We have been treated to a remarkable spectacle. A representative of public companies owned or with substantial stakes held by some of the richest men in the world writing an op-ed in the Wall Street Journal asking for exemption from antitrust laws so that they can maintain their business model:
The problem is that today’s internet distribution systems distort the flow of economic value derived from good reporting. Google and Facebook dominate web traffic and online ad income. Together, they account for more than 70% of the $73 billion spent each year on digital advertising, and they eat up most of the growth. Nearly 80% of all online referral traffic comes from Google and Facebook. This is an immensely profitable business. The net income of Google’s parent company, Alphabet, was $19 billion last year. Facebook’s was $10 billion.
But the two digital giants don’t employ reporters: They don’t dig through public records to uncover corruption, send correspondents into war zones, or attend last night’s game to get the highlights. They expect an economically squeezed news industry to do that costly work for them.
The only way publishers can address this inexorable threat is by banding together. If they open a unified front to negotiate with Google and Facebook—pushing for stronger intellectual-property protections, better support for subscription models and a fair share of revenue and data—they could build a more sustainable future for the news business.
But antitrust laws make such coordination perilous. These laws, intended to prevent monopolies, are having the unintended effect of preserving and protecting Google and Facebook’s dominant position. The digital giants benefit from legal precedent against collective action that has a chilling effect on publishers. Yet each newspaper or magazine on its own has only limited negotiating power.
Is that really their problem? Over the last decade total advertising spending has been flat in nominal dollars at around $200 billion, see here and here. The brief summary of what has happened is that newspaper advertising has declined by about $15 billion while online has grown by a little more than $15 billion. That sounds like the newspapers’ problem is slow private sector economic growth not Google and Facebook. I would also suggest that industry consolidation is a bigger problem for newspapers than Google and Facebook. National grocery chains are less likely to turn to local newspapers for advertising than small local grocers are.
To put the complaints of the president of the News Media Alliance into some perspective, very few of the 2,000 newspapers the organization claims to represent have any reporters. Most of them subscribe to wire services. Clearly, the pleading is on behalf of a very few media conglomerates, namely the New York Times and Washington Post. The Mexican billionaire Carlos Slim owns a major stake in the Times while Amazon’s Jeff Bezos owns the majority stake in the Post. One can’t help but speculate that these presumably savvy investors didn’t realize that these particular investment were actually very expensive hobbies.
Writing at Forbes Tim Worstall is skeptical of what’s being proposed:
When the US newspaper industry has slimmed down to that sort of level and also still can’t make a buck then perhaps something might need to be done.
There is also of course this other manner that we might want to consider. My fellow journalists think that having a large and vibrant newspaper industry is oh so terribly important to the citizenry of the country. By their actions the citizenry seem to be less convinced of this. I tend to think the people should get what they want, not what they’re told they should desire. No to the antitrust exemption therefore, let the newspaper industry adapt to the changing economic geography, don’t prop it up.
I think there’s good reason to be skeptical about the picture painted in the op-ed and not just for the reasons that Tim cites. The decline in newspaper ad revenues began more than a half century ago, long before Google and Facebook existed. What has actually happened is that media conglomerates have failed to change their business models even as the assumptions of those models failed.
The ad revenues of small local independent newspapers have declined much less in percentage terms than those of major newspapers. In some cases they’ve even increased. What I think has actually happened is that the subscription model for digital media has failed which has reduced online ad revenues for the digital outlets of major newspapers.
Instead of looking for exemptions from antitrust the Times and the Post might think less about being national journals and focus more on their local markets. That’s where the the ad revenues come from.
There’s another difference between small, independent local newspapers and media conglomerates. Media conglomerates have grown by taking on debt. It might just be the case the newspaper industry is not one in which carrying heavy debt loads is a good business decision. It isn’t the job of the federal government to indemnify investors against losses due to their own bad businesses decisions, Chrysler and GM notwithstanding.
