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July 19, 2017

What's Really Behind the Newspaper Industry's Quixotic Fight With Google and Facebook

David Chavern stepped into the daily newspaper wars not quite two years ago. Did the president and CEO of the News Media Alliance know what he was getting into?

“No, in retrospect. In a sense, I’m more optimistic than when I started,” he said. “Clearly, I know the audience is there. There’s more people consuming the product more than ever. I think the monetization problems are even harder than people thought they were. For a long time, it was just old newspapers [need to] just get digital. … It is not evident what the future holds.”

Who can blame him? He walked into the leadership of the newspaper industry’s leading trade association at a point when it had seen its revenue drop about $30 billion — annually — from its peak a decade ago.

Chavern came aboard from a position at the U.S. Chamber of Commerce, his last job serving as the Chamber’s first president of its Center for Advanced Technology & Innovation. He has done a lot of jawboning, inside and outside the industry. And soon, he hopes he’ll be spending a more time on Capitol Hill.

 

First published at TheStreet on July 13, 2017

Follow Newsonomics on Twitter @kdoctor

Chavern’s News Media Alliance (the former Newspaper Association of America, renamed to leave “print” in the dust in late 2016) announced what seems to be a quixotic fight on Sunday, July 9. The venue was a friendly one, The Wall Street Journal. Robert Thomson, CEO of its parent, News Corp. (NWSA) , has been among the most outspoken critics of the growing hegemony of Alphabet Inc. (GOOGL) and Facebook Inc. (FB) .

In the op-ed, Chavern explained why his trade group wants Congress to do something it rarely does: grant an exemption to antitrust laws..

NMA wants a “safe harbor,” essentially immunity from Department of Justice antitrust action as the newspaper industry collectively takes on the two companies that it sees as the bogeymen of the time: Google and Facebook.

The argument: their digital advertising duopoly need to give news-producing companies a fairer deal, but they aren’t doing and won’t do it unless the industry as a whole — using its remaining collective might — can negotiate with it.

There’s a lot of history here, now stretching back two decades, and a less-than-unanimous view that the News Media Alliance push is the way to go. Most immediately, the Local Media Consortium, which itself claims membership from at least half of the same daily companies in the Alliance, published its own contrarian declaration on Tuesday. “I fear these mixed messages will have a chilling effect on our relationships both with our existing partners and those on deck, including Facebook, Apple (AAPL) and Amazon (AMZN) ,” LMC executive director Rusty Coats wrote. “Our partners may look at these messages as the protectionist reaction of an industry that lacks cohesion.”

The Alliance/Consortium split neatly represents the poles of industry opinion about “the tech platforms.” Should the legacy news industry just acknowledge the new reality of Google and Facebook becoming the new mass media of our time and work with them on a project basis to adapt? Or are the relatively small dollars generated by partnering inconsequential in the long battle of survival, necessitating new broadsides?

Don’t expect that split to be resolved. In fact, what looks like an either/or strategy may be nothing of the kind.

Let’s consider what the News Media Alliance push with Congress will produce. See if you can find anyone who will take the bet that a Republican Congress and a press-baiting President will do newspapers a favor. So if “safe harbor” — the ability to freely allow the larger group of daily newspapers to negotiate as one with Google and Facebook — isn’t a likelihood, what’s the point?

The point is pressure. If the antitrust subcommittees of the House and Senate Judiciary committees hold hearings on the “safe harbor” request, then the focus on Google and Facebook’s overwhelming market power gets further illuminated. That’s a power that of course extends well beyond news publishers. The ad technology industry, among others, decry this new duopoly, though regulators have had a comically hard time applying 20th century policy to the 21st century digital industry reality.

As Amazon.com Inc. looks to swallow Whole Foods Market Inc. (WFM) and redefine retail as we’ve known it, the huge 100-plus-year-old Teddy Roosevelt-era question of how big is too big percolates more rapidly under the surface of so much business and could-be public policy. Certainly, increased regulatory risk seems de minimis given the galloping billions in Google and Facebook revenues, but societal attitudes toward both tech and bigness seem newly fluid, and potentially dangerous even to the tech elite.

Google and Facebook already feel pressure, particularly in Europe, and the European Union continues to pummel Google for its perceived anti-competitive behavior, a recent $2.7 billion fine a good example.

