Times recently ran an exclusive exposé about Walmart and bribery allegations in Mexico, a story that helped to shave about $16 billion from the retailing giant’s market value over the past few days. For Reuters blogger Felix Salmon, that sparked an idea: why not sell early access to that kind of story to customers who might want to pay for it — say, hedge funds who could trade on the information? After all, he argued, Reuters and Bloomberg have a huge business providing financially sensitive information to paying clients. But is that really the kind of game the New York Times wants to start playing with the news?
The proposal seems to have a lot going for it, at least for a newspaper that is seeking whatever new sources of revenue it can find in the wake of a continued decline in advertising revenue. In its latest financial report, the New York Times said that not only did print advertising fall, but digital advertising did as well. Revenues from the newspaper’s subscription plan or “paywall” are substantial and growing, but not substantial enough to make up for the shortfall — and it’s not clear when they will get to that point, if ever. Perhaps selling early access to stories is one solution?Should hedge funds get an early look at important news?
Salmon points out that this is the same kind of thing that newswires such as Reuters provide for their enterprise customers: early access to information that matters to them, and for which they are willing to pay a lot. The Wall Street Journal and the Dow Jones wire are two parts of a similar business in a lot of ways — some customers get access to the news on the wire earlier than it appears in the newspaper or online. So why shouldn’t the New York Times get in on some of that action?
[H]ow much would hedge funds pay to be able to see the NYT’s big investigative stories during the trading day prior to the appearance of the story? It’s entirely normal, and perfectly ethical, for news organizations, including Reuters, to give faster access to the best-paying customers.
I had a fairly negative initial reaction to this idea, which I posted on Twitter — and an excerpt of the debate that ensued between Salmon, me, Emily Bell of the Tow Center for Digital Journalism at Columbia and John Gapper of the Financial Times (among others) appears below. For me, the idea of giving hedge funds preferential access to market-moving information seems wrong somehow, especially the idea that they would get access to these stories a day ahead of regular readers (many of whom pay for the paper). Would it be different if it was a few minutes, or an hour? Perhaps.
John Gapper said that if regular readers don’t value scoops, which many believe to be the case, then there should be nothing wrong with selling access to those who do value them. Others who debated the issue with me argued that media outlets like the New York Times are damned if they do and damned if they don’t — they get criticized for putting up paywalls and doing other things to try and monetize their content, but unless they can come up with new models their business appears to be doomed.Does the news not have public value as well?
Just to be clear, I am all in favor of media companies like the Times trying new ways to monetize their content, including packaging it in different ways — e-books, PDF downloads, proprietary research reports like those the Economist and others (including GigaOM) offer, and so on. I’ve written about what I think the new CEO of the NYT should do, and most of those things were included in my prescription. And if we’ve learned anything from the music business, it’s that preferential access to music is something that fans will pay for. So why not preferential access to the news?
One of the things that bothers me about this idea is that I think there is still some kind of public-service or public-policy value in journalism, and especially the news — I don’t think it is just another commodity that should be designed to make as much money as possible. And if the New York Times were to take stories that are arguably of social significance and provide them to hedge funds in advance, I think that would make it a very different type of entity than it is now. What if it was a story about a dangerous drug or national security?
Maybe doing that would be more lucrative, and perhaps the future of broad, general-interest news vehicles is so unhealthy that they will all have to become controlled-circulation newsletters for the wealthy, with some free content provided almost as an afterthought. That’s effectively what Rupert Murdoch’s hard paywall at the The Times has done to that newspaper. Reuters and Bloomberg are somewhat different because they were created specifically to appeal to institutions, and started providing news to the public as a by-product.
That is not what people think of when they think of the New York Times — but perhaps it will be in the future. Will that be a good thing for the NYT, or for society in general? I honestly don’t know. Here’s the Storify with the conversation between Salmon, Emily Bell, John Gapper and I:
Storified by Mathew Ingram · Tue, Apr 24 2012 17:32:25@emilybell: I think @felixsalmon’s idea would be morally wrong and also professional suicide. What do you think?Mathew Ingram @mathewi @emilybell tell that to everybody at Reuters and Bloomberg, it’s what we do! Have we all committed professional suicide?felix salmon @emilybell @mathewi @felixsalmon how is this any different than what Reuters does? the entirety of the wire is only available to clientsAnthony De Rosa @mathewi @felixsalmon I can only see bad things coming from it for sure. As I say – useful thought exercise for J School ethics classemily bell @felixsalmon @emilybell: for Bloomberg, the terminal data business is core — consumer news is an add-on. NYT is differentMathew Ingram @felixsalmon @mathewi in fairness you sell wholesale info services… You don’t offer one-off stories to hedge funds for a bucket of cash…emily bell @emilybell @mathewi I wasn’t suggesting that the stories be sold on a one-off basis. I was thinking more of a $1m/yr NYT wire service.felix salmon @felixsalmon @emilybell: and wire subscribers would get a full trading day advance notice of a big story? I don’t think that would flyMathew Ingram @AntDeRosa @mathewi @felixsalmon nyt can construct a higher priced fence round any info they choose, but brand might suffer in a b to c bizemily bell @felixsalmon @emilybell @antderosa: I think it matters that the NYT puts readers first, not traders — Bloomberg does the oppositeMathew Ingram @mathewi @emilybell @antderosa OK, but now we’ve changed the conversation: it’s about branding, not ethics.felix salmon @felixsalmon @emilybell @antderosa: I think it’s unethical too, if only large hedge funds get access — what about the individual investor?Mathew Ingram @mathewi @emilybell @antderosa so, again, you’re saying that Bloomberg is unethical because individual investors can’t afford its product?felix salmon @emilybell @felixsalmon @mathewi If scoops don’t matter to most readers, as digerati claim, logic = sell them to those who do value themJohn Gapper @mathewi @johngapper @felixsalmon but also maybe not more lucrative, Bberg and Reuters have totally different cost structure for servicesemily bell @johngapper @emilybell @felixsalmon: it would turn the NYT into a very different sort of business — maybe more lucrative, but differentMathew Ingram @mathewi @emilybell @antderosa So therefore the NYT should be barred from learning from the more-financially-successful Bloomberg?felix salmon @dsquareddigest @mathewi @emilybell @antderosa if you pay $20k/year for the wire, you get stories faster than if you go to the website.felix salmon @emilybell @felixsalmon @antderosa: so NYT story says "our hedge fund clients read this exclusive yesterday and have already traded on it"Mathew Ingram @emilybell @felixsalmon @antderosa: that sends a very different message about who the NYT values than its stories do currentlyMathew Ingram @mathewi @felixsalmon @dsquareddigest @emilybell @antderosa PS I’m not sure it would work for NYT but early access is a logical premium tierJohn Gapper Sorry, @felixsalmon I think you’ve gone off the reservation with this one: http://reut.rs/I8euYQEpicurean Dealmaker @felixsalmon @mathewi @emilybell @antderosa Bloomberg doesn’t sell differential access to news stories. It really doesn’t.Dan Davies