A Closer Look At The Marburgers' Plan To Save Newspapers Via Copyright Law

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.


Reader Comments (rss)

(Flattened / Threaded)

  •  
    identicon
    Anonymous Coward, Jul 22nd, 2009 @ 10:51am

    You live by the first amendment, you die by the first amendment. How can we have a free press if the government is restricting what people can write about?

    Oh wait, I forgot, this would only affect companies who are not newspapers. If you tried to enforce this on a newspaper they would be screaming censorship within a few second (although you would see it until the next day).

     

    reply to this | link to this | view in chronology ]

  •  
    icon
    No Imagination (profile), Jul 22nd, 2009 @ 12:21pm

    No wonder there are been only a few updates today... You've been writing dissertations.

     

    reply to this | link to this | view in chronology ]

  •  
    icon
    Marcus Carab (profile), Jul 22nd, 2009 @ 12:31pm

    I find it amazing that Google News is so often the focus, but nobody ever mentions Google Reader.

     

    reply to this | link to this | view in chronology ]

  •  
    identicon
    David Marburger, Jul 22nd, 2009 @ 1:42pm

    Marburger analyses

    Actually, your analysis of our analysis is still mistaken, although we've make good use of all of the web dialogue about it, causing us to clarify quite a few things and draft two separate supplements to address questions and critiques. You can get them on www.bakerlaw.com.

    We don't think that any single parasitic aggregator siphons away large amounts of money. We say quite often & quite clearly that single parasitic aggregators subsist on very low ad revenue at very low ad rates. By doing so, they drive the market price for ads around online news down to levels too low for the news originators to recover substantial news-gathering costs that only they bear. If the news is a loss leader for many sites, as you insist, that just underscores the correctness of our analysis.

    Our experience with our analysis verifies that people don't click on links to read the same story twice. The huge volume of web commentary about our proposal has been based on inaccurate synopses appearing on news and other websites, despite links to the actual analysis. The vocal bloggers who are so proud of how adroit they are with web technology & who tout the traffic-driving qualities of links didn't bother to click on the links to the original analyses in our situation. You'd think that, if anyone would use the links, it would be them. But they didn't; they relied on the summaries instead. Just as we say.

    There can be no doubt that summarizing a story that someone else wrote creates a close substitute for the original story. It is silly to pretend otherwise. Adding a link at the end is a nice touch, but can't amount to fair compensation for taking and commercially exploiting the originator's hefty journalistic services. That's because the summary makes clicking on the link redundant. Why read the same story twice?

    Look at Reader's Digest. It profited by selling ads around greatly abridged original works -- which it had paid the owners to publish. If Reader's Digest had links at the end, some readers might click. But the fact that Reader's Digest made handsome profits around summaries alone suggests that substantial readership thought that the summaries were good enough -- close substitutes for the original. Do you really think that most Reader's Digest readers bought the original after reading the "Reader's Digest version"?

    Pure aggregators, such as Google News, that offer just a headline with a link undoubtedly drive traffic to originators' sites. Although they have some downsides for news originators, which our analysis explains, they probably are a net plus for those who originate news reports.

    The expense of discovering and writing about news is exponentially higher than merely hiring someone to rewrite the core of someone else's news report.

    Today, the effect of the copyright act is to compel the originators of those reports to subsidize those who would rewrite the heart of those reports for profit in real time competition with the originator on the same medium.

    That's not free market, where you get to reap what you sow. That's closer to Marxism where the law guarantees that you get to reap what others sow.

    Our most vocal critics tend to be those who enjoy that government-imposed subsidy. Understandably, they don't want it to go away. They don't want to have to pay to commercially exploit the hard work of others even for a day.

     

    reply to this | link to this | view in chronology ]

    •  
      icon
      Mike Masnick (profile), Jul 22nd, 2009 @ 4:00pm

      Re: Marburger analyses

      We don't think that any single parasitic aggregator siphons away large amounts of money. We say quite often & quite clearly that single parasitic aggregators subsist on very low ad revenue at very low ad rates. By doing so, they drive the market price for ads around online news down to levels too low for the news originators to recover substantial news-gathering costs that only they bear. If the news is a loss leader for many sites, as you insist, that just underscores the correctness of our analysis.

      I disagree almost entirely. If a competitor is able to get lower ad rates, that's competition -- but you would think that the originator would have a BETTER PRODUCT and could offer more value and thus command higher ad rates. It's why ads in The Economist cost more than ads in People Magazine.

