Introduction
As Altschull (1984) states in his masterpiece Agents of Power, “The press is the piper, and the tune the piper plays is composed by those who pay the piper.” the dilemma between independence and funding sources of news agencies has long since been a hot spot arousing public discussion, the initial solution of which seems to be that taxation funding support for them is a necessary foundation to address market failure referring to public goods principles; however, the industry practices have implied that commercial operation is an equally popular market choice. The contradiction above lies in that the characteristics of news reporting as a public good naturally constrain its viability in market competition, while accuracy, as one of its other vital natures, shall be controlled or affected by neither government funds nor market capital. News agencies have recently been wavering between these two solutions, with diversified coexistence models created and modified, while none provide the ultimate answer.
Fortunately, technological progress brought us a new prescription that enables news reporting to retain its features as a public good, and that is Web3. In this user-oriented and decentralized network world, people can participate in value creation and allocation more autonomously compared to “the read-only Web1” and “the participative social Web2”, through which media and public freedom are manifested, independence of news reporting is protected, and accuracy safeguarded by blockchain technology. Most significantly, Web3 may reshape the business model of news agencies’ operations in a revolutionary way, reducing reliance on taxation funding support or advertising revenue. The future impacts deserve constant observation and research in its rapid development.
1． Accuracy, the precondition of news reporting as Public Good
1.1 Definition and features of public goods
Public goods, the essential parts for the survival and development of human beings, are distinguished from private ones by the following features: 1) non-rivalrous consumption, referring to individual usage, will not affect supply to other consumers at zero marginal congestion cost, and 2) non-excludability, which means to exclude certain people from consuming it is something impossible or not supposed to do (Samuelson, 1954).
1.2 Accurate news reporting as a public good and its value
The characteristics above apply to news reporting well. A piece of news can be learned by A and B together without cross impacts or marginal congestion cost, with spreading scope demonstrating its value, indicating that it is theoretically non-excludable, and any sign of exclusiveness deviates from its publicness and publicity features. However, accuracy is the precondition of news reporting to be recognized as a public good; only through trust can it be established and public demands for authentic information can be met. Contrarily, fake news, disobeying this principle and infringing public interests, cannot be classified as public goods or services.
Accurate news reporting is vital to a democratic society, demonstrating its positive externality as a public good. Meanwhile, authentic news reporting provides the public with channels to supervise the behaviors of governments and social institutions, enabling the media, as the “fourth estate,” to defend social transparency and responsibility.
1.3 Causes of the traditional dilemma of news reporting
From the perspective of economics, the two characteristics of public goods mentioned above result in the “free rider” phenomenon, in which consumers expect to use public goods for free. Thus, suppliers may lose motivation for costs not covered, leading to shrink production capacity, short supply of public goods, and inefficient resource allocation. To tackle this problem, public goods are provided mainly by governments or other public institutions to ensure access by all members of society. However, this funding solution may further affect the accuracy of news reporting as a public good, and the balance between them has attracted great concern.
2. Accuracy or taxation support, balances among diversified models
2.1 Government funding—initial solution by public goods principles
Generally, public goods cannot survive market competition, while government operation mechanisms offer an alternative plan. The social functions of government can satisfy the public needs of all society members; meanwhile, its power to tax as a public authority can ensure the cost of public goods is covered best, with steady income generated to avoid free-rider problems and market failures.
However, receiving government funding may risk the independence of news agencies and the accuracy of news reporting, for political interference may interrupt news editing (Schiffrin, 2014), thus negatively impacting news agencies' reputations. What is more, how to allocate taxation funding as public social resources to achieve the best social benefits transparently and somewhat sets up a test for governments (Pickard, 2019). Balances among social needs, economic developments, and diversified industrial strategies propose challenges to government leaders.
There are many cases of government-funded news agencies, one example of which is the news media in China, which mainly relied on government financial support from establishing the PRC until 1978. Also, in certain European countries or Commonwealth member states like Canada, broadcasting institutions are still owned by public institutions or states and funded by parliament, the education sector, or social organizations. With more public participation and supervision involved, the model of government-funded operation has been constantly rectified and improved through practice.
2.2 Commercialized operation—popular market choice
News can be categorized into the following: 1) Pure public goods, referring to Hard News, the most basic category mainly to satisfy public needs and ensure people’s rights to know, such as disaster alarm and election information; 2) Quasi-public goods, referring to information services such as weather forecast and stock market information; 3) Private goods, or Soft News, meeting private or excess needs such as consumption and entertainment. The category classification above lays the foundation for the commercialized operation of news reporting by generating profits through membership, subscription, and customized services.
In addition, advertisements make it economically possible for news reporting to operate commercially by selling news products and advertising slots. News products grasp public attention to ensure advertising exposure to more audiences. In contrast, advertising slot reservations and investment by advertisers for promotion can generate revenue as well, enabling the public to get news reporting at low prices or even for free.
Nevertheless, the accuracy of news reporting is still challenged under commercialized operation, where profits drive media to cater to the ideas of advertisers, pander to vulgar interests and excessive entertainment, impairing the reputation, authority, and influences of news agencies, just as Popula mentioned in an interview that “the ad-dependent, profit-driven press system has always obfuscated the public-good nature of journalism—especially the positive externalities that the market typically does not account for and does not support” (Wildblood, 2023)
Lots of states have selected the commercialized operation model. Media in China started to explore operation marketization in 1978 when the People’s Daily and eight other news agencies adopted a corporation management and operation model, with advertising services recovered since 1979 and diversified businesses conducted since 1985. Nowadays, most media institutions in China rely no longer on government financial support but try to survive market competition by leveraging more exposure for advertising revenue.
