By David Callahan
The views expressed are his own.
The demise of the News of the World after a phone hacking scandal will not change a troubling truth about tabloid journalism – or business in general these days: Bad ethics can yield big financial rewards and such are the upsides of cheating that even honest professionals may feel they must bend the rules to compete.
Tabloid editors will surely think twice now before drawing on illegally obtained information. But other unethical practices – used by a range of print, broadcast, and online media businesses – will continue, like paying sources for dubious information (“cash for trash”) or fabricating juicy stories outright to boost circulation or ratings.
This sleaze machine is fueled not by the deviance of editors and producers but by rational incentives. The media business is brutal, with intense competition, impatient shareholders, and often razor-thin profit margins. Everyone in this world is under extreme pressure to perform and cutting ethical corners is one way to get an edge. The News of the World became Britain’s highest-circulation newspaper in large part by being less scrupulous than the competition. Cheating paid – at least until this week.
These dynamics are not unique to the media industry. All publicly-held companies are expected to show robust earnings every single quarter and while executive compensation has skyrocketed it has also become more tied to performance. With the sticks hitting harder and the carrots getting fatter, it should be no wonder that scandals have consumed so many industries – whether it’s corporations cooking their books or bankers lying about the toxicity of mortgage-backed securities or pharmaceutical executives authorizing the illegal “off-label” marketing of drugs.
When cheating pays, and few people are punished for breaking the rules, even those who want to be ethical may find that this isn’t so easy. If other tabloids are paying cash for trash in the hottest story of the moment, and you’re not, good luck with those circulation numbers – and getting that year-end bonus or even keeping your job. Many bank and mortgage executives during the real estate boom weren’t thrilled about embracing ethically dubious lending practices, but worried about losing market share to less scrupulous competitors if they didn’t.