      If the publications are unable to get a premium on their ad rates, it's because *they* are doing something wrong from a marketing/sales/product perspective. There's nothing "unfair" about it at all.

      Our experience with our analysis verifies that people don't click on links to read the same story twice. The huge volume of web commentary about our proposal has been based on inaccurate synopses appearing on news and other websites, despite links to the actual analysis. The vocal bloggers who are so proud of how adroit they are with web technology & who tout the traffic-driving qualities of links didn't bother to click on the links to the original analyses in our situation. You'd think that, if anyone would use the links, it would be them. But they didn't; they relied on the summaries instead. Just as we say.

      This seems like a rather snide remark. Your analysis is long and involved. However, I did take the time to read it carefully, and then embedded it here for others to do so.

      So I'm not sure why you seem to be implying otherwise.

      But, really, the point of the above paragraph does NOT enforce your point. It reinforces mine: which is that YOU as the originators did a very POOR job packaging your analysis for public consumption. You are learning -- hence your updates -- and that's exactly how the market should work.

      But, based on your analysis, ad revenue we get for this post could be in jeopardy, because you could claim hot news over the material. Doesn't that seem like a massive restriction on free speech? Isn't that horrifying as a First Amendment lawyer?

      There can be no doubt that summarizing a story that someone else wrote creates a close substitute for the original story. It is silly to pretend otherwise. Adding a link at the end is a nice touch, but can't amount to fair compensation for taking and commercially exploiting the originator's hefty journalistic services. That's because the summary makes clicking on the link redundant. Why read the same story twice?

      Again, you are falsely assuming that the story is all a publication has to offer. Every single story we write here is based on a link to somewhere else, and people come here because of *the community*. We offer more value. There's no reason an originating publication can't. They choose not to do so, and your effort looks to give them gov't protections for failing to innovate. That's horrifying.

      Look at Reader's Digest. It profited by selling ads around greatly abridged original works -- which it had paid the owners to publish. If Reader's Digest had links at the end, some readers might click. But the fact that Reader's Digest made handsome profits around summaries alone suggests that substantial readership thought that the summaries were good enough -- close substitutes for the original. Do you really think that most Reader's Digest readers bought the original after reading the "Reader's Digest version"?

      It doesn't matter what "most readers" did. What matters is what each of the parties did to best put in place a business model that works.

      That's called the free market. As supposed free market supporters it's incredibly troubling that you don't see this. That you seem to act as if the originator has a right to a protectionist system.

      The expense of discovering and writing about news is exponentially higher than merely hiring someone to rewrite the core of someone else's news report.

      No doubt. Just as the expense of cooking a fine steak is much higher than nuking a hamburger. But, you know what, the fine steakhouse down the street has figured out ways to make it worth paying for. Why can't a newspaper do the same?


      Today, the effect of the copyright act is to compel the originators of those reports to subsidize those who would rewrite the heart of those reports for profit in real time competition with the originator on the same medium.


      No, that's entirely backwards. The effect of copyright is to give the originators a gov't backed monopoly -- a subsidy -- against those who choose to make copies.

      That's not free market, where you get to reap what you sow. That's closer to Marxism where the law guarantees that you get to reap what others sow.

      You have a very odd and very, very wrong view of what is the free market and what is marxism.

      Your confusion is your belief that "free riding" or "free" itself isn't just another price in the free market. That's wrong. I recognize that some people are blinded by the zero, but a professional economist should not be.

      Our most vocal critics tend to be those who enjoy that government-imposed subsidy. Understandably, they don't want it to go away. They don't want to have to pay to commercially exploit the hard work of others even for a day.

      I am the exact opposite of that description. I am a very strong free market supporter. And I disagree almost entirely with your analysis, which I find to be troubling and showing a surprising disregard for both the free market and free speech.

       

      reply to this | link to this | view in chronology ]

      •  
        identicon
        David Marburger, Jul 22nd, 2009 @ 7:06pm

        Re: Re: Marburger analyses

        I think you're more reacting more viscerally than you should.

        1. The reason that gawker, newswer, daily beast, allen media, and a slew of others can subsist on low ad rates isn't that they're more efficent than the originators of news. If they were more efficient, we'd agree with you: the efficient competitor sd put the inefficient competitor out of business.

        But those who subsist on low ad rates can do it because they rely on others to bear the substantial cost of ferreting out & publishing daily news. That's not being more efficient. That's free-riding.

