Advertising and political bias in the media: the market for criticism of the market economy

American Journal of Economics and Sociology, The, July, 2002 by Daniel Sutter

A boycott, however, also imposes costs on a business. Corporations do not advertise for charity's sake. A firm forgoes the benefit of advertising to punish the prior critical message from the news organization. A boycott does not undo the damage of the message already transmitted, unless the attacked business seeks a retraction of the message. The victimized business that employs a broad boycott loses market share to competitors who continue to advertise. Of course, a firm that boycotts CBS has other outlets of advertising, which reduces the cost of punishing a single offending organization. Yet the threat of an indefinite boycott is not credible, and news organizations will discount this possibility accordingly. Several companies, including Armour meats, the Life Assurance Company and Mutual Life, cancelled their advertising in McClure's following its publication of muckraking exposes about their industries. But even in these cases, the companies resumed advertising after several months (Lyon 1963:300-301). Miraldi (1990:63) interprets these incidents as teaching reporters a lesson. The real shock, though, is not that Armour cancelled its ads for six months, but that it resumed advertising in McClure's after such a short period of time.

V

Alternatives to Advertiser Support

MY ARGUMENT THUS FAR maintains that advertising does not allow corporations to control the content of information transmission by the media via advertising. But suppose that I have overstated my case. Even if corporations overcome their collective action and credibility problems, the public may still receive anti-business messages because two other methods of funding the transmission of messages exist: audience payment and contributions from individuals wishing to publicize the ills of corporate capitalism.

The corporate bias argument assumes that an audience exists for anti-business messages. Audiences could instead pay through subscriptions, single issue (newsstand or pay-per-view) purchases or classified advertising. Advertising now provides between 80-100 percent of revenue for major news organizations, but the fraction of newspaper revenues provided by advertising has varied over time. The penny press, for instance, was funded largely through consumer purchases. Prior to the penny press, political parties often subsidized newspapers. Classified advertising is a major source of revenue for newspapers and some magazines, such as Village Voice. Audience payments could also take the form of contributions or purchases of tie-in products like "Caveat Emptor" T-shirts and coffee mugs. Celebrity endorsements and images on products create tie-ins between fame, a nonexciudable public good, and excludable private goods. Such devices, which allow celebrities to market their renown (Cowen 2000), can also be used by tele vision shows.

Clearly, advertiser support is a stable equilibrium in the news market. But the exceptions suggest that advertiser support is not the only equilibrium, which the corporate bias argument implicitly assumes. Customers accustomed to ad-supported news may require time to adjust to paying for some news. But reluctance does not imply adjustment is impossible. Cowen (2000:chap. 3) points out that in Sweden telephone companies are experimenting with offering advertiser-supported phone service. While callers used to the current system of consumer payment for phone service would regard advertising as an intrusion on phone calls, some callers might willingly adjust. (11) Similarly, consumers might be willing to pay a premium for a newscast.