Different Media Systems in U.S. and France Impact Success of Online News Startups Says Powers
“What makes a startup start in the news business?” asked Matthew Powers, Assistant Professor in the Department of Communication at the University of Washington, during a presentation at the Center for Media, Data and Society on April 26. In a comparative study conducted with Sandra Vera Zambrano from Sciences Po Toulouse, Powers analyzed the news ecologies in Seattle, Washington and Toulouse, France.
The U.S. and France have distinct media systems – the U.S. news model is advertising-dependent and based on objectivity whereas the French news model is government subsidized and opinion-based – yet they face similar challenges. The media landscape in both countries is changing as legacy media outlets struggle to adapt and media consumption habits change. “How have these two different models dealt with the same issues?” Powers queried.
Analyzing news startups in Seattle and Toulouse, Powers and Vera Zambrano found that most began operations between 2007 and 2009, a period coinciding with the global financial crisis and long-term declines in advertising revenues and news consumption. During this period, Seattle became home to over 50 news startups while Toulouse only gave birth to four. “Because of the nature of the media system in the U.S., there were suddenly many experienced journalists on the job market,” explained Powers, “and this affected who could and did found startups.”
According to Powers, three factors were important in creating space for the formation of startups: market exposure, media policies, and labor regulations. In terms of market exposure, Seattle news outlets were much more exposed than French outlets. The Seattle Times, for example, earned 90% of its revenue from advertising in 2009 while advertising revenues for La Dépêche in Toulouse in the same year were only 36.5%. During the financial crisis, Seattle outlets were thus hit harder than Toulouse outlets.
Media policies also played an important role in startup formation. In Toulouse, the law stipulates that newspapers receive direct government subsidies to the tune of six cents per paper. In Seattle, newspapers could pursue joint operating agreements (JOAs) that allowed companies to combine business operations yet maintain editorial independence. In 2009, a major JOA in Seattle ended, leading to the downsizing of the newspaper group.
Lastly, labor regulations impacted the news ecologies in both cities. In France, it is financially disadvantageous to lay off employees. “Companies must offer compensation commensurate to the number of years worked,” explained Powers, “so laying off established journalists is very costly.” At the same time, Powers highlighted that it leaves young journalists fighting for very few vacant jobs. In the U.S., employees are guaranteed no such severance package. From 2005-10, Toulouse newsrooms lost 50 people, mostly due to retirements, while Seattle lost 240. “Seattle had a lot of veteran journalists hitting the market, while Toulouse didn’t. The combination of these three factors explains why Seattle became home to many more news startups than Toulouse,” added Powers.
“One of the most important factors in the success of online news startups is symbolic capital,” emphasized Powers. If startup founders already had recognition and prestige in the journalism world as trusted reporters, they had greater access to funding sources, media credentials, and partnerships with legacy media outlets.
“Forming startups is relatively easy, but sustaining them is very hard,” concluded Powers. “One implication of our study is that knowing how to convert symbolic capital is one of the main keys to success.”