        In the history of the free market, name one industry that was continually subjected to lawful free-riding by direct competitors that presented close substitutes to the original that survived. The answer is none -- that's what caused free-rider economic theory to exist. The theory reflects what has actually happened.

        The Economist is not a close substitute for People Magazine; whereas Time is a close substitute for Newsweek.

        Newspaper accounts are not close substitutes for attending a baseball game. Radio play-by-play is a closer substitute. Live TV is a very close substitute. The closer the subtitute, the more economically destructive the free-riding.

        Whatever additional value that your site offers is a great niche. Newspapers can innovate too, but somebody has to pay to discover and write about the news in the first instance, even with niches like the one that your site may enjoy.

        As long as the law compels the newspapers to allow others to compete directly against them in real time on the same mass medium by using summaries or rewrites of their original stories during their peak, but woefully brief, commercial lives, the newspapers will never stop losing money. Innovating only gets them so far. They are bearing almost 100% of the heaviest costs upon which a significant component of your innovation rests -- fresh facts to talk about.

        For example, if you had to pay to gather the facts around which your community subsists on your site, you'd have to demand a lot more from advertisers to cover your costs and to make a profit. You could do that in an ASCAP-type arrangement or some mutually beneficial contract, or you could hire your own journalists, or you could postpone your summaries for most of the first day that an original report airs, or you could have only headlines, comments, and links.

        We're in favor of free content on the internet, but in a different sense than you seem to be. We believe that it would never be in the newspapers' long-term interest to charge readers to gain access to the news & information on their sites, and we say that in our analyses.

        But that doesn't mean that the law should compel newspapers to allow competitors to rewrite the original news reports and undercut the originators' ad rates t exactly the same time & on the same mass medium that newspapers are trying to recoup their very high news-gathering costs thru ad revenue.

        You are correct that, where copyright attaches to expression, it gives a decades-long monopoly to that expression. It allows the author to treat his work as property, which means that he can exclude others from that property for a long, long time.

        But copyright works another way, too, which you seem to ignore. It doesn't just grant rights; it also abolishes rights.

        As we explain in our analysis, the prevailing view is that the copyright act abolished common-law rights that the news media used to have to prevent each other from using rewrites of each others' stories in very direct competition with each other for brief periods of time.

        By abolishing those common-law rights, copyright has compelled the investor in hefty journalistic services to subsidize every direct competitor who wants to use those services in real time competition against the originator. That's a subsidy & government compels it.

        You may have the mistaken belief that aggregators' rights to free-ride come from the first amendment. I've been litigating first amendment cases almost exclusively since 1983. The first amendment is not what's giving the protection; it is exclusively the copyright act's apparent abolishment of common-law unfair competition and unjust enrichment.

        If the copyright act's apparent ban on those common-law legal theories is lifted, parasitic aggregators will find that the first amendment will budge. It will not give them the protection that they think it gives them now.

        The first amendment allows legitimate legal interests to interfere with speech, but only when those interests have their fullest force or justification. That's why the first amendment budges when you publish true information that invades someones' privacy, or when you publish true information that exposes someone's trade secret, or when you publish true information that inflicts severe emotional distress, or when you trespass on private property to gather true information for a news story.

        If the copyright act is pulled away so that the common law can breathe again, the aggregators will find that the first amendment will afford only limited protection.

        So if the common law was restored, and the Washington Post sought a permanent injunction against Gawker from ever rewriting Post stories, the Post would lose. The first amendment would side with Gawker.

        But if the Post sought an injunction that barred Gawker from straight rewriting Post stories for-profit for 16 or 20 hours after the Post first publishes them, I'm confident that the first amendment would respect that. The Post would win.

        Could Gawker offer contemporaneous commentary about Post stories along with some of the basic facts that help explain the commentary? Definitely on the commentary; yes on the facts, depending on how it was done. Could it offer headlines with a link? Of course. What it couldn't do is typically offer a close substitute for the Post's original reports at the time that those reports have their highest commercial value.

        Common-law unfair competition does not convey property rights at all; so it's not really like copyright. It grants what the law would call relational rights. Relational rights occur in varying contexts, but in this one, it's a limited right only against direct commercial competitors who exploit the originator's journalistic services for profit during the height of their commercial life.

