Journalistic integrity has mattered for media companies for decades.
The rise of fake news
The American election has brought unprecedented attention to the problem of fake news. According to the Pew Research Center and Knight Foundation, 62% of the U.S. population gets news from social media, while in the three months leading up to the election, Facebook allegedly showed its users more fake headlines than real ones. Facebook, Google, and other companies have begun taking steps to curb the trend, but critics contend that the proposed changes don’t go far enough, and President Obama criticized social media for eroding democracy during his recent visit to Germany.
Despite 2016 being the “year of fake news,” the importance of journalistic integrity is nothing new. For example, a 2013 study by the Public Accountability Initiative found that among 22 different Syria pundits, all of whom had a conflict of interest, disclosure was made in just 13 out of 111 television and op-ed appearances.
The role of media in society and the impact of journalistic integrity on their bottom line
As the gatekeepers of news and current affairs, major media corporations have been in charge of delivering news to millions of households for decades. Society relies on journalists for accurate and timely information about current events. Indeed, Stanford research finds that teenagers lack the skills to distinguish between fake and real news, judging credibility based on the length of the headline and whether a large photo is attached. In order to maintain their social license to operate and minimize regulatory oversight, media companies have the responsibility to fairly present information.
SASB’s standards for the Media Production & Distribution industry recognize the materiality of ‘Journalistic Integrity & Sponsorship Identification,’ primarily through its impact on brand value and reputation, as well as on revenues and market share over time. Failure to disclose a conflict of interest may result in a loss of trust among readers and viewers, while lawsuits or regulatory actions can acutely affect a company’s expenses or cost of capital. For example, in 2011 News of the World was exposed to a phone hacking scandal that led to a $4.8 million settlement and additional costs of $199 million and $183 million in 2012 and 2013, respectively.
Improving company disclosure
While publications such as The New York Times post an email address and phone hotline for raising concerns about journalistic integrity, disclosure on this topic across the Media Production & Distribution industry is generally poor. Of the ten largest U.S.-listed media companies by market cap, only one company disclosed any metrics in its 2015 10-K. Two of the ten companies have no disclosure, while the remaining seven companies provide only vague, boilerplate language.
Investors would benefit from the disclosure of comparable metrics related to journalistic integrity, such as those in the SASB Media Production & Distribution standard:
- Amount of legal and regulatory fines and settlements associated with libel or slander;
- Fact-checking expenses as a percentage of news production costs;
- Revenue from embedded advertising; and
- Discussion of management approach to assuring journalistic integrity of news programming related to: (a) truthfulness, accuracy, objectivity, fairness, and accountability, (b) independence of content and/or transparency of potential bias, and (c) protection of privacy and limitation of harm.
According to a Gallup poll, Americans’ trust in newspapers, TV, and radio has fallen to a new low, with only 32% of adults saying that they trust the media a “fair amount” or a “great deal.” Better disclosure on how media companies are upholding the principles of journalistic integrity would do much to restore their reputations and ensure they are not misleading the public, as well as to protect their revenues and market share from the onslaught of “fake news.”