Hefty government government subsidies for media are annoying for many reasons. Worst of all: the federal government and publishers are skirting the main problem of the media, Peter Hody writes in an essay for finews.first.

This article is published on finews.first, a forum for authors specialized in economic and financial topics.

«The media are of central importance for our direct democracy.» With this introductory sentence, the seven-person ruling Swiss government sent the package of measures to subsidize Swiss media to parliament for deliberation in April.

After the usual fuss, parliament decided on a support package of 120 million Swiss francs ($131 million), the majority of which goes to newspaper publishers which also operate online portals as well as local radio and television stations.

Virtually as the stimulus package was being put together in parliament, publishing houses such as TX Group and CH Medien decided on radical cost-cutting programs. It is not too bold to forecast that the subsidies will not save a single job in Swiss journalism.

Google and Facebook are bulldozing

But that's what the subsidies are actually intended for: to enable high-quality journalism and to win time in the ongoing transformation of the Swiss media industry.

These are noble intentions. But they are contradictory, unrealistic, annoying, and simply useless. The problem of the Swiss media and their creeping decline is not inferior journalism or poorly-managed publishing houses. In short, the problem does not lie in Switzerland, it lies in Silicon Valley.

With a market share of around 75 percent, Google and Facebook are bulldozing the Swiss online advertising market. In contrast to the print market, online is growing by 100 to 200 million francs annually. The two tech giants draw the largest share of this growth every year.

Technological Dominance

But their dominance is essentially a technological one. Thanks to intelligent algorithms, Google and Facebook supply their users precisely with content that meets their individual needs and ideas and therefore achieves the longest attention span. The companies sell this attention to the highest bidding advertisers, who thus achieve the best return on investment.

Swiss publishers have long since become reliant on Google and Facebook. The online readership is fed to a considerable extent by the search engine and the social media platform. Corporations such as Facebook and Google (also Twitter, Pinterest etc.), have triggered the destructive developments in the advertising and reader market.

At the same time, they have become indispensable as so-called «gatekeepers» for news from around the world. In the U.S., the debate is how to disrupt the dominance of these corporations, like breaking them up. It is platforms such as Facebook, Google and Twitter that have become a danger to democracies because they only supply their consumers with content that confirms their world view. And because they knowingly disseminate fake news, to earn even more money from advertising.

Wide Berth For Fake News

The Swiss subsidy debate gives this issue a wide berth. Instead, there is some debate about whether online journalism should also be promoted. The result is ultimately a massive contradiction: Swiss media accept subsidies from the state so that they can remain its fourth estate.

If media subsidies always have the whiff of independence lost, this much-vaunted package contains a fundamental conceptual error: Subsidies always – despite all efforts and assertions – distort markets. This will be especially true here, since an outlet can only benefit from a subsidy if it meets certain criteria set by the state.

This is also a huge, inherent contradiction: the state wants to protect the free and independent media, but sets guidelines on how it should function.

Dual-Class Media Economy?

The package is annoying for media such as finews.com. It breeds a dual-class society in digital journalism. Thirty million francs will be used exclusively to support online media with a subscription business model. What makes paywalls a signature of higher-quality journalism?

Editorial platforms with an advertising business model – such as finews.com – are of inferior quality according to the government criteria and therefore do not deserve any subsidy. To put it mildly, but this of rather limited knowledge of media diversity and the media market.

The government is ignoring the fact that media are active in two markets: media outlets earn their money not only with subscribers, but more importantly, by selling advertising space.

Publishers Grown Wealthy

In Switzerland, there seems to be a prevailing view that online media are inferior if they earn money with advertising. In contrast, digital media projects such as «Republik,» which promise total freedom of ad revenue, are upheld as the new standard-bearers of independent journalism.

Politicians and media experts equate freedom of advertising in the Swiss media landscape with independence. This is simply wrong and it is worth adding that the free and independent Swiss media landscape, a pillar of democracy for more than 150 years, has made its publishers extremely wealthy because they had an advertising monopoly.

The intention to subsidize «paid» online journalism is absurd, also in light of the new online strategy of SRF. The state television and radio broadcaster wants to expand forcefully online. SRF can not implement a subscription model, since it is already subsidized. Now it will become a subsidized competitor to all other media in the highly competitive online advertising market.

Subsidies Can't Stop Death of Media

Perhaps there is something to be said for Switzerland throwing its liberal principles overboard when it comes to ensuring the preservation of direct democracy. But why the belief has taken root that this can only be achieved through «paid» and soon subsidized journalism is incomprehensible in view of the debate so far.

The Swiss approach to media promotion is simply useless in view of the enormous financial and technological superiority of Silicon Valley. Switzerland lacked the courage or imagination to consider other concepts, such as a levy on Google and Facebook data volumes. The path now taken will hardly affect the transformation of the Swiss media and will at best slow down, but certainly not halt, the ongoing media concentration and death.

Peter Hody is editor-in-chief of finews.ch. He has held several managerial positions at «Cash» and «Stocks», Swiss financial news outlets. Previously, he was a reporter at Associated Press and RTL/ProSieben. Hody studied history and acquired an MBA in Media Management at the Hamburg Media School.

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