        As for ASCAP, I suggest it only as a convenient way for aggregators to enter into voluntary contracts if they wanted to. That seems easier than entering into separate contracts with the Washington Post, the NY Times, the Atlanta Constitution, etc.

         

        reply to this | link to this | view in chronology ]

        •  
          identicon
          David Marburger, Jul 22nd, 2009 @ 7:23pm

          Re: Re: Re: Marburger analyses

          To be clear: We oppose extending copyright to facts, just as you do.

          We oppose granting property rights in facts, just as you do.

          We advocate restoring common-law relational rights against direct commercial competitors of the kind that I describe.

          The difference between those relational rights and property rights can be staggering. We think that property rights would be wrong and grant far too much power.

          Relational rights are far less powerful, but provide originators of news with enough bargaining power to put themselves in a position use business acumen to profit again.

           

          reply to this | link to this | view in chronology ]

          •  
            icon
            Matt (profile), Jul 22nd, 2009 @ 7:52pm

            Re: Re: Re: Re: Marburger analyses

            I am curious how you would apply relational rights from a practical standpoint. If you do not grant property rights or copyright to facts, how do you prove that a "parasitic aggregator" is "free riding" off specific content. As long as they provide only the facts, they should be in the clear.

            Am I misreading this?

             

            reply to this | link to this | view in chronology ]

            •  
              identicon
              David Marburger, Jul 22nd, 2009 @ 10:51pm

              Re: Re: Re: Re: Re: Marburger analyses

              It would work like this. If I was the lawyer for the Washington Post, I sue Gawker.com for violating my common-law rights against unfair competition.

              Because lawsuits cost a lot, we wdn't sue Gawker over a single story. We'd only sue if we noticed a consistent pattern of Gawker taking our stuff and commercially exploiting it in direct competition with us.

              Before we'd have a hearing in court, I already would have deposed people who work for Gawker, and Gawker's lawyer wd have deposed Post people.

              I'd know how strong the evidence was that it was our stories that Gawker was rewriting. If the evidence was strong, we'd try to negotiate some kind of business agreement with Gawker that would end the suit.

              If Gawker wdn't cooperate, we'd put on our evidence at trial; Gawker would put on its evidence. A judge would decide if Gawker was (1) really competing against us for-profit by offering a substitute for our original report and (2)that substitute was comprised of my client's original reporting.

              If the judge ruled for us, then we'd argue for a remedy. Gawker would counter-argue.

              Before the judge imposed a remedy, we'd try again to resolve the matter with Gawker by voluntary agreement. If that didn't work, the judge wd decide what remedy to impose. Likely it would be an order barring Gawker from rewriting our stuff within the first day after we publish it, and maybe disgorge some ad money based on expert witness testimony as to how much that would be.

              If Gawker lost & appealed, and then Gawker lost on appeal, the appellate decision will buttress or supplement the common-law rights that the Post sued on.

               

              reply to this | link to this | view in chronology ]

        •  
          icon
          Mike Masnick (profile), Jul 23rd, 2009 @ 1:36am

          Re: Re: Re: Marburger analyses


          1. The reason that gawker, newswer, daily beast, allen media, and a slew of others can subsist on low ad rates isn't that they're more efficent than the originators of news. If they were more efficient, we'd agree with you: the efficient competitor sd put the inefficient competitor out of business.


          Heh. (1) The total revenue of all of those sites combined is a rounding error for newspaper revenue. Focusing on them is totally missing the point.

          (2) Of the ones that I have some insight into, the ad rates aren't actually that low. Those sites are considered higher end and command significantly higher CPMs.

          (3) How is it that YOU get to determine who's more efficient? That's not a free market response. It's anything but.

          But those who subsist on low ad rates can do it because they rely on others to bear the substantial cost of ferreting out & publishing daily news. That's not being more efficient. That's free-riding.

          You are confusing externalities with free-riding. Your economics is about 25 years outdated. There are most certainly externalities given off in the production of news online, but you are falsely calling it "free-riding" rather than recognizing the positive externalities generated as well.

          That's a huge analytical mistake.

          In the history of the free market, name one industry that was continually subjected to lawful free-riding by direct competitors that presented close substitutes to the original that survived. The answer is none -- that's what caused free-rider economic theory to exist. The theory reflects what has actually happened.

