Newspaper Group’s Hope for Antitrust Exemption Is a Hail Mary Pass

by Mathew on July 10, 2017 · 17 comments

The news came by way of a softball pitch of a story from the New York Times: The News Media Alliance — a group formerly known as the Newspaper Association of America — says it plans to ask Congress for a special exemption from antitrust regulations. Why? So that its members can work together to negotiate with Google and Facebook for better terms.

According to the story in the Times (which is a member of the Alliance and supports the lobbying effort) the group’s plan isn’t just about the fight for digital territory, it’s about the endurance of “quality journalism,” which the paper says is “expensive to produce, and under economic pressure as never before” from fake news that gets promoted by Facebook.

If you feel a twinge of something when you read that, you’re not alone. The first thing I thought was “So quality journalism only comes from the members of the News Media Alliance?” That’s some excessive hubris you’ve got there, folks.

This sense of entitlement is at the core of what the NMA is proposing. In effect, it is suggesting that mainstream newspaper companies are the only entities capable of producing quality journalism, and therefore they deserve a get-out-of-jail-free card so they can engage in what amounts to collusion. And they are hoping Congress will see Google and Facebook as the enemy.

Here’s a thought: What if these newspaper companies had spent a little more time trying to compete over the past decade or so, instead of relying on their historic market control to keep their profits rolling in? What if more had tried to improve their websites and their mobile versions, so that users wouldn’t install ad blockers, or turn to other solutions like Facebook Instant Articles?

Every single competitive threat the newspaper industry has faced, from Craigslist to Facebook, has been visible long before it decimated the industry’s profits, and most of the newspapers in the NMA did little or nothing to deal with them until it was too late.

Would Facebook and Google have become just as dominant in the advertising business if that had happened? Probably. But only because they can offer demographic targeting that no newspaper has even tried to produce, let alone succeeded at producing. And in Google’s case, it controls much of the “programmatic” or automated ad bidding market, which has driven prices down.

As Ben Thompson noted in an essay on the topic for his subscription newsletter Stratechery (which I encourage you to subscribe to), the case made by the NMA’s David Chavern is based on a myth: The group argues that it needs help negotiating with Google and Facebook so that it can repair the damage done to its quality journalism business. But quality journalism has never actually been a business.

“The truth is that newspapers made money in the past not by providing societal value, but by having quasi-monopolistic control of print advertising in their geographic area; the societal value was a bonus. Thus, when Chavern complains that “today’s internet distribution systems distort the flow of economic value derived from good reporting”, he is in fact conflating societal value with economic value; the latter does not exist and has never existed.

And yet, this is the classic argument from the industry — that they need to be protected because they are are only ones capable of producing that socially valuable journalism. The Alliance’s counsel, Jonathan Kanter, said that “we’re not just talking about widgets, we’re talking about news, and news is crucial for a democratic society.”

Okay, so let’s assume the group’s journalism is crucial for democracy. And what are the newspapers asking for? They want better terms from Google and Facebook, i.e. more ad revenue — but they also want support for subscriptions. In other words, paywalls. So this product that is crucial for democracy is only delivered to people who can afford to pay, and all of the revenue from that flows to a private company’s bottom line.

This is the kind of thing that drives Thompson to refer (correctly, I think) to what he calls the “suffocating sense of entitlement and delusion” that flows throughout the NMA’s proposal, which “expects someone — anyone! — to give journalists money simply because they are important.”

Realistically speaking, there’s approximately zero chance that Congress is going to exempt the NMA from antitrust rules (although the group may also be hoping that bringing up the subject gets regulators interested in looking at Google and Facebook and their advertising duopoly). But even if it did, it’s unlikely that collective bargaining would help the news industry where it counts.

The reality is that even if newspapers have a monopoly on quality journalism — which is a stretch — they no longer have the monopoly their business was based on, which is the control over advertising. And that’s because they don’t control the distribution of their content, and never will.

It certainly won’t be easy, but there are ways for newspaper companies to compete in this environment, and they don’t involve illegal collusion in an attempt to extort more ad revenue from Google and Facebook. That’s a Hail Mary pass that has little or no hope of succeeding, and likely wouldn’t help the industry much even if it did succeed.

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