Certainly, both companies have taken more initiative to meet and work with news publishers. Google’s two-year-old, European-heavy Digital News Initiative just granted €21.97 million to fund 107 projects in 27 countries in its third round of funding.

Facebook’s new news partnership team, headed by former TV anchor Campbell Brown, has upped that company’s involvement with the press. In addition, both companies have publicly expressed their dismay with “fake news” and are saying the right things about supporting real news production. Further, they talk more with publishers — especially the big ones — than they ever have.

The problem, publishers near uniformly tell me: The Google and Facebook responses are at best piecemeal, usually slow and fail to acknowledge the new business model necessities — digital subscriptions top the list — that are now fundamental to preventing the real threat of news company extinction.

The News Media Alliance initiative only points to these much larger questions, which you’ll read much more about in the year ahead. I recently talked with Chavern about the congressional push, what’s behind it and the plight of the industry in this Q&A, edited for length and clarity.

KEN DOCTOR: This is a long-standing issue. I recall organizing conference calls with the general counsel of Knight Ridder [for which I worked], Tribune and Gannett more than 15 years ago around the question of what is “fair use.” We discussed whether the nascent Google was overstepping fair use bounds and whether to challenge it legally. We never did. Here we are now, and the value of news content in the digital age really has never gotten a reckoning.

DAVID CHAVERN: If it is valuable, then we have every right to ask that it be valued. If we’re going to be hiring reporters and hiring lawyers and doing all the hard stuff, there has to be rights around that, [ones] that protect economic value. And people struggle with this because they are used to a world in which the economic value was derived from the print advertising and then you could just use the other stuff for free basically.

DOCTOR: Right.

Let’s consider what the News Media Alliance push with Congress will produce. See if you can find anyone who will take the bet that a Republican Congress and a press-baiting President will do newspapers a favor. So if “safe harbor” — the ability to freely allow the larger group of daily newspapers to negotiate as one with Google and Facebook — isn’t a likelihood, what’s the point?

The point is pressure. If the antitrust subcommittees of the House and Senate Judiciary committees hold hearings on the “safe harbor” request, then the focus on Google and Facebook’s overwhelming market power gets further illuminated. That’s a power that of course extends well beyond news publishers. The ad technology industry, among others, decry this new duopoly, though regulators have had a comically hard time applying 20th century policy to the 21st century digital industry reality.

As Amazon.com Inc. looks to swallow Whole Foods Market Inc. (WFM) and redefine retail as we’ve known it, the huge 100-plus-year-old Teddy Roosevelt-era question of how big is too big percolates more rapidly under the surface of so much business and could-be public policy. Certainly, increased regulatory risk seems de minimis given the galloping billions in Google and Facebook revenues, but societal attitudes toward both tech and bigness seem newly fluid, and potentially dangerous even to the tech elite.

Google and Facebook already feel pressure, particularly in Europe, and the European Union continues to pummel Google for its perceived anti-competitive behavior, a recent $2.7 billion fine a good example.

Certainly, both companies have taken more initiative to meet and work with news publishers. Google’s two-year-old, European-heavy Digital News Initiative just granted €21.97 million to fund 107 projects in 27 countries in its third round of funding..

Facebook’s new news partnership team, headed by former TV anchor Campbell Brown, has upped that company’s involvement with the press. In addition, both companies have publicly expressed their dismay with “fake news” and are saying the right things about supporting real news production. Further, they talk more with publishers — especially the big ones — than they ever have.

The problem, publishers near uniformly tell me: The Google and Facebook responses are at best piecemeal, usually slow and fail to acknowledge the new business model necessities — digital subscriptions top the list — that are now fundamental to preventing the real threat of news company extinction.

The News Media Alliance initiative only points to these much larger questions, which you’ll read much more about in the year ahead. I recently talked with Chavern about the congressional push, what’s behind it and the plight of the industry in this Q&A, edited for length and clarity.

KEN DOCTOR: This is a long-standing issue. I recall organizing conference calls with the general counsel of Knight Ridder [for which I worked], Tribune and Gannett more than 15 years ago around the question of what is “fair use.” We discussed whether the nascent Google was overstepping fair use bounds and whether to challenge it legally. We never did. Here we are now, and the value of news content in the digital age really has never gotten a reckoning.

