Is investigative journalism a private or public good? A new Stigler Center case study focuses on the success of French online news website Mediapart and explores the economics of media companies in the age of digital disruption
Once a favorite to win France’s upcoming presidential election, François Fillon’s hopes of ever becoming president have been irrevocably dashed in the past two months, following a series of revelations that as a senator he had allegedly used public money originally intended for paying assistants to pay hundreds of thousands of euros to his wife and children for fake jobs as parliamentary aides. Previously the frontrunner, Fillon is now placed third in the polls, after he and his wife were formally charged with several counts of embezzlement and misappropriating public funds.
Many of the revelations that led to these investigations and the derailment of Fillon’s campaign first appeared in the online investigative magazine Mediapart. Back in 2014, Mediapart reported that at least 20 percent of French parliament members employed their immediate family members (hiring family members is legal for MPs in France, so long as the jobs aren’t fake), calculating that 52 wives and 60 sons and daughters were paid by MPs.The Fillon scandal was the latest in a long string of investigations by Mediapart, a hard-hitting investigative website launched in 2008 by Edwy Plenel, the former editor-in-chief of the French newspaper Le Monde. In the past 9 years, on the back of several high-profile investigations that shook French politics and business world, Mediapart has become one of France’s leading news outlets, with a growing subscriber base that rivals those of some of the country’s major legacy newspapers.Moreover, Mediapart has also managed to become highly profitable—practically unheard-of for an online investigative news outlet—despite the fact that its business model overtly defies every truism about how media outlets should operate in the digital world: it displays no ads, has no corporate backers, and its only source of revenue are the monthly fees paid by its subscribers. Nevertheless, it still pays its journalists competitive salaries.Mediapart is the subject of the first in a series of case studies by the Stigler Center at the University of Chicago Booth School of Business. It was chosen because of the crucial role independent investigative journalism plays in reducing the power of vested interests and allowing for competitive markets to function properly. The case was written by Dov Alfon, Haaretz‘s editor-at-large in Paris, with a teaching note written by Guy Rolnik, a Clinical Associate Professor at Chicago Booth and Co-Director of the Stigler Center [also, one of the editors of this blog]. On April 13, the case will be presented in a special Stigler Center event that will feature Plenel, his co-founder Marie-Hélène Smiejan-Wanneroy, and James T. Hamilton, the Hearst Professor of Communication and the Director of the Journalism Program at Stanford.In a global media landscape that’s characterized by shrinking ad revenues, conventional wisdom has it that investigative journalism is financially unviable. In his recent book Democracy’s Detectives, which examines the economics of investigative journalism, Hamilton writes: “Investigative reporting involves original work, about substantive issues, that someone wants to keep secret. It is costly, underprovided in the marketplace, and often opposed. It is more likely done when a media outlet has the resources to cover the costs, an incentive to tell a new story, cares about impacts, and overcomes obstacles. Changes in media markets put local investigative reporting at risk.”With the disintegration of journalism’s business model, newspapers were left with fewer resources to fund costly and time-consuming investigations into the misdeeds of politicians and regulators. Since the nature of the web makes it more difficult to exclude access to information, and therefore charge for it, private firms have far fewer incentives to produce it. These developments, scholars like Hamilton say, have made investigative journalism more of a public good.Can we really expect the market to supply quality investigative journalism that exposes wrongdoing, uncovers corruption, and holds the powerful to account? Many would say there’s simply no demand for it. The success of Mediapart, however, may provide a unique counterfactual.Plenel, the publisher, editor-in-chief, and leading force behind Mediapart, established the site in late 2007 together with three other partners, all veteran journalists—Laurent Mauduit, François Bonnet, and Gérard Desportes—with the aim of providing a new outlet for investigative journalism that would not be beholden to any political or financial interests. The four were all highly experienced journalists, but had absolutely no experience in business. For this, they relied on Smiejan-Wanneroy, an entrepreneur and marketing expert. They managed to raise €2.9 million prior to launching, mostly from friends, two individual investors, and out of their own pockets, figuring that 50,000 subscribers would allow them to break even.In order to achieve total independence, Mediapart’s founders chose a unique business model, which includes no advertising and instead relies on subscription fees to pay for content—a risky proposition today and even riskier in 2007, back when most news outlets had yet to erect paywalls and the notion that readers would never be willing to pay for online content was the predominant view.Despite having no source of revenue other than its monthly subscription fee (currently at €11 and initially €9, although various promotional deals have offered reduced fees), Mediapart has been profitable since 2011—three years after its launch. For 2016, it reported a net profit of €1.9 million and a 10 percent growth in revenues. It currently has 140,000 subscribers (compared with 15,000 in 2010), and its subscription revenues have grown more than 18-fold since 2008.
Mediapart’s profitability stands out, even when compared to much older, much bigger, much more established counterparts: Mediapart’s operating margin was 18 percent in 2016, compared with 6.5 percent for the New York Times. Similarly, while the Times’ net margin stood at 1.9 percent last year, Mediapart had a net margin of 16.6 percent....MORE