          Again, you're calling it "free-riding" when it's just an externality, and there are TONS of industries that have worked that way. The problem is that you seem to refuse to recognize that MARKETS CHANGE. If newspapers really can't make a go of it because someone rewrites their story, that's NOT A PROBLEM. It means that those newspapers need to do a better job giving people reason to come to their site. To date most of them have failed. But, seriously, if your only value is so easily copied from someone else and you do nothing about it, that's entirely your fault.

          Automobiles "free rode" on the roads that were made to support horse drawn carriages. And yes, the carriage business died. But what came back was better.

          Externalities are just a sign of a market opportunity, not a market failure. You have defined your market way too narrowly. The *journalism* industry doesn't go away. Only the *news organizations that don't adapt* and *don't provide more value*.

          Trust me, the likes of the Daily Beast aren't killing newspapers. That's like saying we at Techdirt are killing the NY Times. Ha!

          The Economist is not a close substitute for People Magazine; whereas Time is a close substitute for Newsweek.

          Geeze, where to begin. There are LOTS of markets where competitors can "free ride" and the original sticks around. But you know how? By innovating and by growing.

          Historic example: Switzerland had no patent protection for many years, and yet built up a strong dye/chemical industry in those years, where every player could free-ride on the others. And you know what? It was fine. The innovators did well by innovating and they could and did charge a premium. The "free-riders" were always later to the game and less sophisticated and thus couldn't charge as much.

          Even in today's pharma industry, distorted as it is by patents, once a drug goes off-patent, the original branded version sells at a *massive* premium, despite the "free-rider" generics in the market, that produce identical drugs.

          We're seeing the same thing today in the music industry. People can "free-ride" certainly, but (despite the claims you might here from the RIAA) the *music* industry is thriving. More money is being spent in the music ecosystem than ever before (Harvard study discussed this last month) -- it's just that it shifted away from plastic discs.

          From your analysis, you would probably take the RIAA's position that only IT could produce music. But what the free riders really exposed was just that the old *model* failed. Not that music went away.

          Same thing here. All these new providers are showing is that the old *model* can be improved and changed -- not that journalism goes away.

          You've defined your market incorrectly.

          Newspapers can innovate too, but somebody has to pay to discover and write about the news in the first instance, even with niches like the one that your site may enjoy.

          Indeed. And one of the things we write about here all the time are INNOVATIVE JOURNALISM companies that have found ways to make that PAY without resorting to an old and busted model.

          Why do you look to gov't support to prop up an old model, rather than allowing the free market to serve the market?

          As long as the law compels the newspapers to allow others to compete directly against them in real time on the same mass medium by using summaries or rewrites of their original stories during their peak, but woefully brief, commercial lives, the newspapers will never stop losing money. Innovating only gets them so far. They are bearing almost 100% of the heaviest costs upon which a significant component of your innovation rests -- fresh facts to talk about.

          Pure conjecture, not supported by the facts -- at all. We're seeing news organizations (real reporting ones with journalists) that have found ways to make it pay -- even if people copy them. TPM is massively trying to expand its hiring. VoiceOfSanDiego is doing amazing reporting. Spot.us and ProPublica are both non-profits, but are showing other models that work.

          In the meantime, the most visited news sites online are sites like the NY Times and CNN. They're not being undercut by the Daily Beast at all. I can't see how you can make that claim with a straight face.

          For example, if you had to pay to gather the facts around which your community subsists on your site, you'd have to demand a lot more from advertisers to cover your costs and to make a profit.

          If our model was supported mainly by advertising. But if it's supported by a smarter model (as it is) then no, we wouldn't have to demand a lot more from advertisers to make a profit.

          Your problem is you assume the only model is advertising.

          We're in favor of free content on the internet, but in a different sense than you seem to be. We believe that it would never be in the newspapers' long-term interest to charge readers to gain access to the news & information on their sites, and we say that in our analyses.

          Indeed. On that we agree. I've always said that paywalls will fail.

          But you seem to think that the only models are advertising or paywalls. Broaden your outlook a bit. There are lots of other models.

          As we explain in our analysis, the prevailing view is that the copyright act abolished common-law rights that the news media used to have to prevent each other from using rewrites of each others' stories in very direct competition with each other for brief periods of time.

          I just don't buy it. That "common-law right" is antiquated and obsolete for a *good reason*. It limited free market competition and was a mistake.

          By abolishing those common-law rights, copyright has compelled the investor in hefty journalistic services to subsidize every direct competitor who wants to use those services in real time competition against the originator. That's a subsidy & government compels it.

