Felix Salmon of Reuters put forth a controversial business proposition involving The New York Times in an article yesterday: why not charge hedge funds a fee in order to receive breaking news of investigative stories a full trading day before publication?
Salmon came to this conclusion when the value of Wal-Mart’s shares plunged after the Times published an exposé over the weekend about alleged bribery of Mexican officials by the company, he said in the article.
Noting how much the piece affected the stock market, Salmon suggested that the Times could take advantage of this influence by allowing corporate clients early access to such investigative material for a price, which could supplement the paper’s losses in revenue.
“But how much would hedge funds pay to be able to see the NYT’s big investigative stories during the trading day prior to the appearance of the story?” Salmon wrote. “It’s entirely normal, and perfectly ethical, for news organizations, including Reuters, to give faster access to the best-paying customers.”
Salmon explained that editors can simply send the stories out to clients under a “strict embargo,” which would prevent them from publishing the content before the designated date. He seemed to skate over the issue of possible insider trading, however:
“The main potential problem I see here is that if such an arrangement were in place, corporate whistleblowers might be risking prosecution as insider traders,” he wrote. “But I’m sure the lawyers could work that one out. The church-lady types would I’m sure faint with horror. But if hedge funds are willing to pay the NYT large sums of money to be able to get a glimpse of stories before they’re made fully public, what fiduciary could simply turn such hedge funds away?”
While the idea of paying for early access to scoops might be treading into murky legal waters, the practice raises ethical questions as well. While conceding that newswires such as Reuters and Bloomberg regularly share financial news with paying clients before the public, Matthew Ingram of Gigaom suggested that papers such as the Times should continue to disseminate investigative news according to the public interest, and that changing that editorial structure would in effect change the face of the newspaper.
“I think there is still some kind of public-service or public-policy value in journalism, and especially the news — I don’t think it is just another commodity that should be designed to make as much money as possible,” he wrote. “And if The New York Times were to take stories that are arguably of social significance and provide them to hedge funds in advance, I think that would make it a very different type of entity than it is now. What if it was a story about a dangerous drug or national security?”
The notion of charging for earlier access to content also seems in itself to favor the highest bidder; instead of benefiting smaller traders, too, only the big players with enough money to pay for the wire service would receive the tips.
Ingram also brought up the fact that news organizations can alienate readers with less means to pay for news by implementing high payment systems, such as the hard paywall at London’s Financial Times. In contrast, according to The Guardian, the metered paywall at The New York Times has been relatively successful with about a half million subscribers, so it doesn’t seem likely that the Times would embrace an exclusionary practice like the proposed newswire.
Of course, there’s also the question of whether scoops are really even worth a high price at this point, with journalists often breaking news on Twitter and most online organizations aggregating stories that they didn’t break themselves. According to Salmon, investigative stories such as the Wal-Mart one can have a deep impact on markets if shown to the right people; but are the potential risks to the integrity of newspapers worth it for a few more bucks?