Setting The Record Straight: News Media Alliance’s Request To Be A Cartel Ignores The Facts
Yesterday, The Wall Street Journal published an op-ed by its trade association, the News Media Alliance (NMA), offering an erroneous critique of America’s leading tech services to justify U.S. policymakers giving newspaper publishers permission to form a cartel. Antitrust exemptions are rarely granted because consumers lose when competitors collude. More importantly, the reason for the proposed exemption — the alleged “digital duopoly” — gets several key points about the tech sector wrong.
First, NMA ignores the reality that thousands of local media outlets have worked to partner with leading tech services and don’t agree with the NMA. When NMA first launched this effort in 2017, the Local Media Consortium (over 1,800 local outlets) argued NMA does not speak on behalf of the industry and that “partnerships align the news industry – print, broadcast and ultimately digital – with tech companies in a symbiotic relationship.” The Local Media Association (over 3,000 local outlets) responded saying, “LMA is intensely focused on fulfilling its mission on behalf of the industry, and will continue to pursue new partnerships and collaborations moving forward.”
Second, NMA argues that leading tech services are unfairly competing as a “duopoly”, but experts at the Technology Policy Institute and The Adam Smith Institute, among others, have argued newspaper publishers must adapt to changing market, not collude. Specifically, Technology Policy Institute’s Tom Leonard has noted, “newspapers have been criticized for being behind the curve when it comes to developing new business models appropriate for the internet age.”
Third, NMA’s “duopoly” claims obscure the fact that advertising is a competitive $540 billion global market across all mediums including TV, with new entrants — including News Corp itself with its NewsIQ digital ad platform that competes with Google and Facebook — and ignores the fact that publishers receive the lion’s share of revenue generated by leading ad networks, totaling billions of dollars a year.
Local Paper Associations View Leading Tech Services As Partners, Undercutting NMA Allegations
Local Media Consortium CEO Rusty Coates Says His Group Representing Over 1,800 Local Outlets Has Worked To Establish A Partnership With Leading Tech Services And Disagrees With NMA. “First, Chavern’s position ignores the LMC’s work during the last four years forging partnerships essential to us as providers of quality local content and local business solutions. Those partnerships align the news industry – print, broadcast and ultimately digital – with tech companies in a symbiotic relationship. The LMC has provided revenue opportunities for all levels of local media – and we’ve done that while leveraging our scale to garner both the attention and respect of the tech platforms. We have built partnerships based on shared value, not entitlement.” (Rusty Coates, Local Media Consortium, 2/25/18)
The Local Media Association, Representing 3,000 Newspapers, TV Stations, And Radio Stations, Notes They Are “Pleased With The Progress Being Made” Via Partnerships With Google And Facebook. “LMA, acting on the direction of our members and board, has actively pursued partnerships with Google and Facebook (as well as other leading technology companies) – partnerships that speak directly to our mission. We have actively engaged top leadership at both organizations, with the belief that a cooperative and collaborative environment is key to providing our members with the tools needed to evolve their businesses. These partnerships are far from one-sided, and we are approaching them very cautiously. Nearly a year ago, the LMA board appointed a committee led by Tom Sly, VP Digital Revenue, E.W. Scripps Company, to specifically work with Facebook. We are pleased with the progress being made, including strategic executive discussions, brainstorming and small project tests. Representatives from most of the country’s largest local media companies participated in these meetings with us.” (Local Media Association, “LMA’s Position on Facebook and Google,” 7/18/17)
Technology Policy Institute, Tim Worstall And David Goodfriend Have Argued That Rather Than Colluding, Newspaper Publishers Must Adapt To Changing Market
Technology Policy Institute’s Tom Leonard Argues Newspaper Publishers Want To Prevent Competition To Shield Themselves From Market Changes. “There is an inherent tension between these platforms [Google and Facebook], which want to maximize the amount of information freely available to their users, and newspaper publishers, many of whom want to preserve the subscription-based model.” (Tom Leonard, “Newspapers Don’t Need Anti-Trust Immunity,” Real Clear Policy, 9/7/17)
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“Resolving this tension is a tough challenge. But shielding the newspaper industry from competition is not the way to do it. Ultimately, the newspaper industry will have to come up with the answer itself. Newspapers have long been criticized for being behind the curve when it comes to developing new business models appropriate for the internet age.” (Tom Leonard, “Newspapers Don’t Need Anti-Trust Immunity,” Real Clear Policy, 9/7/17)
