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Monday, May 05, 2008

The Demise of Newspapers: Economics, Copyright, Free Speech

Neil Netanel

In my last post, I reported on newspapers' likely demise and argued that blogs can act as an important supplement, but not substitute for the fourth estate functions of the traditional press. Here I want to say something about the economics of newspapers' demise and how that is relevant to copyright law and our system of free expression.

Newspapers are in decline for two basic reasons. First, the days in which daily newspapers held virtual monopolies over print news and classified ads in many cities are over. The Internet offers competition from many sources, all of which erode newspapers' (and TV networks') market share. Even papers that successfully transition to the Web face far greater competition for eyeballs than in the print era. And, to add to that, the Internet has decoupled classified ads from newspapers, thus eliminating an old stalwart of newspaper revenue.

Second -- and here is where copyright might come in -- many Internet competitors build on the content and value that newspapers create. The Google News news aggregation site is essentially a combined digital news clipping service and news reader search engine. The Google News home page displays headlines, photos, and story leads from newspaper, news agency, and TV news Web sites (as well as some blogs). It also siphons off ad revenue from those sites. Likewise, news and opinion blogs are largely (but certainly not entirely) parasitic on the institutional press. They copy, quote from, discuss, and criticize stories reported in the press far more than engaging in original reporting or linking to other blogs. And just like peer-to-peer traders of music and movie files, online readers copy and distribute stories from newspaper Web sites to their friends via email and social network sites. Especially for the young, trading copies of newspaper stories often substitutes for visiting the paper's Web site.

Newspapers thus suffer from the classic public goods problem. Producers of quality journalism invest heavily in investigating, reporting, editing, and fact checking. But once they make their work product available, they cannot prevent many others from copying from and reading their work without payment. In the long run, they will lose out to competitors who build on their investment in quality journalism without making a similar investment in original reporting. In fact, newspapers’ public goods problem extends even wider. We all benefit from a society in which quality reporting is produced and disseminated even if we don’t actually read that reporting ourselves.


The traditional means for addressing the public goods problem facing creators of original expression is by giving them exclusive rights in their work product. That is largely the province of copyright, but copyright is limited to the literal form in which ideas and information is expressed; it does not give newspapers the ability to capture the social value of the information they produce. To remedy that gap, some states have recognized, and in its much discussed 1918 decision in International News Service v. Associated Press, the Supreme Court gave its imprimatur to, a newspaper's "quasi-property right" to prevent competitors from appropriating hot news. Following on that legal regime, a number of news agencies have sued Google News for copyright infringement, asserting that Google's copying of news story headlines, photos, and story leads infringed their copyrights in expression. (The primary US case settled.) And one could imagine copyright and hot news misappropriation claims asserted against other Internet "competitors," both commercial and noncommercial.

That aggressive propertization of newspapers' work product would pose significant free speech concerns. It would also run counter to our nation's information policy extending back to the Founding. The first copyright act, the Act of 1790, did not accord copyrights in news stories. In fact, far from recognizing intellectual property rights in news stories, the early federal government subsidized newspapers' sharing of their content. It provided free postal delivery for newspaper publishers to exchange their papers with one another, largely to facilitate editors' common practice of using nonlocal news items from other papers to fill their columns.


But in the digital age newspapers are far more vulnerable to massing copying. And, like Google News, some competitors reap some of the value of newspapers' work product without engaging in original reporting themselves. So what is to be done?

One answer, of course, is nothing. Google News argued that its copying is noninfringing fair use. That is a solid argument under current copyright law. And bloggers who quote from or link to news stories without copying the entire story have an even stronger fair use claim. Perhaps newspapers need to take their lumps and, along with all other traditional media, seek to reconstitute themselves and find new business models suitable to the digital age.

The Pew Research Center’s Project for Excellence in Journalism argues in contrast that news providers should create consortia to "charge Internet providers and aggregators licensing fees for content." As the Project recognizes, "those fees would likely add to the bills consumers pay for Internet access. But the notion that the Internet is free is already false. Those who report the news just aren’t sharing in the fees."

To my mind, giving news providers a proprietary veto over online news aggregators', Internet providers', and bloggers' referencing of news stories would impose an unacceptable burden on speech. I argue in Copyright's Paradox that, all in all, holding such referencing to be fair use or otherwise noninfringing of copyright is the best solution. But I can see advantages to imposing some sort of statutory license or levy on commercial Internet service providers and news aggregators who profit from news providers' investment. Newspapers should not have a veto over who references their stories or how. But ensuring that they receive some compensation for their investment in quality reporting might be our only hope for maintaining that investment and the vital fourth estate benefits that flow from it.



