Felix Salmon observed the other day that the NYT’s Walmart expose sent Walmart’s share price tumbling. As it is the kind of investigative reporting we’d all like to see if someone would pay for it, he wondered if this fact meant there would be someone to pay for it. A slight tweak to the NYT’s business model that currently involves publishing scoops to everyone at the same time might do the trick: let some fraction of readers pay for ‘early exposure’ to the scoop.
At first glance, this is not a bad line of thinking. There is information that, while being technically non-rival (as in costless to distribute widely), is value rival (in that it can be valuable to a few if kept in the hands of those few). [For more on value rivalry see my paper with Scott Stern on the subject.] Financial information normally falls into the class of value rival information whereas generic stories about some celebrity do not. Salmon proposes that the NYT’s price discriminates so as to be able to charge for the value rival component of its stories. He notes that there are many others in the business of supplying information for use in financial trading so why deny the NYT the same deal.
Well, here is one reason to give us pause. The NYT is not selling limited access to important information even under Salmon’s model. Instead, it is selling access to the information that the NYT is going to publish sensitive, financial market impacting, information. As Salmon notes, even in Walmart’s case, the information and NYT investigation was probably known to many. Instead, what ‘surprised’ the market was its publication and the consequences that might flow from that. For instance, with the information public, the practices that Walmart was engaging in may have to cease. The market probably knew about the practices all along. What the market did not know is if the NYT’s had enough that it would threaten those practices.
Now with the NYT now properly seen as being in the business of ‘selling the knowledge that it is about to publish’ issues arise. For one, it is murkier as to whether that activity constitutes insider trading — as it is now selling knowledge of potential activities of the NYT although not with respect to their own share price. Second, what does this do to the incentives of the NYT in its publishing practices? Currently, this is done with respect to maximising readership. But if they had priority access, they would have to consider publication dates that might have the maximal impact on the market. Third, how are they going to price this thing? It is really valuable if there are only a handful of subscribers. But in that case, they will each have to pay a lot. That’s fine but it is only as valuable as the NYT’s finding exclusive scoops to sell them. Is there a steady supply of that? Fourth, only a certain form of investigative story will be valuable in this way. All this distorts journalism and credibility which is precisely the thing that the NYT would be trading on.
So when you think about it the Salmon idea doesn’t really have legs. Actually, it may have limited legs but I’m not sure it has legs as a solution to the funding of impartial, independent and thorough journalism.