Good journalism needs money to survive, social media is not helping

The Journalism Competition and Preservation Act will allow news organisations to bargain collectively against tech platforms

By David Chavern

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Published: Wed 12 Jun 2019, 9:00 PM

Last updated: Wed 12 Jun 2019, 11:17 PM

The news media has played a key role in US democracy since our founding. Its mission has been to enrich society's knowledge base and to foster public discourse that is vital in a healthy democracy. And over the years, the news media has fulfilled that mission.
We are an industry of innovators. News organisations have always been among the first to adopt new technologies and to find new ways to connect with the public. That has never been more true than with the advent of the Internet. Over the past two decades, news organisations have rapidly evolved from providing content solely in print to offering digital access across a range of mediums and devices. In doing so, they have reimagined the ways in which they report news and distribute content: They have invested in making sure their audiences have up-to-the-minute facts about rapidly developing world events. They have personalised news by delivering stories that are most relevant to individual readers. They have developed new ways to gather, analyse, and present data that gives people a deeper understanding of their world. They have created apps and websites to offer a better user experience that invites audiences to engage more deeply in current events. And they have invested in video, podcasting, and other online media formats to connect with audiences in new ways.
The news media has thus been at the forefront of embracing and adapting to the digital age. But at the same time, the rise of digital news distribution has introduced new, potentially existential threats to the news industry. Specifically, the emergence of dominant tech platforms as intermediaries between news organisations and their audiences threatens to bring to naught the news industry's investments in a digital future.
Online platforms serve an important purpose. Today, 93 per cent of Americans get at least some of their news online.  Digital platforms help online users find news and other content that they might otherwise miss. In doing so, they have contributed to the enormous growth in digital news audiences over the past two decades.
In the same way that digital platforms are critical for online news, online news is critical for the digital platforms. According to a study conducted by NMA, approximately 40 per cent of clicks on "Trending Queries" and 16 per cent on high-volume queries in Google Search are news content. That translates into big money for Google. Our researchers estimate that links to news content have earned approximately $4.7 billion annually for Google in search advertising revenue - and that number does not even include the revenue Google generates from ads that appear on news organisations' own sites.  Facebook's reliance on news content to drive user engagement (and revenue) is similarly high.
The platforms' and news organisations' mutual reliance upon one another would not be a problem if not for the fact that concentration among the platforms means a small cadre of tech giants exercise an extreme level of control over news. At the same time, those same platforms also control the digital advertising technologies that news organisations use to monetise traffic. This has proven to be a dangerous combination.
In today's digital age, the tech giants' dual control over news distribution and monetisation threatens the very survival of news organisations. These tech giants use secret, unpredictable algorithms to determine how and even whether content is delivered to readers. They scrape news organisations' content and use it to their own ends, without permission or remuneration for the companies that generated the content in the first place. They also suppress news organisations' brands, control their data, and refuse to recognise and support quality journalism.
In effect, a couple of dominant tech platforms are acting as regulators of the digital news industry. Only these regulators are unconstrained by legislative or democratic oversight. And their primary motivation is not to serve the public interest, but rather to maximise their own advertising revenues. Indeed, two dominant platforms -Google and Facebook - now take the vast majority of US online ad revenue through their online advertising services, leaving news organisations with little to reinvest in high-quality, original journalism. They capture that revenue in two ways. First, they scrape news organisations' content and display it on their own pages, where they can monetise it through ads. Second, they control the advertising technology news organisations use to sell ads on their own sites, and the platforms charge increasingly exorbitant fees for the use of those technologies.
The result of the tech platforms' regulation of the news industry has been to siphon revenue away from news organisations. This trend is clear if you compare the growth in Google's total advertising revenue to the decline in the newspaper industry's ad revenue. In 2004, Google's US revenue (which came overwhelmingly from digital advertising) was $2.1 billion, while the newspaper industry accounted for $48 billion of advertising revenue. In 2017, in contrast, Google's US revenue had increased over twenty-five times to $52.4 billion, while the newspaper industry's ad revenue had fallen 65 per cent to $16.4 billion.
The effect of this revenue decline on news organisations has been catastrophic, and they have been forced to cut back on their investments in journalism. That is the reason that newsroom employment has fallen by nearly a quarter over the last decade.
One question that might be asked is, "If the platforms are, on balance, having a negative impact on the news media, then why don't news organisations do something about it?" The answer is that they cannot -at least not under the existing antitrust laws.
News organisations face a collective action problem. It is in each of their interests to resist harmful or exploitative policies imposed by platform monopolists. It is in their interest to resist scraping, to demand attribution for their content, to demand better remuneration for their content, and to demand a greater focus on originality and reliability. But no news organisation on its own can stand up to the platforms. The risk of demotion or exclusion from the platforms is simply too great. And the antitrust laws prevent news organisations from acting collectively, so the result is that publishers are forced to accept whatever terms or restrictions the dominant platforms choose to impose.
The Journalism Competition and Preservation Act, is an innovative, market-oriented solution to this collective action dilemma. Markets work best when different parties can negotiate with one another on reasonably even footing - and where both parties have some leverage to credibly withdraw from negotiations if the other side demands unreasonable or exploitative terms. Monopolies frustrate this dynamic because monopolists know the other side cannot afford to resist their demands, so they are free to impose welfare-reducing, inefficient terms on their negotiating partners. The Journalism Competition and Preservation Act helps remedy this imbalance by allowing news organisations to bargain collectively against dominant tech platforms. Our expectation is that, by doing so, news organisations will be better situated to partner with tech platforms to find better ways to reach audiences, generate content, and support high-quality journalism.
Ultimately, our goal is to work with online platforms to give Americans the best news content and experience possible. Today's market dynamics - in which a few tech intermediaries have been permitted to thoroughly monopolise their distribution channels - is not conducive to that goal. The Journalism Competition and Protection Act promises to help solve that problem while remaining true to the spirit of free market competition that animate the antitrust laws.
Present trends in the news business cannot continue. Without action by the Congress, we will all experience the effects of deep financial stress in the industry, and the loss of great, important journalism in communities all across the country. The very fabric of our civic society is at risk. And this is not a problem that will be solved by private charity from the wealthy - or even from the big platforms themselves. What we need to sustainable business relationships that actually return value to the great and important journalists who create the news content on which we all depend.
David Chavern is President and CEO News Media Alliance that represents 2,000 US newspapers. This is an excerpt from his testimony to the House of Representatives

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