          Whoa. You have a very strange definition of "the gov't compels it." The gov't TAKING AWAY a BAD and MARKET LIMITING regulation is NOT the gov't compelling anything. It's the opposite.

          That's like saying that when the gov't took away sugar monopolies the gov't "compelled" sugar monopolists to lose their rights to be fat and happy. It was never their right in the first place.

          You may have the mistaken belief that aggregators' rights to free-ride come from the first amendment. I've been litigating first amendment cases almost exclusively since 1983. The first amendment is not what's giving the protection; it is exclusively the copyright act's apparent abolishment of common-law unfair competition and unjust enrichment.

          We'll agree to disagree. There are a lot of first amendment scholars who disagree with you on that one.


          If the copyright act's apparent ban on those common-law legal theories is lifted, parasitic aggregators will find that the first amendment will budge. It will not give them the protection that they think it gives them now.


          I find that unlikely and troubling. It's hard to square such a thing with any First Amendment analysis that I've heard. It would, by definition, create a law that prevented freedom of press and expression. It's a textbook violation of the 1st Amendment.

          Could Gawker offer contemporaneous commentary about Post stories along with some of the basic facts that help explain the commentary? Definitely on the commentary; yes on the facts, depending on how it was done. Could it offer headlines with a link? Of course. What it couldn't do is typically offer a close substitute for the Post's original reports at the time that those reports have their highest commercial value.

          Two points on this:

          (1) I still find that troubling on First Amendment grounds, no matter what you say.

          (2) You have narrowed this issue down to such an INCREDIBLY MINISCULE part of the market, as to be effectively meaningless. Seriously. Newspapers are not dying because of a few tiny sites occassionally "rewriting" a story without adding commentary. Trust me. I'm in this particular business. It's not happening. If they're siphoning off any traffic it's so marginal as to be a rounding error at best.

          Your proposal wouldn't change the revenue equation in the slightest. But it would create dangerous and wasteful lawsuits as newspapers sought to expand what was considered unfair competition.

          As for ASCAP, I suggest it only as a convenient way for aggregators to enter into voluntary contracts if they wanted to. That seems easier than entering into separate contracts with the Washington Post, the NY Times, the Atlanta Constitution, etc.

          If you look at the situation we have today with ASCAP you would realize what a dangerous suggestion that is. You create a situation where you end up with MASSIVE regulatory capture.

           

          reply to this | link to this | view in chronology ]

          •  
            identicon
            David Marburger, Jul 23rd, 2009 @ 12:48pm

            Re: Re: Re: Re: Marburger analyses

            Here's a good example of why the first amendment will budge if we revived the common law.

            Daniel spends 6 hours a day for several weeks researching the history of Boston for a for-profit walking tour that he'd like to start. He asks Dave to help him do the research. Dave doesn't bother.

            Daniel finishes his research, plans his tour & refines it. He opens a stand on Boston common and charges $12 a person for the tour.

            Dave sees that Daniel is making money. He pays the $12, goes on the tour and either takes copious notes or tapes Daniel. Dave then takes 4 hours, rewrites Daniel's historical tidbits and maybe changes the order of which sites to visit first.

            Dave opens up competing walking tour stand near Daniel's on Boston common. But Dave charges only $3. If Dave has decent speaking skills, Dave will drive Daniel out of business.

            If common-law unfair competition were alive and well, and Dave refused to work out a mutually-agreeable accommodation with Daniel, Daniel could sue Dave for the usual common-law remedies.

            Understand that Daniel does not "own" or have a property right in the historical facts that his research uncovered. But he has a "relational" interest against Dave for the unfair competition.

            Assuming that the court doesn't impose more some oddball or overkill remedy, I have zero doubt that the first amendment will not protect Dave. Dave is going down.

            If you think that the first amendment will protect Dave in that circumstance, you are dreaming.

            That's like saying that the first amendment will protect speech that invades privacy, inflicts emotional distress, libels, incites public unrest, and the like.

            The first amendment has not barred recovery for speech that injures legitimate interests. The first amendment places some limits on liability, but it respects those counter-speech interests and allows liability to happen.

            It would respect the theory that we advocate restoring -- so long as the courts don't use our theory to create property rights in factual information. We would oppose that just as you do.

            This is first amendment 101. Very basic; very established.

             

            reply to this | link to this | view in chronology ]

            •  
              identicon
              David Marburger, Jul 23rd, 2009 @ 1:15pm

              Re: Re: Re: Re: Re: Marburger analyses

              Whoops -- there's a flaw in my Boston walking tour analogy.

