More on Newspapers and Aggregators

If newspapers ultimately survive, they might owe a debt of gratitude not only to Rupert Murdoch (as Patrick Maines suggested here recently), but also to two brothers who have combined their expertise in economics and the law to analyze the problem and come up with a potential solution.

As I wrote here earlier this month, online aggregators quite possibly could kill off newspapers by pirating the papers’ original news content.   Among the industry watchers who have studied this phenomenon are Daniel Marburger, Ph.D., a professor of economics at Arkansas State University, and his brother David Marburger, Esq., a partner at the Baker Hostetler law firm in Cleveland.   

The brothers have conducted an extensive analysis of both the economic and legal frameworks of the newspaper industry (print and online), and how these frameworks intertwine in the digital age.  In a number of papers and articles, the Marburgers have gone beyond the usual observations in two important ways: (1) They draw a distinction between “pure aggregators” and “parasitic aggregators”; and (2) they suggest a way of closing a loophole in copyright law that would seriously curtail the so-called parasites.

“Pure aggregators,” they say, use only a headline and maybe a sentence from the original news source, and then link back to that source (i.e., a newspaper website).  Pure aggregators are economically good for papers on balance because they drive readers to the newspapers’ websites.

“Parasitic aggregators,” on the other hand, take content from newspaper sites, rewrite it a bit, and then pass it off on their own sites.  These parasitic aggregators are bad because they retain readers rather than drive them to the newspapers’ sites.

In the Marburgers’ longest paper on the economic viability of newspapers, two section titles sum up the problem and its effect: “The federal copyright act allows parasitic aggregators to ‘free-ride’ on others’ substantial journalistic investments”; and “If the law does not change, newspapers continually will diminish their journalistic resources until they can subsist only by underproducing news or until they go out of business.”

The Marburgers’ solution would allow newspapers to seek redress for unfair competition under state statutory or common-law remedies for unjust enrichment – remedies that federal copyright law has in effect precluded since 1976.  They’re not suggesting a new law – just an amendment to Section 301 of the Copyright Act.

In this short space I am oversimplifying the Marburgers’ excellent analysis and recommendations – but I hope I can help draw attention to a thoughtful paper that is worthy of serious consideration and widespread recognition.   

A Matter of Trust

We’ll know soon whether the proposed Google-Yahoo! advertising deal will be challenged by the Department of Justice. Certainly there are signs, most notably the hiring of antitrust litigator Sanford Litvack, that it may do so.

But figuring out what is, and is not, in restraint of trade is kind of tricky these days.  In 2002, antitrust concerns derailed the merger of DirecTV and Echostar, a union that would have reduced the number of satellite TV companies from two to one.  Yet just this summer, the two companies that comprise the whole of the satellite radio industry were allowed to merge.

So the opinions that follow aren’t informed by any special knowledge of what the DOJ will do, or even by the factors that will carry the greatest weight within that agency.  By whatever market analysis the DOJ employs, the deal that some refer to as GooglyHoo either will or will not be allowed to go forward.

The question being addressed here is narrower.  It is what the deal might mean to online publishers.  Because of the inherent uncertainties in a deal not yet consummated, much less experienced, we don’t have all the facts.  But there’s a difference, as someone once said, between a lack of complete knowledge and a complete lack of knowledge.  We don’t know everything about GooglyHoo, but we know enough to be worried.

Importantly lurking in the background of this matter is the parlous state of journalism and the legacy media.  In the introduction to its State of the News Media 2008, here is how the Project for Excellence in Journalism (PEJ) put it: “The crisis in journalism, in other words, may not strictly be loss of audience.  It may, more fundamentally, be the decoupling of news and advertising….  Online, the problem is that the revenue model is in search, not conventional, advertising — and journalism sites are now already lagging behind other Internet sectors financially.”

In a Perspectives piece published by The Media Institute earlier this week, attorney Stephen Kinsella suggests a number of ways in which the Google-Yahoo! ad deal could harm the interests of publishers.  Most directly, he says the deal would mean that “online publishers will earn less revenue from their search syndication and contextual advertising deals.”

“Google and Yahoo!,” Kinsella notes, “are currently the two major players in syndicated search and contextual advertising, and compete with each other for these deals with online publishers.  This competition is what pushes both companies to offer more advantageous terms to online publishers.  A Google-Yahoo! agreement will weaken Yahoo!’s competitiveness in bidding for these deals, simply because Yahoo! will have fewer of its own ads to serve as advertisers increasingly migrate away from Yahoo!’s higher prices following the implementation of the deal.”

A similar argument was made by the World Association of Newspapers (WAN).  On Sept. 15, this umbrella organization for some 18,000 newspapers worldwide asked competition authorities in Europe and North America to block the deal, saying it would have a negative impact on the ad revenues that the search firms provide to newspapers.

Quoth the WAN: “The competition that currently exists between Google and Yahoo! is absolutely essential to ensuring that our member titles receive competitive returns for online advertising on their sites….  In our view, the proposed advertising deal between Google and Yahoo! would seriously weaken that competition, resulting in less revenues and higher prices for our members.”