Comments:

It seems to me that newspapers ostensibly offer more than simply original reporting of basic facts. I seriously doubt that copying of that particular service (assuming it happens as you say) could explain the demise of newspapers.

I think the reasons are multifold:

1. Newspapers have stopped doing a very good job of reporting facts. They have degenerated into he said/she said stenography. It's worthless to me, the reader, to tell me that Hillary supports a gas tax "holiday" and that Obama opposes it unless the article goes on to explain the issue in detail and the merits of the respective positions. It's this latter function which newspapers have stopped supplying. In its place they offer sound bites from each candidate, apparently under the theory that the reader will decide for herself (based on facts we learn on the street, I suppose, like how we learned about sex).

2. Reporting about government functions, especially at the national level, has become far too incestuous. Reporters grant confidentiality for sources when those sources are merely repeating official policy anyway. There's no good reason for that. Worse yet, the reporters don't challenge the assertions of these anonymous officials. We saw that particularly with Judy Miller's coverage in the run up to the Iraq War, where the NYT essentially became a conduit for propaganda.

3. Reporters must be overworked. I say this because they make blatant, obvious errors when they report on areas like the law. If newspapers want to continue in effect, they need to hire reporters who either understand the topic or who know who to call for advice.

4. To the extent that papers also offer commentary on the news, there's no reason to protect them from competition. Anyone can offer commentary. This gets us back to the problem of expertise. Who in their right mind would want the commentary of the NYT or WSJ on, say, the Heller case if they could read this blog or Volokh?
 

To Mark,
Of course there is a chicken and the egg problem. Some argue that newspapers' decline stems from drastic cutbacks necessitated by drops in revenues, due in part to the causes I discussed in my post.
 

While newspapers may be suffering from the "classic public goods problem", its worth noting that the expectation of a certain revenue flow from so-called original reporting of basic facts came to be entrenched largely because a particular manufacturing and distribution model was in place for this industry. And like music and publishing industries have found out, the way to respond to this challenge is NOT a) to demand the same revenue flows as before and therefore b) to demand an increasingly unreasonable set of legal protections to this end. Newspapers have long given up doing real quality journalism (perhaps emboldened by the lack of competition before the digital era and the constant stream of mergers). Perhaps the "shock of the new" will bring about some serious introspection on how they can relevant and make a partial return to their original mission.
 

Who in their right mind would want the commentary of the NYT or WSJ on, say, the Heller case if they could read this blog or Volokh?

Right, newspapers seem to lose their relevance most when expert opinion and multi-faceted analysis is only a click away.

One area that newspapers traditionally have an advantage over, say, the legal blog, is their reach; the typical blog can't afford to send reporters around the world for long-term coverage of an ongoing process. (The typical blog might not be able to send a reporter across the street, for that matter.)

One might put together a team of worldwide bloggers to discuss local issues in a global context, but it still wouldn't be quite the same. That leverage, along with the parasitic nature of blogs that Neil mentions in the previous post, would seem to allow newspapers to remain relevant, even when more detail can be found elsewhere.
 

One area that newspapers traditionally have an advantage over, say, the legal blog, is their reach; the typical blog can't afford to send reporters around the world for long-term coverage of an ongoing process. (The typical blog might not be able to send a reporter across the street, for that matter.)

Agreed, though with some footnotes:

1. In a few cases where bloggers have tried to cover a particular event, some of them have done very well indeed. Firedoglake, for example, covered the Libby trial far better than the traditional media.

2. The ongoing coverage supplied by newspapers still needs to meet the standards which the better bloggers are enforcing. It does no good for the NYT to "cover the war in Iraq" if it's "coverage" consists of a reporter who stays in the Green Zone and simply repeats what the US military says.

The problem that I see is this. Newspapers still have a niche to supply basic facts about the world. But this has two limits. First, that's not going to provide the public interest or the profit margins that they expect from earlier days. Second, the real action is in those aspects of media which go beyond the basic facts, whether analysis or commentary. The traditional media simply are not meeting the competition; they're trying to sell mainframes when the market is PCs.
 

Newspapers forming consortia to sell their information to ISPs, portals, etc., are going to run into problems with the antitrust laws. Indeed, such consortia might be characterized as per se illegal price fixing cartels. After all, the object of the consortia is to raise the price their members are getting for their product through joint bargaining because the market will not pay them an "adequate" price. The consortia will not be able to take advantage of the CBS v. BMI case unless they make their products available individually, which would defeat the purpose of the consortia. The consortia could argue that they are the sort of distressed industry cartel the Supreme Court said didn't violate the antitrust laws in the old Appalachian Coals case in the 1930s. That is not likely to help them because the argument that a cartel is necessary because an industry is in economic difficulty has not been accepted since that case, and the case itself is regarded by antitrust commentators of all persuasions as a depression era fluke.
 