              The analogy works if Daniel changes the tour each week based on hours of new research that he undertakes the previous week, and Dave does the same for-profit mimicking of each changed tour. That's closer to daily news and unfair competition.

              Again, Daniel does not own the facts that he uncovers thru research, but he has a legal interest to stop Dave from persisting in that conduct.

              Suffice it to say this: Where legal interests against unfair competition exist and they don't create property rights in facts, the first amendment will respect those legitimate legal interests.

              We've got a long history of that in America.

               

              reply to this | link to this | view in chronology ]

              •  
                icon
                Matt (profile), Jul 23rd, 2009 @ 1:43pm

                Re: Re: Re: Re: Re: Re: Marburger analyses

                The flaw here is in Dave's business model. He has created an undifferentiated product that does warrant his high price premium.

                In my business there are always new companies coming along trying to create low cost knockoffs. We maintain our price premium because of our service, reputation, quality, etc.

                 

                reply to this | link to this | view in chronology ]

            •  
              icon
              Mike Masnick (profile), Jul 23rd, 2009 @ 2:39pm

              Re: Re: Re: Re: Re: Marburger analyses

              Dave opens up competing walking tour stand near Daniel's on Boston common. But Dave charges only $3. If Dave has decent speaking skills, Dave will drive Daniel out of business.

              Because Daniel chose a bad business model.

              This isn't "unfair" competition. It's competition. Daniel needs to adapt and INNOVATE to stay in business. He can do a variety of things both increasing the actual benefit (improve the tour!) or in the perceived benefit ("the ORIGINAL Boston tour").

              It's competition and that's a good thing.

              I find it troubling that you are against basic competitive markets, and claiming that you support a free market approach.

               

              reply to this | link to this | view in chronology ]

  •  
    identicon
    David Marburger, Jul 22nd, 2009 @ 1:58pm

    One more thing about the analyses

    If we restored common-law unfair competition by lifting the copyright act's apparent blocking of it, those who summarize others' news reports for profit in real time competition with the originator would have the following choices:

    1. Become a for-profit pure aggregator without anyone's consent by featuring headlines with links to the originator, but no summaries.

    2. Enter into mutually beneficial contracts with the originator to use the substance of their reports commercially.

    3. Expend your own resources to verify the original story and possibly add new information that your discover using your own efforts.

    4. Postpone commercially rewriting the core of the original news story for most of a day.

    5. Don't sell ads around contemporaeous commercial rewrites.

    6. Continue parasitic aggregating and see if you get sued.

     

    reply to this | link to this | view in chronology ]

    •  
      icon
      Sneeje (profile), Jul 22nd, 2009 @ 3:03pm

      Re: One more thing about the analyses

      At the extreme risk of oversimplifying one of the possible flaws here, what about the can't put the genie back in the bottle issue?

      #1 is irrelevant because of the following assertions... The number of agents in the market seems to make the possibility of #2 unfeasible. #3 is fine, obviously. #4 is ludicrous--information ages too quickly. Technology advances in language processing will continue to make #5 possible and #6 impossible for the originator. How exactly will a court determine what is "parasitic" and what is not? Not to mention that news orgs will quickly realize (much like pirating) that suing these folks will be the equivalent of whack-a-mole.

       

      reply to this | link to this | view in chronology ]

    •  
      identicon
      David Marburger, Jul 22nd, 2009 @ 3:30pm

      Re: One more thing about the analyses

      #1: why is becoming a pure aggregator irrelevant?

      #2: contracting would be feasible if news originators formed a society like ASCAP that could grant simple, cheap licenses.

      #4: we know that's ludicrous; but that's sort of the point. Free-riders are loathe to give up that free-riding commercial advantage.

      #5: not selling ads around contemporaneous rewrites would certainly work to make liability go away, but we assume that summarizers-for-profit don't want to stop making profits on the rewrites. Again, that's sort of the point. Free-riders don't want to give up the commercial subsidy that the copyright act provides.

      #6: free-riding at your own legal risk is no worse than publishing libel at your own legal risk. Libel in the mainstream media is as commonplace as shoes, but generally only the dumbest mistakes or meanest characterizations get sued.

       

      reply to this | link to this | view in chronology ]

      •  
        icon
        Matt (profile), Jul 22nd, 2009 @ 3:56pm

        Re: Re: One more thing about the analyses

        Setting up a collection society as mentioned in #2 is dangerous on many levels.

