from the not-as-bad...-but...-still... dept
A few weeks back, I wrote an article based on a column written by Connie Schultz of the Cleveland Plain Dealer, where she discussed and endorsed a proposal by two brothers (David and Daniel Marburger) -- one a First Amendment lawyer and the other an economist -- supposedly on ways to change copyright law to protect newspapers. I found this troubling for a variety of reasons -- not the least of which is the idea that a First Amendment lawyer and an economist together would agree to a protectionist policy that limits free speech! The story itself got lots of attention when Jeff Jarvis called attention to the fact that Schultz happens to be married to U.S. Senator Sherrod Brown, leading to a counter attack from Schultz, but not necessarily a clear discussion of the actual proposal. I don't care one way or the other about Schultz, but I was interested to receive an email from one of the Marburgers suggesting that Schultz greatly misrepresented their analysis. I had based my own analysis on what Schultz had written, and they suggested that the full report was quite different. They sent over a copy and said that I could share it with the readers here as well, so click on through to read it (if you'd like to download it, you can go directly to the Scribd page, where there's a download option:
It's true that the Marburgers' suggestions are a lot more interesting, nuanced and (frankly) less ridiculous than Schultz's distortion of what they put forth. And yet, it still has some significant problems. Most specifically, the paper makes a mischaracterization in the assumptions that aggregators who merely "offer truncated rewrites of newspapers' reports" somehow "are close substitutes for those that newspaper publishers and others originate." There's been scant evidence to support that. In fact, most of the aggregator behavior we see is a link to the original story with a very brief snippet (often computer generated). If that brief snippet and the headline acts as "close substitutes" to the original report, the problem is not with aggregators. The problem is with the original reports not providing enough value beyond that brief summary. But much of the Marburgers' ideas are based on this idea that aggregators are a substitute, rather than a distribution channel. That's a problem.
To be fair, they do attempt to distinguish between "pure aggregators" that just do snippets and "parasitic aggregators" that do much more. But their examples of "parasitic aggregators" is also quite odd. It's basically any competitor who has real staff that writes a story that competes with the original reporting. That's not an aggregator. It's competition. And if someone who was not on the scene can actually add so much value to the news that the original reporter doesn't provide enough value, the problem is in the original publication for doing a poor job in providing enough scarce value beyond the basic facts. However, the Marburgers conveniently conflate these two types of "aggregators" despite the fact that it doesn't make much sense. Later in the paper they admit that a "pure aggregator" like Google News is not doing anything wrong, and shouldn't be impacted, but the first third of the paper does not make that clear, and many readers naturally assume that the aggregators being discussed include Google News.
Furthermore, the report (again mistakenly) assumes that the aggregators are siphoning away advertising dollars from the newspapers -- but again, there's little evidence there. Instead, we've seen that aggregators don't tend to make very much money at all from news aggregation, and -- if anything -- it simply acts as a loss leader. Since much of the proposals seems based on the faulty idea that aggregators are getting unfair "profits" from aggregating the news, this is equally problematic. The "pure" aggregators that the Marburgers' discuss tend to use news aggregation as a loss leader, so it's not taking away much ad revenue. The "parasitic aggregators" (i.e., actual competitors) are simply other news sites -- and the ones named (
The Daily Beast and
Newser) are so tiny that if they're taking away any revenue from newspapers, it's at best a rounding error. Honestly, the newspapers aren't complaining about The Daily Beast. They're complaining about Google News, which the Marburgers eventually absolve, but that's deeply buried in the report.
Next, the Marburgers continually, incorrectly, focus on aggregators "free riding" on the content of newspapers. This is incorrect. It is a relationship where benefit goes in both directions. If you believe the Marburgers' view, then the newspapers are, in fact, "free riding" on all of the traffic that aggregators send them. They're also "free-riding" on whoever they write about and whoever they quote, since they don't pay those people either. In fact, this is a big part of the problem. The Marburgers only focus on the flow of value in a single direction, quoting an analysis from 1942 suggesting that "free-riding" in the news would cause trouble in the industry. But that ignores the realities of the market, and that
smart publications can learn to
benefit and
profit from traffic sent to them
for free. It's not about free-riding, it's about learning to capitalize on promotion.
