|By Euan Wilson and Matt Lampert, originally published in the November 2011 Socionomist|
Negative Social Mood Translates Into Positive Ratings for Cable News Networks
In May we explored the swings in popularity for Fox News’ Glenn Beck, a bear market icon whose recent fortunes correlated closely with changes in social mood as indicated by the stock market.1
This month, we set out to answer a larger question: Is the popularity of news itself mood-dependent? As our preliminary study shows, the answer appears to be “Yes.”
Figure 1 illustrates the aggregate viewership of the four major U.S. cable news networks. It shows that from 2000 to 2003, as social mood became more negative, the DJIA declined and news viewership went up. From 2003 to 2007, as social mood became more positive, the DJIA advanced and news viewership went down. But once again, social mood became more negative, causing the DJIA to collapse toward its 2009 low and news viewership to surge. Finally, social mood became more positive again, prompting the DJIA to rally and viewership to fall roughly in concert through the end of the survey period.
We decided to take a deeper look. First we retrieved monthly ratings data from the online repository mediabistro.com. The site gathers networks’ news ratings from network news releases. Its data go back to June 2005. We plotted the data and found a positive correlation (+44%) between the inverted DJIA and viewership. Further, we detrended the data to make certain that the inverse relationship is not due solely to general overall trends in both data series. The relationship held.
Finally, we singled out Fox News, the most-watched news network in America today2, for an even closer look (Figure 2). We found that Fox News’ viewership has fluctuated roughly inversely to mood. Positive mood peaked in 2000. Fox News’ viewership grew each year of the ensuing 2½-year decline (Trend A). Then, during the positive mood years of 2003–2007, Fox News’ viewership drifted lower by roughly 200,000 viewers (Trend B). But then as mood turned negative again through 2008 and 2009, Fox News gained 400,000 viewers, recovering double the previous years’ losses in less than half the time (Trend C). More recently, the channel hit its all-time peak in viewership at the end of 2009 and then began trending lower in concert with the DJIA’s rally from 2009 through 2010.
This short story seems to say that watching the news is a more compelling activity in bear markets. Why might that be the case? In 1999, Prechter’s The Wave Principle of Human Social Behavior noted a similar relationship regarding the markets and the popularity of economic cycle theories. Prechter reported that membership in the Foundation for the Study of Cycles tended to rise when the stock market fell and fall when the market rose, that books on cycles were strong sellers in the corrective period of the 1970s, and that at the stock market top in 1999, the Foundation for the Study of Cycles folded after more than 50 years of operation. Prechter offered this explanation:
The answer is that people equate uptrends with predictability and downtrends with unpredictability. [A] Harper’s Weekly quote from 1857 includes the phrase, “never has the future seemed so incalculable as at this time.” Translation: “The market has been falling for several years.” The media constantly characterize market setbacks as injecting “uncertainty” into a picture of the future that presumably was previously as clear as crystal. I am not exaggerating when I say that this foible is timeless.3
The idea is that during positive mood periods, people do not perceive as much uncertainty as they do during negative mood phases. They become more sure of things. “Everyone is an expert,” Prechter says.
A similar function may be at work in the news-watching habits of people. In other words, as they become less certain about the world, they look for more information in an attempt to understand what’s going on. They show their feelings of uncertainty in the markets during these periods, too, by bidding prices lower.
The results of our small study corroborate the idea that people are more inclined to (1) sell stocks and (2) tune into television news during times of increasingly negative social mood, which induces feelings of uncertainty. When mood recovers and the feeling of certainty returns, people pay less attention to the news.
We have long heard the adage, “bad news sells.” This study provides graphic and statistical evidence for that assertion. In addition, we suggest that it is not the traditional “prurient interest” or “anxiety” that fuels the increase in news consumption but misplaced feelings of uncertainty about the future. There is in fact no basis for people to feel less certain about the future during periods of negative social mood than during periods of positive social mood. One can be just as certain that a trend is down as that it is up. But since this is not people’s normal default, association of uncertainty with scary times is probably unconscious, just like social mood.■
1Wilson, E. (2011, May). The status quo returns: Optimism increases, dow doubles and society settles down: 2. Glenn Beck’s goodbye: The rise and fall of a cable news personality. The Socionomist.
2Stelter, B. (2011, October 9). Victory lap for Fox and Hannity. The New York Times, Retrieved from http://www.nytimes.com/2011/10/10/business/media/fox-news-and-hannity-at-the-top-after-15-years.html?pagewanted=all.
3Prechter, R. (1999). The Wave Principle of Human Social Behavior (pp. 342-343). Gainesville, Georgia: New Classics Library.
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Most economists, historians and sociologists
presume that events determine society’s mood. But socionomics hypothesizes
the opposite: that social mood regulates the character of social events. The
events of history—such as investment booms and busts, political events,
macroeconomic trends and even peace and war—are the products of a naturally
occurring pattern of social-mood fluctuation. Such events, therefore, are not
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predictable. Socionomics also posits that the stock market is the best available
meter of a society’s aggregate mood, that news is irrelevant to social
mood, and that financial and economic decision-making are fundamentally different
in that financial decisions are motivated by the herding impulse while economic
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