Before Tomorrow’s SJC Hearing, Get Up To Speed On Competition In News
Tomorrow, the Senate Judiciary Committee will hold a hearing on “journalism, competition, and the effects of market power on a free press.” Ahead of that hearing, it’s important to understand that the news industry already enjoys dynamic competition and that the proposed regulatory “solutions” would harm the market. Here’s what you need to know:
— News readership is growing and American news preferences skew toward online media versus print.
— A majority of new ad revenue for digital platforms comes from new sources.
— Tech services have helped media reach consumers on multiple platforms and have streamlined opportunities for consumers to access news.
— Overhauling regulation to protect competitors instead of competition would harm the market and consumers’ access to information.
News readership is growing and American news preferences skew toward online media versus print.
More than half of Americans are increasing their news readership, and they’re doing so online, explains a 2021 Accenture study. “Over the [15 years to 2018], more than half of Americans report their overall consumption of news has increased significantly or somewhat. The decline in print readership has been more than made up for by the increase in online readership. Americans are also increasingly willing to pay for that online readership. This has supported a stabilisation of circulation revenues and increase in digital subscriptions.”
— The study also finds: “Print circulation has remained stable over the five years to 2018, while paying digital audiences have grown rapidly.”
Technology offers new and innovative tools for news publishers to effectively reach their audiences, notes Thomas Bihlmayer of the Association of the Internet Industry. “And I mean, Cathy pointed it out, it should be kind of the time right now is the perfect time for spreading your news, for being a journalist, for maybe even being a publisher. Using the tools that are out there, given by the so-called big tech, and just reaching the audience you want to reach. I mean, it’s easier than it was ever before to, even if you have a very specific, very narrow specialty or special field of interest, to reach an audience making it worth writing for them.”
A majority of new ad revenue for digital platforms comes from new sources.
Almost three-quarters of search advertising growth has been new development finds Accenture. “[N]early three-quarters of the growth of online search advertising has come from new growth rather than displacing the existing markets of traditional advertising. These new advertising dollars are coming in part from changing readership patterns and also the rapidly growing participation of small and medium-sized businesses in advertising spending, as they are now able to choose from a more diverse array of advertising platforms.”
The growth of online search advertising has primarily come from “new opportunities as the overall market grew,” finds an Accenture study. “Online search advertising grew $51.4 billion in between 2004 and 2018, which amounts to a CAGR of 20%. Almost three-quarters of the growth ($38.1 billion) came from new opportunities as the overall advertising market grew. In other words, search won market share over other categories of advertising, but did not reduce the absolute value of advertising spend in these other categories. Online search has represented an entirely new way for advertisers to connect with their clients that is scalable and cost-effective. Furthermore, small businesses are focusing more keenly on how much they spend on advertising, and have been steadily increasing this amount over the past few years. The remaining $13.3 billion of online search revenue growth was captured from print directories and trade magazines. No other category of media advertising has declined materially in absolute value since 2004 that is attributable to online search.
Tech services have helped media reach consumers on multiple platforms and have streamlined opportunities for consumers to access news.
Tech services enable news publishers to reach wider audiences than ever before, notes CCIA’s Matt Schruers. “These services enable publishers, journalists, and other content producers of all sizes to reach a larger, global audience at a fraction of the cost of traditional formats. This has permitted traditional publishers and media outlets to greatly expand their audience through their websites, apps, and social sharing. Newspaper website traffic continues to grow. The average monthly unique visitors for the top 50 newspapers rose from 8.2 million in 2014 to 11.5 million in 2017, an increase of 40%.”
Publishers gain more from reader traffic and subscriptions than the tech services that send readers to them, writes the Washington Post Editorial Board. “[P]ublishers (including The Post) make more money from the traffic and subscriptions they gain through platforms than platforms do from monetizing the material publishers put there. What platforms gain is high-quality content and a healthier information ecosystem.”
In fact, Google does not run ads on Google News, reminds Slate’s Jordan Weissman. “Google does not actually run any ads against its Google News app, which means they don’t directly monetize it, and if you use its regular search bar to look up the news of the day, there’s a good chance you won’t get much if any advertising either.”
For smaller outlets, Google News increases news consumption by as much as 26.3%, and article page views by 44.6%, finds an NBER working paper. “A striking pattern can be observed when we compare the total news consumption of treatment and control users: while the effect of Google News on the top 20 publishers is not statistically significantly different from zero (with estimates small in magnitude), smaller outlets gain as much as 26.3% from the presence of Google News. When we dissect this effect by page view type we see that the availability of Google News changes the page view mix towards articles and away from landing pages for larger outlets, but that the two effects cancel in the aggregate. For smaller outlets, the landing page traffic is unaffected by Google News but article page views increase by 44.6%.”
— The paper continues: “We find that the shutdown of Google News reduces overall news consumption by about 20% for treatment users, and reduces page views on publishers other than Google News by 10%. This decrease is concentrated around small publishers. We further find that users are able to replace some but not all of the types of news they previously read. Post-shutdown, they read less breaking news, hard news, and news that is not well covered on their favorite news publishers.”
The current media environment is characterized by abundant consumer choices and fierce competition for ad dollars, said broadcast industry representatives in a recent amicus brief to the Supreme Court. “As the costs of producing and distributing local news and other local programming continue to climb, local broadcasters are simultaneously required to navigate a media marketplace populated with abundant other sources of programming that compete with broadcast television for viewers—and for advertising dollars.”
Data from Pew Research Center shows that more than eight-in-ten Americans get their news from digital devices. “More than eight-in-ten U.S. adults (86%) say they get news from a smartphone, computer or tablet “often” or “sometimes,” including 60% who say they do so often.”