Oddly, the Marburgers then use the fairy tale of the Little Red Hen, to suggest that a market involving free riding is not a free market. This is wrong. There may always be some kind of free riding. Nearly all products and markets give off some
externalities that involve free riding. While formerly assumed to be a small part of the market, these days economists are learning that externalities can often be a very large part of the market -- and unlike what the Marburgers' claim, that's not necessarily a bad thing
if you take the time to understand the larger market. It's
only a problem if you so narrowly define your market as the single product that gives off the externalities -- which is a major flaw in the Marburgers' analysis. They assume, incorrectly, that the "free-riding" does not lead to any externalities that can be monetized back by the newspapers. That's wrong. And, from this, the Marburgers simplify the world of news production to an unrealistic level, that may prove their point, but does not represent the actual market.
So while the Marburgers appear to have spent a lot of time detailing how newspapers make money, they incorrectly assume that this is the only way to make money from newspapers. On top of that, they seem to assume that newspapers cannot fund reporting -- but there is little evidence to support that. Almost all of the newspapers currently discussed as being in "trouble" are actually still profitable (i.e., they can fund reporting from advertising), but are in trouble because they cannot meet their debt obligations (i.e., management took out too many loans that they can't repay). And, from that, they get to their questionable challenges concerning how to "remedy" a situation that does not appear to actually need a remedy.
Their real focus is not actually on "aggregators" so much as it is on direct competitors who don't have a reporter on the scene, but tend to write an analysis based on what original reporters have written. Of course, that's almost as expensive as the original reporting, in that it still requires human bodies to write up the news -- and it's
always (by definition here) delivered late. Anyone who's spent time online playing with traffic stats of news reporting pretty quickly learns that the first publication to break a story is much more likely to get the majority of the traffic. Sometimes that fails, but in the long run, if you're first, you're more likely to get a substantial amount of traffic. Furthermore, having actual reporters on the scene should give the original source
better material with which to add more value to the community on the site. The failure to do so isn't because of "parasites" but because of a weak understanding by many newspaper execs of the importance of community.
As for the specific proposals, then, Schultz incorrectly stated the Marburgers' proposal to be:
- Aggregators would reimburse newspapers for ad revenues associated with their news reports.
- Injunctions would bar aggregators' profiting from newspapers' content for the first 24 hours after stories are posted.
But that's not true. The Marburgers don't have any problem with
real aggregators. Instead, their concern is with a few relatively small online sites that often do rewrites/summaries of news stories. This is an amazingly small market that doesn't actually make that much money already. So the idea that they're siphoning off very much does not appear to be supported by much evidence. Furthermore, the second point isn't quite accurate either. The change the Marburgers are pushing for is more about adding some sort of economic hardship to these competitors such that they're more likely to form an economic relationship with the newspapers that originate the news stories.
But this, too, is not a particularly good solution, and makes little economic sense to me. Putting barriers into a market almost always makes that market less efficient, not more, and leads to less production, not more. Furthermore, in a world where
anyone can be a reporter, forcing every publication to do a deal with every other publication is a legal nightmare. The false assumption the Marburgers seem to make is that all "real" news will be published by a small group of big name newspapers (
The NY Times,
The Washington Post,
USA Today etc.) and everyone else will pay them for their "journalism." Also, it's worth noting that the Marburgers appear to not necessarily focus on changing copyright law to officially state all of this, but merely adjust copyright law to allow
common law to make this happen.
So, while Connie Schultz' description of the Marburgers' paper was wholly inaccurate, the paper itself has many problems and does not seem like a reasonable suggestion either. It's based on too many faulty assumptions that do not appear to be accurate.
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