Attorney And Advocate David Goodfriend Explains That Large Newspapers Calling For An Antitrust Exemption Are Missing The Need To Focus On Innovation. “Ultimately, the future of Progressive media and all journalism probably lies in being more innovative about business plans and revenue models. Some, like TalkingPointsMemo and Slate, supplement their advertising revenue with premium content for subscribers. The big newspapers calling for an antitrust exemption so that they can legally collude in selling advertising seem to miss this point. We need fewer gatekeepers, not legalized collusion.” (David Goodfriend, “Journalism And Digital Platforms,” Huffington Post, 7/19/17)
The Adam Smith Institute’s Tim Worstall Notes That Newspaper Publishers Are Struggling To Preserve Their Past Influence As “Former Monopolies.” “The argument is that the two tech firms now dominate the online advertising market and if the newspapers are to survive to produce that democratically important public service journalism then they must be allowed to combine in negotiation. Myself I’m howlingly sceptical of the proposition, my own take being that the newspapers are suffering horribly from the collapse of their own former monopolies. … It stems from their former position as local monopolies spread across the country, local monopolies which are now dismembered as a result of the internet’s abolition of distance as an economic factor.” (Tim Worstall, “US Newspapers’ Problems Come From Their Former Monopoly, Not The Duopoly Of Facebook And Google,” Forbes, 7/10/17)
Publishers Actually Receive A Significant Share Of Advertising Revenues
CCIA President Ed Black Points Out That The Majority Of Revenues For Ad Placement Is Passed On To Sites Featuring The Ads. “The winners in this fierce competition are the publishers on whose sites advertisements are displayed. While it is sometimes stated that Google and Facebook earn 85% of new digital revenues, this is misleading, since the majority of the revenues for ad placement is passed on to the sites where the ads are placed. Google, for instance, transfers 68% of display revenues to publishers.” (Ed Black, “News Corp. Enters Competitive Advertising Market, While Denying It Is Competitive,” Huffington Post, 5/24/17)
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News Corp. Recently Entered An Already-Crowded Advertising Market. “And even within just the digital segment, competition is heavy. News Corp. joins platforms like Google and Facebook dueling with a host of digitally-delivered services for user attention, and therefore the opportunity to display relevant advertising.” (Ed Black, “News Corp. Enters Competitive Advertising Market, While Denying It Is Competitive,” Huffington Post, 5/24/17)
Google Has Continuously Increased The Proportion Of Display Ad Revenue It Distributes To Publishers Since 2014, Hitting 72 Percent In 2017. In Google’s financial reports (page 35), the revenue that goes to the publisher is called Traffic Acquisition Costs, or TAC. Overall, Google’s TAC rate was 71.9% in 2017. In other words, almost 72% of the revenue from showing ads on non-Google sites is paid out to publishers and content owners. As a proportion of network revenue, Google’s TAC has increased each year from 2014 (67.8%) to 2015 (68.1%) to 2016 (69.9%) and 2017 (71.9%). This means Google has increased the proportion of its display ad revenues to publishers each year since 2014. (“Form 10-K: Alphabet Inc.,” United States Securities And Exchange Commission, 2017)
CCIA’s Matt Schruers Argues Today’s Reality Is That “Advertisers Compete To Reach The Same Consumers Across Multiple Mediums,” With Digital Ads Competing Directly With TV, Print, And Outdoor Options. “Consider today’s reality: advertisers compete to reach the same consumers across multiple mediums. Services that deliver ads digitally to an individual’s mobile device don’t just compete against one another; they compete directly with television, print and outdoor options (e.g., highway billboards, subway stations, Times Square installations)…This competition is fierce, as advertisers continually shift budgets among platforms to maximize the return on their ad spend. What was once a quarterly or monthly re-evaluation of advertising programs has become a weekly and even a daily recalibration of how and where advertisers are reaching their audiences…As we’ve discussed here on DisCo before, Internet radio does compete with traditional broadcast radio – aggressively so. It would therefore be strange to suggest that advertising on digital radio doesn’t similarly compete with advertising on broadcast radio.” (Matt Schruers, “Infographic: How Ad Dollars Are Spent,” Project DisCo, 1/16/18)
WSJ’s Holman W. Jenkins Argues Tech Leaders “Hardly Dominate” The $540 Billion Advertising Market. “Facebook and Google together are said to be dominant in digital advertising. But digital ads are ads, a $540 billion annual market they hardly dominate.” (Holman W. Jenkins, “Tech Giants Are Less Powerful Than They Seem,” WSJ, 2/24/17)