News publishers told Congress Tuesday that they need an exemption from antitrust laws to shore up their revenue in the digital age, in the first hearing of a series on "Online Platforms and Market Power" by a House Judiciary subcommittee.
Why it matters: Everyone agrees that trustworthy journalism is essential to democracy, but that's where the consensus ends.
Driving the news: Representatives from both parties are backing a proposed Journalism Competition and Preservation Act that would grant news publishers a waiver from antitrust laws so they could bargain as a group with Google and Facebook.
"News publishers face a collective action problem. No publisher on its own can stand up to the tech giants. The risk of demotion or exclusion from the platforms is simply too great. And the antitrust laws prevent news organizations from acting collectively. So the result is that publishers are forced to accept whatever terms and restrictions are imposed on them."— David Chavern, president, News Media Alliance, at the House hearing
The big picture: The internet broke the dominance that TV networks and newspapers had for decades over the U.S. local advertising market.
- Some in media, including speakers at the hearing like News Corp general counsel David Pitofsky, argue that Google and Facebook are "free-riding" by linking to publishers' content without paying for it or cutting them in on related ad revenue.
- Tech leaders and some media critics maintain that the decline in news revenue isn't directly correlated with the dominance of online advertising by search and social networks, and that Google and Facebook benefit news organizations by sending them readers.
The catch: Publishers still sell ads — lots of them — on their own pages. Now they're asking for a cut of Google's revenue from Google's search traffic, too.
- Google could as easily maintain that publishers owe it a referral fee for all the readers it sends them.
Be smart: Google and Facebook own most of the online ad business, largely because the ads they sell work better than publishers' ads. But even if publishers somehow extract a chunk of the platforms' revenue that relates to news content, it's likely to be a much smaller amount than they think.
- The News Alliance released a report on the eve of the hearing claiming that Google earned $4.7 billion from news content in 2018 — but that number's accuracy was widely criticized.
- Quality journalism is an important public good but less valuable as a vehicle for targeted ads. Product recommendations, travel advice and real estate listings drive much more revenue than investigative features.
Reality check: Google and Facebook would get by fine if publishers collectively threatened to pull their content from the platforms (which they could individually do right now).
- That would leave the publishers with the same problem they've had ever since the internet arrived: Building new direct-to-user businesses that don't depend on the old newspaper or broadcast model.
Flashback: Newspapers were dying in the 1950s and '60s, too, thanks to the rise of TV. Congress passed the Newspaper Preservation Act of 1970.
- It created an antitrust exemption that kept multiple news outlets operating in some major cities while they shared printing presses and ad sales departments.
- Those arrangements mostly failed — and the cumbersome deals got in the way of publishers' efforts to adapt to digital change.
The question no one at the hearing asked: Why did people decide in the first place that they prefer to look for news on Google or Facebook instead of news sites or apps?
- Much of the public voted with their feet, choosing "news that my friends recommend" or "news that answers a question I have right now" over "news that editors want me to see."
Our thought bubble: If lawmakers give publishers an antitrust exemption, they could use it to provide trustworthy journalism on their own collective platform — and a killer news app to go with it.
Go deeper: Sara Fischer has more on the proposed Journalism Competition and Preservation Act.