The Financial Times re Michael Arrington, Techcrunch and AOL:
More to the point, what did anyone expect in a world where what would once have been a subscription newsletter became a free blog that relied on low-yield advertising? If publishers cannot make money in legitimate ways, someone will invent a dubious way instead.
The news business is experiencing a similar evolution to investment banking after deregulation on Wall Street in 1975, and in the City of London in 1986. The abolition of fixed commissions led to a squeeze on investment research, for which institutions had paid, and a search for a new source of revenue.
Eventually, ignoring the conflicts of interest, investment banks came up with the idea of getting companies rather than investors to pay for the analysts by using the latter to market initial public offerings. That culminated in the IPO research scandal when the 1990s internet bubble burst.
” . . . it was rife with conflicts of interest. Would news coverage be slanted to favour sites in which CrunchFund or Mr Arrington invested? Would venture capitalists feel forced to cough up in order to ensure that their own deals were covered on TechCrunch? Human nature and financial incentives being what they are, both were very likely.
[Mr. Arrington] is also right that traditional news outlets have their own conflicts – even if they formally separate their commercial and editorial operations, reporters face the temptation to trade favourable coverage for inside access. But individual misbehaviour is one thing; a fully-fledged business model is another.
The truth is that, no matter how loudly people protest that they have safeguards in place and will not abuse their power, conflicts of interest lead to abuses as surely as rivers flow to the sea. Even if they are disclosed in disclaimers, as banks now do with investment research, bad things will happen.
The conflict of interest in free news – FT.com.