DAVID CHAVERN: If it is valuable, then we have every right to ask that it be valued. If we’re going to be hiring reporters and hiring lawyers and doing all the hard stuff, there has to be rights around that, [ones] that protect economic value. And people struggle with this because they are used to a world in which the economic value was derived from the print advertising and then you could just use the other stuff for free basically.

 

DOCTOR: Right.

CHAVERN: So, you strip out the advertising model, you actually have to value the content. And I think you’re right that “fair use,” first of all, it keeps expanding over time. We haven’t yet wrestled with what is fair return for somebody creating valuable content.

The one thing I do know — I gave a speech at a copyright IT conference up on the hill — and some of the questions were: “Would people still make music if they didn’t get paid for it? Would people still write books if they didn’t get paid for it?” Blah, blah, blah.

First of all, whether they would or wouldn’t doesn’t mean it’s fair right. So you should return value to people who create. But I said, listen, with the news business, it’s really clear what the free news business is. The free news business is “Pope Endorses Trump.” There will be news. It will all be garbage. We’ve all seen now the dark side of the free news business. We’ve got to get to where our content is valued, and part of that is a relationship with subscribers. You know, reader revenue.

 

DOCTOR: Well, it’s clearly part of the answer. But let me get to kind of the genesis of this new push. How long have you been working on this question of whether to take this approach? Is this months or how long?

CHAVERN: We probably have been formulating the idea about what a possible approach was for probably three to four months.

 

DOCTOR: I talk to a lot of publishers, and there’s been a continuing source of frustration. The platforms talk a good game there, and then we see piecemeal progress. Is this move a response to the slowness of the platforms in accommodating the individual requests of publishers?

CHAVERN: Yes. We hit a moment of frustration. There’s not going to be any singular thing that did it. I think it is the slowness of the platforms to respond, disappointment over some of the things, [Facebook’s] Instant Articles being the first on the list [because of little monetization for publishers]. And disappointment doesn’t help anybody. It’s like, “Am I going to be disappointed again?” They’ve had some disappointment that felt like the platforms were moving very slowly. In the meantime, the print revenue is not degrading slowly. So the challenges that they are facing aren’t slow at all.

 

DOCTOR: The easy rejoinder to this push: “It’s that old dying industry circling the wagons, trying to circle the wagons, again. One of the questions is how do you define the group that you’re asking for this exemption. Is it essentially the Media Alliance group of daily newspapers, or does it include a wider group? 

CHAVERN: Well I, first of all, we will start talking about my members, which are primarily legacy newspapers. I think that news is really the defining category in the sense that news is not just content, it has a disproportionate importance to people and to society, right?

 

DOCTOR: Right.

CHAVERN: And you need it to stay in any business. The line I’ve used is that nobody’s having congressional hearings over fake cat videos, right?

 

DOCTOR: Right. So how is that group defined? Is it defined as Media Alliance members or daily newspapers? Or if you define it as the news industry? … The point I’m trying to get at is, Would you include major news providers such as BuzzFeed Inc. and Vox Media Inc., for instance, and Vice Media Inc. in this group that could potentially negotiate with an exemption or would you not?

CHAVERN: You know, it’s just that I haven’t gotten there yet. I mean I’m mostly focused on my members, and I think practically at the end of the day you’re looking … because there’s this huge convergence in the news business, right?

We’re all going to the same place. I think practically you are looking at a group that would encompass more than just legacy newspapers. It’s people delivering news digitally. But the issue is I haven’t talked to those other folks, so I don’t know their interests. What I do know is that my members have interest.

 

DOCTOR: How about broadcasters? So clearly with the statements in the fall about cross-ownership and [the National Association of Broadcasters joining in], have you talked to broadcasters, local news broadcasters or national news broadcasters about this?

CHAVERN: I have not as of yet. But, again, as their platform … as their distribution moves more away from TV into these same realms, it wouldn’t surprise me if they had an interest. It’s just that I haven’t talked to them about it.

 

DOCTOR: OK, and on the politics of it, as we know this is a fraught time. I mean, you could have brought up this issue up any time really in the past 20 years. But this is the most contentious time in terms of the role of the press. And a president who is clearly anti-press, and a majority party that hasn’t really stood up for the press. So, and I know you’ve had that point made to you strongly, why then do we think this has any political chance of working given the political complexion of the time?

