NMA’s “Cartel Solution” Would Do Little To Bolster Innovation In News
A new op-ed from trade association News Media Alliance’s president and CEO David Chavern dismisses the contributions of leading tech services and argues publishers should form a cartel and extract rents by implementing controversial new regulations. In reality, though, leading tech services have taken great steps to empower publishers in the Internet Age, while the “cartel solution” would do little to bolster innovation.
NMA dismisses leading tech services’ investments in journalism as throwing money at a problem, but these initiatives are partnerships helping publishers transition to the new online world.
Google: As a longtime partner of news organizations, Google has helped train over 500,000 journalists across the world in digital tools. In 2018, the company committed $300 million over the next three years to help publishers transition online through the Google News Initiative.
Buzzfeed is working on new revenue innovations as part of the Google News Initiative to “pilot a membership model that will ask readers to contribute to the news outlet. Similar to The Guardian, which has had success soliciting donations from readers, BuzzFeed News is adding messaging to pages that solicits small donations of $5-$100. The initial benefits will be updates on big investigations and new video programming.”
Facebook: The social network plans to invest $300 million into journalism initiatives over the next three years, with a significant portion of that going to local news organizations.
Facebook’s contributions are appreciated by recipients for their independent nature, as noted by Pulitzer Center founder Jon Sawyer: “We are grateful for Facebook’s commitment to helping us meet the challenges of today’s journalism, especially in smaller cities where the survival of news outlets depends on new models of reporting and community engagement.”
Relationships between leading tech services and publishers are mutually beneficial, despite what Chavern suggests. To monetize their content, publishers use tech platforms, who then pass on the majority of their revenue to the publishers.
As former Local Media Consortium CEO Rusty Coates once said, the group, which represents 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.”
Facebook invested $1 million in the Local Media Association/Local Media Consortium as part of its broader $300 million rollout.
Incentives for leading tech services are aligned, per Google Chief Business Officer Phillipp Schindler: “Schindler said Google has ‘two clear business incentives’ to support high quality journalism. First, he said Google search ‘by its very nature depends on the open web and depends on open access to information and that obviously depends on high quality information.’ Second, he noted that Google’s DoubleClick ad business is all about splitting revenue with publishers, with $12.6 billion paid out to partners last year. ‘The economics are very clear: If you do not grow, we do not grow,’ Schindler said.”
CCIA President Ed Black: 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.“
NMA supports Rep. David Cicilline’s efforts to use antitrust exemptions to create a cartel out of the publishing industry — a “solution” that doesn’t incentivize innovation or adaptation to the Internet Age.
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.”
Professor of Journalism and Communications Jeremy Littau: “The crisis facing American journalism did not start with the internet.” “In the pre-internet world, papers functioned as pseudo-monopolies based on the limits of technology and the radius a delivery truck could travel. Online publishing, with its low cost and global reach, changed everything. Those information needs could be met by a wider, more global array of choices. The newspaper was not the only game in town. Newspapers that once lacked competitors were competing with everyone, and they were unprepared after decades of scant investment. The tragic mistake these companies made was not that they gave away content for free, as one argument goes, but rather that they took too long to realize the internet had destroyed their local monopoly on meeting citizen’s [sic] information needs. They should have safeguarded their connection to this community of readers who were their advertising golden goose. Instead, they hunkered down and treated the internet as just another place to publish, and they paid dearly for it.”
Proposals to adopt controversial European regulations on linking are geared toward providing additional revenue streams for news publishers, but the European experience shows a lack of success.
CCIA’s Disruptive Competition Project: These laws “simply do not work.” “Statements like these as well as the experiences with the Spanish ancillary copyright confirm that such laws simply do not work. To put it bluntly, the underlying flaw in this strategy is that these legislative proposals misuse copyright for industrial policy purposes. It remains unclear which problem or market failure these laws actually try to solve. The impact of these proposals on digital services has been discussed at length, not least because of the high-profile Google News shutdown in Spain. What has not been so widely discussed, at least until very recently, is the impact on media plurality and competition in news publishing. The recent study produced by NERA Economic Consulting at the request of the Spanish Association of Publishers and Periodical Publications has shed some light on this issue.”
Additionally, as Project DisCo notes in a separate deep-dive, the experience of news publishers in Europe shows this tactic doesn’t lead to more innovation or choice. “If new publishers received this exemption, consumers can expect to see increased prices, less choice (as news publishers lose the incentive to explore different business models), reduced innovation in news offerings, and a reduction in information diversity as smaller publishers are shunted to the sidelines.”
Technology Policy Institute’s Thomas M. Lenard: Granting antitrust exemptions to publishers would likely harm consumers as well as the economy. “It is, therefore, unsurprising that a bipartisan Antitrust Modernization Commission in 2007 described antitrust exemptions as ‘harmful,’ ‘pernicious,’ and ‘likely to harm both U.S. consumers and the U.S. economy.’ The News Media Alliance argues that an antitrust exemption is necessary because “antitrust enforcers have declined to address Google and Facebook’s growing dominance, enabling the digital giants to roll up the information economy.” The Alliance notes that these two companies together account for more than 70 percent of the $73 billion spent on digital advertising. Setting aside the fact that this statistic distorts the extent of competition by ignoring entry into the market by major players such as Amazon and News Corp, it is wholly irrelevant to the real problems newspapers face.”