Also, in America, the news industry's private operation model efficiently satisfies the needs of modern American society for news and information (Zhang, 2006). Formulation of business models and introduction of market capital facilitates the rapid development of the news industry.
Cases show that public goods supply cannot be ensured if news agencies tend to eliminate political or economic control. At the same time, government funding or commercialized operations may affect their independence and accuracy. In recent years, news agencies have been wavering between these two solutions, with diversified coexistence models created and improved, but none provide the ultimate answer.
3. Web3, an innovative new solution
3.1 Definition and features of Web3
Web3 represents the next evolutionary phase of the internet, which differs from Web2, particularly in 1) decentralization, censorship resistance, and privacy protection; 2) data ownership by users; 3) profits realizable by users through data ownership with the support by blockchain technology, a decentralized database which is irrevocable and traceable.
3.2 Web3 addressing the traditional dilemma between accuracy and taxation support
Blockchain technology safeguards the accuracy and transparency of news reporting. A decentralized news-releasing platform contributes to identity verification and mutual trust, based on which journalists can ensure the authenticity and irrevocability of news reporting. The public can verify it by checking the news release time and sources and changing records through blockchain browsers. Permanently stored digital footprints of users can efficiently prevent fake news from being certified as facts.
Through Web3, democracy and news media independence are safeguarded, just as the article Wildblood (2023) states, “A truly ‘free’ press is a cacophony of voices, not a small number of individuals with megaphones.” In the world of Web3, freedom of media and public speech is manifested in the natures of Web3, such as protecting users’ privacy and against censorship by centralized institutions, offering respect and shelter to the discourse power and intellectual property of not only media but also each information poster, where the examination of public voices by governments, as well as data monopoly by technology giants will not work out.
In addition, the media restore their role as public resources under democratic control. Web3 promises numerous DAOs (Decentralized Autonomous Organizations) where users can actively participate in the production and maintenance of collective resources and realize democratic decision-making, resource allocation, and ownership sharing through voting.
Web3 reshapes the business model of news agencies in a revolutionary way by realizing endogenous and sustainable development and no more reliance on external funding, the foundation of which is tokenization, “the process of converting rights to an asset into a digital token on a blockchain” (TokenMinds Team, 2024). News agencies or individual journalists can convert a piece of news into a unique digital asset valued by newsworthiness through NFT (Non-Fungible Token, ownership or authenticity certification of specific digital works) and link news reporting with its author by smart contracts. Through this process, the author’s rights are certified. In Web3, tokenized news raises funds through IDO (Initial DEX Offering, issuance in decentralized exchange, similar to stock IPO or crowdfunding), with regular revenue generated through browsing, voting, or trade. Token holders participate and share profits by recommending and voting through DAO, under which model news agencies can realize sustainable and endogenous operations without relying on external support.
3.3 Web3 future into reality
Several renowned media have led the way to Web3: Reuters, Bloomberg News, CNBC, and The Times have all released tokenized news reporting. The most noted case is Mirror, a decentralized publishing platform established in 2020, gathering groups of influencers, industrial practitioners, and followers, on which everyone can create, share, and sell their unique NFTs. Another example in the East is Techub News, a Web3 media platform in Hong Kong that develops rapidly, integrating graphic, text, and video content from over 50 platforms. All these show that the Web3 Generation has arrived, although issues may occur alongside its development.
Conclusion
To sum up, accuracy is the principal nature of news reporting, which shall be assured as a top priority under any operation model. The analysis above demonstrates that the contradiction between funding sources and accuracy cannot be addressed through original choices or business models. At the same time, Web3, the new technology, offers another possibility to restore the nature of news reporting as a true public good. Backed up by technologies such as blockchain, the operation of news agencies relies no more on taxation or advertising, with freedom and independence of news and media protected, and news reporting truly serves as a public good under a democratic mechanism for the sake of public interests. This new and innovative solution is undergoing rapid upgrade and transformation, the impacts of which on the future news industry deserve constant observation and research.
Reference
Altschull, J. H. (1984). Agents of power : the role of the news media in human affairs. Longman.
Pickard, V. (2019). Democracy without journalism?: Confronting the misinformation society. Oxford University Press. https://doi.org/10.1093/oso/9780190946753.001.0001
Samuelson, P. A. (1954). The pure theory of public expenditure. The review of economics and statistics, 36(4), 387-389. https://doi.org/10.2307/1925895
Schiffrin, A. (Ed.). (2014). Global muckraking: 100 years of investigative journalism from around the world. The New Press.
TokenMinds Team. (2024, March 27). Tokenization ultimate guide – Redefining value in Web3 era. TokenMinds. https://tokenminds.co/blog/web3-development/tokenization
Wildblood, F. (2023, January 3). Who owns the news in Web3? RightClickSave. https://www.rightclicksave.com/article/who-owns-the-news-in-web3
Zhang, J. (2006). The timeliness, profit, and institutional choice of news production: An economic interpretation of the private enterprise system in American journalism. JOURNALISTIC UNIVERSITY, 2006(01), 104–107.