CHAVERN: So one thing, I’ll start with Congress, and one thing I do know, because I’ve talked to a lot of congressmen about the news business, is you know how people say people hate Congress but like their congressman?

 

DOCTOR: Right.

CHAVERN: There’s sort of a similar thing with congressmen and their local media, which is most politicians that I know of dislike or have hostility toward quote-unquote “the media” as a mass. But actually most of them have a pretty decent relationship with their local newspapers and also worry about what would happen if they went away. They worry about there being good coverage in their district, so actually I haven’t seen so much hostility. … When you frame it as, Look at what happened to the newspapers in your district, and the challenges they face, people kind of get that. And they also get that fake news is not a good alternative, right? Everyone expects there to be sort of a knee-jerk “I hate newspapers” [reaction], and I don’t get that at all.

 

DOCTOR: And what’s the nature of the lobbying effort? Is there a lobbying firm, a single lobbyist? How does the lobbying work on something like this?

CHAVERN: Yeah, it’s run through the News Media Alliance, and particularly our chief lobbyist, Paul Boyle. He’s retained some outside firms to help with it.

 

DOCTOR: And what’s your best sense of timing, what could happen when?

CHAVERN: Well, we are rolling into summer, but I’d certainly like to see some action, maybe hearings, going into the fall. I think that would be good progress, and … regardless, we’re going to keep banging the drum.

 

DOCTOR: What else is Media Alliance doing to push the platforms to better help the business fortunes of daily newspapers?

CHAVERN: First of all, we meet with them regularly. We try to convey … one of the key things that’s been missing in the industry is learning. The industry has such a history of competition. … There hasn’t been nearly enough … information sharing across our members, where we’d like to be.

 

DOCTOR: So are you doing joint meeting at Facebook or at Google?

CHAVERN: We’re planning those as we speak, I think.

 

DOCTOR: But have you had those already and decided that you need to take this other path? I’m trying to see what the alternatives are. We’ve seen the Digital News Initiative that Google set up, and Facebook is starting its programs. And to some extent there’s some reality behind those programs, and there’s a lot of public relations behind those programs.

I would see what you’ve done in making this announcement as a kind of frustration with the pace and the impact of those programs, but what I’m hearing is, you’ll push for this antitrust exemption and you’ll kind of facilitate more industry discussion, is that the best way to put it?

CHAVERN: That’s correct. I’ll move in every avenue I can. Whatever gets to a better, more sustainable deal for the industry. This is a moment of frustration, I think that’s fair. But that doesn’t mean that all hope is lost. We feel the need to keep pursuing every direction.

 

DOCTOR: And if you are able to get an antitrust exemption, what are the top things that you would want to negotiate?

CHAVERN: Okay, it’s division of ad revenue.

 

DOCTOR: Division in what way? Is it something like if articles are linked to like in Google News that there would be a share of revenue? Or share of revenue around what kind of usage?

CHAVERN: First of all, split ad revenue. Better support for subscription models, and Facebook’s talked about building something, but we haven’t seen it yet. [Talking about Google would include] First Click Free, basically an anti-subscription model policy. [The program requires participating publishers to allow web surfers unfettered access to a limited amount of content from search results.]

 

DOCTOR: Yep.

CHAVERN: So better support for subscription models. Better data. Often … who these readers are, who the audiences are is important. So why can we not get more information about who our readers are, for a whole variety of reasons, both in terms of creating content and monetization? And … probably most amorphous is better brand attachment [to brands of news presented on platforms].

 

DOCTOR: If you look at that list, has the industry gotten together and said, here’s our top things? Has it been conceptualized that way? It seems to me, but I may be wrong, that it’s been more piecemeal.

CHAVERN: Yeah, it’s been more piecemeal. Part of it is I think the preference of platform. And part of it is there is the anxiety about the book sellers and Apple Inc. That’s the legal [core antitrust] thing we’re wrestling with, which is a bad precedent there. And people and Google lawyers are well aware of that.

 

DOCTOR: Last question. What have we learned about the EU and Google?

CHAVERN: I don’t think anybody loves the fact that the EU is sort of an activist in this space, but the U.S. has been on sideline, right? You kind of leave the field open for the EU to meddle.

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