Newspapers forming consortia to sell their information to ISPs, portals, etc., are going to run into problems with the antitrust laws. Indeed, such consortia might be characterized as per se illegal price fixing cartels. After all, the object of the consortia is to raise the price their members are getting for their product through joint bargaining because the market will not pay them an "adequate" price. The consortia will not be able to take advantage of the CBS v. BMI case unless they make their products available individually, which would defeat the purpose of the consortia. The consortia could argue that they are the sort of distressed industry cartel the Supreme Court said didn't violate the antitrust laws in the old Appalachian Coals case in the 1930s. That is not likely to help them because the argument that a cartel is necessary because an industry is in economic difficulty has not been accepted since that case, and the case itself is regarded by antitrust commentators of all persuasions as a depression era fluke.
 

A lot of people don't own laptop (or notebook) computers and a laptop computer cannot be carried and used everywhere. A newspaper can be purchased and read anywhere and is a cheap throwaway item.

Also, a lot of BVD-clad bloggers ( I prefer "BVD-clad" to "pajama-clad" because Hugh Hefner considers pajamas to be formal wear ) have the chutzpah to claim that they are better than the traditional news media even though these bloggers don't even have any ethical standards, let alone the means to perform serious investigations. Ron Steinman wrote,

There is a growing and disturbing movement in the media for a new freedom that promotes the idea that whoever covers news, and believes they are journalists without credentials, can and should be their own editor, writing and saying what he pleases in his self-created Web log [and also arbitrarily censoring comments from those who disagree with him]. Everywhere I turn, those who call themselves serious journalists, some even using that grand and old fashioned phrase, the press, are assaulting us with the virtues of this new-found freedom. Thus, blog, the shortened version, is now the latest gobbledygook noun in the English language. Lewis Carroll would be proud.

. . . .A major problem is bloggers who run items with no sources. When they cite sources, they are so tenuous as to make you pass Go and return the $200. When caught, the blog will sometimes print retractions quickly [a BVD-clad blogger is likely to just delete the comment that pointed out the error]. The problem is that the readers have become so undiscerning it makes no difference. As quickly as an item is found wrong and as quickly as the blog runs a correction, another rises to take its place. Accuracy has no place on many blogs.
(bracketed comments are mine)

The notion that blogs have obsoleted the traditional news media is typified by a stupid book titled, "We're All Journalists Now: The Transformation of the Press and Reshaping of the Law in the Internet Age," by Scott Gant.

Carolynne Burkholder wrote,
.
. . . . bloggers’ claims that they are the true citizen-journalists and that they can self-correct their errors is questioned by journalists and ethicists as self-serving rhetoric. Critics note cases where rumours were circulated by blogs and they were not proven to be false until much damage had been done to the reputation or career of a person or group. Self-correction by blogs is an imperfect process [and is made even more imperfect by the arbitrary censorship of comments]. Other critics accuse blogs of hypocrisy by claiming they believe in accuracy but they do not believe in editorial controls on postings prior to publication [BVD-clad bloggers also do not believe in any controls after publication]. Bloggers are also accused of wanting freedom without responsibility -- of reaching thousands of readers but rejecting calls for ethical codes and standards.(emphasis added; bracketed comments are mine)

And one of those "ethical codes and standards" that BVD-clad bloggers are rejecting is, of course, a rule against arbitrary censorship of blog visitors' comments. And, of course, this arbitrary censorship not only impacts factual accuracy but also impacts fairness in the presentation of opinions.
 

For what its worth, I might add the observation of a phenomenon - one that appears to be resisting the fate of many such fads to go away - that associates posting a link to an aggregator pointing to a blog entry with a link to legitimate content but with little genuine substance added with acute humiliation and rejection. Its called linkjacking, and it gets extinguished frequently, often with prejudicial humiliation. The so-called 'blogosphere' is aware of the difference between genuinely sourced content and linkjacking. Any blogger wishing for their site to retire into the hitless realm of linkjacking limbo will ignore the trend.

People do know the difference, and the news industry will respond. Which news organization seems the relevant question.
 

How is Google News "siphoning off" ad revenues or hurting newspapers in any way? There are no ads on the Google News site. Even if there were, the brief snippets to be found are an invitation to click and actually visit newspaper Web sites. I do not see what the problem is.
 

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