Concerns about the prospective anti-competitive effects of the deal have also been expressed by the leading U.S. advertising association, the Association of  National Advertisers, and with less vigor by the American Association of Advertising Agencies.

The concerns and objections raised by these individuals and organizations do not, of course, prove that the Google-Yahoo! ad deal would be ruinous to online publishers, or that the deal would mark the beginning of the end for Yahoo!.  But given the current state of the legacy media, and their future reliance — if they have a future — on online advertising, it is not surprising that this deal has alarmed many people.

Judging by some of its business practices and policy positions, as posted here in July, Google the company (as distinguished from Google the search engine) disappoints in many ways.  And at the end of the day this disappointment, if shared, may be a matter of some moment.  Because given the opacity and potential harm of this proposed deal, the question of support for it may come down to a matter of trust.  And the view from here is that Google hasn’t earned that trust.

The Real Problem With Radio

Washington radio icon Chris Core was given the boot in February after 33 years behind the microphone at WMAL-AM in the Nation’s Capital.  He was part of a cost-cutting move by the station’s owners, who also fired the entire on-air staff of sister station WJZW-FM.

Marc Fisher, a Washington Post reporter who had written “The Listener” radio column since 1995, wrote his final column and signed off June 1, as he lamented the passing of “the kind of eccentric, iconoclastic voices that made radio so alluring from the 1950s into the ’80s.”  Now, Fisher says, the talent is “mostly anonymous and amateur.”  The implication: Radio in the Washington, D.C., market isn’t worth writing about anymore.

Critics of “media concentration” will be quick to seize on the tales of Core and Fisher to “prove” that big is bad.  They will tell us that the multiple-station ownership practiced by big companies like Clear Channel and Citadel (which now owns WMAL) is the root cause of all that is wrong with radio today, from the loss of “localism” to the homogenization of programming.

Unfortunately, these critics will be exactly wrong.  Media concentration is not the cause of radio’s problems – it is an effect of something else entirely: the fragmentation of audiences that has come about as exploding technology has given the public a whole new panoply of delivery platforms.

Listeners (and especially young listeners) are getting their audio fix via satellite radio, Internet radio, cell phones, and PDAs, and can create their own mix on iPods and MP3 players.  Don’t forget free HD radio and, soon, free Internet radio in cars.  The always-philosophical Core recognizes that “radio stations have to either evolve from their traditional ways or wither.” 

Kenneth J. Goldstein, president of Communications Management Inc., presciently observes that fragmentation not only is the cause of consolidation (as station owners try to re-aggregate audiences), but also of cost pressures, less localism, content sharing, and stretching the boundaries of taste. 

Regrettably, policymakers are being bombarded with the big-is-bad “concentration myth” by critics of multiple ownership.  However, until policymakers understand the issue correctly (i.e., realize that media consolidation is merely one effect of technology-driven fragmentation), the debate is fated to be an uninformed waste of time.  And any policy “solutions” that spring from such a spurious debate are almost sure to be catastrophic.

Continue reading “The Real Problem With Radio”

Cross Ownership: That ’70s Show in the Senate

There they go again. No, not the FCC.  This time it’s the U.S. Senate, still worried after all these years that the same company might own a newspaper and a TV station in the same market.  The Senate recently passed Senate Joint Resolution 28, which cancels a very modest attempt by the FCC to relax the newspaper-broadcast cross ownership rule in the nation’s top 20 media markets.

In effect, the Senate is saying that ownership of newspapers and TV stations should be restricted just as it was in 1975 when the rule was adopted – when viewers in big cities were lucky to get six over-the-air channels, and “cable” was still the “community antenna” in rural areas.

The effort to relax or even eliminate the cross ownership ban has gone on for years, even as the FCC was repealing virtually all of its other ’70s-era ownership restrictions.  The FCC’s action on Dec. 18 wasn’t much, but it was still too much for a Senate that’s apparently afraid to move out of the 1970s.

John F. Sturm, president and CEO of the Newspaper Association of America, summed it up when he said: “It is incomprehensible that Congress would shackle local newspapers – and only newspapers – with a ban that fits the eight-track era, but not the iPod world we live in.”

There is no logical reason for the Senate to act this way.  Could the reason be political?  Congress and the FCC are routinely barraged with mass e-mails orchestrated by various interest groups.  The magnitude of these mailings can appear far greater to policymakers than it really is.  Think of the man behind the curtain in "The Wizard of Oz."

A popular policy target of such groups has been “media consolidation,” always portrayed as a looming evil.  But in today’s economic environment, multiple ownership of media outlets has become an economic necessity – a matter of survival. 

Critics fear that “consolidation” will result in fewer voices and viewpoints reaching the public.  The real danger, however, is that media voices will be lost as struggling newspapers and broadcast outlets are forced out of business, suffocated by antiquated rules that prevent them from taking advantage of the economies of scale that come with multiple ownership.

It will be ironic indeed if the anti-consolidation forces triumph, leaving us with less rather than more media diversity.  The politically timid Senate is playing right into the critics’ hands.  It’s time for our solons to pitch their eight-tracks and reach for an iPod.