Other highlights from that research include:
— “When asked which of these platforms they prefer to get news on, roughly half (52%) of Americans say they prefer a digital platform – whether it is a news website (26%), search (12%), social media (11%) or podcasts (3%).”
— “About two-thirds of U.S. adults say they get news at least sometimes from news websites or apps (68%) or search engines, like Google (65%). About half (53%) say they get news from social media, and a much smaller portion say they get news at least sometimes from podcasts (22%).”
— “Among digital platforms, the most preferred [platform] for news is news websites or apps: About a quarter of U.S. adults (26%) prefer to get their news this way, compared with 12% who prefer search, 11% who prefer to get their news on social media and 3% who say they prefer podcasts.”
Overhauling regulation to protect competitors instead of competition would harm the market and consumers’ access to information.
The bill being considered to regulate this industry could “reduce free and open access” to the internet and information, explains consumer advocacy group Public Knowledge. “[T]he JCPA, and particularly what would be required to enact it, would actually reduce free and open access to the internet, and the information available to citizens for civic engagement.”
— Public Knowledge continues: “There were and are multiple drivers for the financial downturn in news, and changing copyright law is the wrong way to address most of them. It risks undermining the open nature of information on digital platforms and elsewhere on the internet. A negotiation based on intellectual property rights will invariably favor and entrench the largest players. And if the principle becomes established in law, we can expect it to expand, undermining the free and open access that makes the internet such an important medium of information, speech and civic engagement.”
Proposals to change the way consumers access news online would block “an important aspect of the value of web content”, writes Professor Tim Berners-Lee. “Requiring a charge for a link on the web blocks an important aspect of the value of web content. To my knowledge, there is no current example of legally requiring payments for links to other content. The ability to link freely – meaning without limitations regarding the content of the linked site and without monetary fees – is fundamental to how the web operates, how it has flourished till present, and how it will continue to grow in decades to come.”
The JCPA would give news publishers “a get-out-of-jail-free card with respect to antitrust law,” explains Matt Schruers. “This bill and its House companion, H.R. 1735, aim to subsidize news publishers by giving them a get-out-of-jail-free card with respect to antitrust law. A U.S. antitrust exemption inviting competing news publishers to coordinate was enacted in 1970, with no success. This newer proposal is an import: the idea of redistributing revenues from the U.S. tech sector to news conglomerates is popular in the European Union, Australia, and elsewhere, having gained support from News Corp and others who stand to gain if regulators increase their rivals’ costs.”
— Schruers continues: “Policymakers will not solve news publishers’ challenges by trying to insulate them from each new wave of competing media through cartelization, even if this idea has found favor in France and Australia, with an assist from Microsoft.”
— “[M]arket economies don’t solve problems by blessing ‘special’ industries with the privilege of not playing by the rules. A sustainable news industry needs more than a get-out-of-jail-free card.”
The JCPA would carve out exemptions that would make it harder for smaller players to survive in the digital age, explains Rachel Chiu of the Cato Institute. “If enacted, the JCPA would carve out antitrust exemptions for print, broadcast and digital news companies, enabling them to collectively negotiate with social media and online platforms. The bill’s sponsors argue that it is necessary to protect small news outlets — a worthwhile cause, yet not achieved by the JCPA. Contrary to its name, the bill does not promote competition nor preserve local community news. But it will make it harder for the struggling newspaper industry to survive in the digital age.”
Cathy Gellis, internet lawyer and policy advocate, explains that regulations should focus on getting rid of barriers—not creating them. “And I think some of the answer from a regulatory standpoint is not necessarily regulation that is thou shalt not, thou shalt, or mandates of what a company needs to do. Thou shalt have the interoperability. Maybe the thing to do is what I was saying earlier, get rid of the barriers and look for the fluidity so that people’s innovations, innovative spirit can take root and actually produce something without fearing that they’re going to be chilled.”
— Gellis continues: “So this should be a fantastic period for journalism in America and probably the world, and the fact that it’s not, we need to figure out why. But this external scapegoating of, well let’s blame the toolmakers who are providing these other mechanisms I don’t think is the way to go.”
Antitrust immunity for specific groups distort the free market and harm consumers, explains a report from the Antitrust Modernization Commission. “Typically, antitrust exemptions create economic benefits that flow to small, concentrated interest groups, while the costs of the exemption are widely dispersed, usually passed on to a large population of consumers through higher prices, reduced output, lower quality, and reduced innovation.”
Antitrust carve-outs would primarily end up benefiting the largest media conglomerates, writes legal scholar, Professor Thom Lambert. Exemptions would “immunize collusive conduct by such major conglomerates as Murdoch’s News Corporation, the Walt Disney Corporation, the New York Times, Gannet Company, Bloomberg, Viacom, AT&T, and the Fox Corporation.”
Regulation should tackle underlying issues directly rather than attacking competition in the broader market, explains CCIA’s Matt Schruers. “The intense competition taking place in the advertising sector is generally healthy and benefits the U.S. economy. It has given people more access to information at lower costs. But some traditional news publications have struggled to compete in the face of changing consumer habits and a new media environment. Policies to address this effect may be appropriate, but should tackle directly the news production problem, and not impair competition in the broader advertising market.”
Consumers win when antitrust focuses on competition—not competitors, explains Schruers. “As the head of an association that has defended free competition in the marketplace and fought media consolidation, I am well aware of the role that governments should play in safeguarding consumers’ welfare. But regulators should protect the competitive process, not competitors. Consumers win when competitors have to slug it out in the marketplace for their dollars or attention. Prices fall, quality rises, innovation increases.”
— Schruers continues: “Cheerleading regulations that would hamstring rivals, seeking to beat the competition not in the marketplace but rather the regulatory ‘swamp’ ー what I’ve called ‘swampetition’ ー is a strategy to which politically sophisticated companies sometimes turn.”