        1. Who do we declare a news originator? Is this compulsory for anybody who publishes to the internet? Seems that this would favor the large publications.
        2. How do you verify the first source for a news story? Multiple sources could cover an event at the same time. How do you know which one "deserves" the license?
        3. Everyone is now a publisher. Would I need a license to link and comment about a story in my twitter feed? We have already seen this with ASCAP now asking mechanics to pay performance fees for having a radio on in the garage.

        Also groups like ASCAP have shown to have many issues of their own. Take a look at a few examples.

        http://www.techdirt.com/articles/20090109/1823043352.shtml
        http://www.techdirt.com/art icles/20090302/0200473945.shtml
        http://www.techdirt.com/articles/20090709/0109185492.shtml

         

        reply to this | link to this | view in chronology ]

      •  
        icon
        Mike Masnick (profile), Jul 22nd, 2009 @ 4:06pm

        Re: Re: One more thing about the analyses

        #2: contracting would be feasible if news originators formed a society like ASCAP that could grant simple, cheap licenses.

        Yikes. As Matt pointed out, adding in a bureaucratic middleman is the exact opposite of a free market solution. It's adding massive friction where the market says it's not needed. You're purposely adding in a monopoly inefficiency to drive up the price and limit supply! How is that *possibly* a free market style solution?

        #5: not selling ads around contemporaneous rewrites would certainly work to make liability go away, but we assume that summarizers-for-profit don't want to stop making profits on the rewrites. Again, that's sort of the point. Free-riders don't want to give up the commercial subsidy that the copyright act provides.

        Wait. Really? This is the first time I've ever seen anyone claim that it's *copyright law* that grants FREE RIDERS a subsidy. The truth is exactly the opposite. Copyright law grants the originator a subsidy in the form of a gov't granted monopoly.

        When it comes to news coverage, there is no such subsidy because the information is FACTUAL and for a VERY GOOD REASON you cannot copyright facts. Your analysis is that this is a bad thing. And, I'm sorry, but you are wrong on both the legal and the economic fronts.

         

        reply to this | link to this | view in chronology ]

  •  
    identicon
    Jeff Sonderman, Jul 23rd, 2009 @ 6:48am

    New story on this subject

    There is a new story in the Cleveland Plain Dealer on this today, which continues to disparage bloggers. Read about it here.

     

    reply to this | link to this | view in chronology ]

  •  
    identicon
    Josh Young, Aug 12th, 2009 @ 10:32pm

    Beige t-shirts hyppthetical

    Thank you, Messrs. Marburger, for encouraging Mr. Masnick to post your analysis. It was a refreshingly clear read. So let's jump in.

    In your analysis, you write, "The competition among the dyers to sell their shirts will force them to undercut one another in price" (p. 28). True enough, if the only dye in the world were beige, as you suppose. But what if there were many dyes, and what if dyers could mix them or otherwise combine them in ways that could produce highly desired patterns and designs? Let's suppose dyers could differentiate their products so as to compete on quality rather than merely price. That seems plausible, at least.

    Let's further suppose that buyers of shirts are quite enamored of their multi-colored, branded shirts. Of course, the dyers' "prices will not reflect the cost of making the shirts." But I'm not sure it's therefore necessarily the case that "the price of a dyed shirt will be below the price of the foundational white shirt...." Instead, buyers of colored shirts might pay a premium for them and the self-expression they afford. Not necessarily, of course, but it's plausible.

    Does the mere fact that beautiful multi-colored shirts fetch a price greater than what the plain white ones fetched while they were alone in the market mean that the price of the white shirts won't dip once they face competition from the multi-colored shirts? I'm not an economist, and I don't have a strong intuition either way. I might be wrong, but let's presume that the balance of white shirts maintain their original price.

    Here, the analogy breaks down some because news is a "public good," while shirts are not. So let's try to forget the hypothetical fact that the makers of the white shirts were forced in the first place to give away their wares to be dyed (you chose to analogize between digital and analog goods and services, not me!). Mustn't we conclude that the makers of white shirts are no longer harmed--that they do not face unfair competition? They're no longer losing profit per shirt, after all.

    There are two relevant conclusions, one theoretical and one empirical. The first is that the value an aggregator adds to an article matters theoretically. The more value an aggregator adds--whether it arises from additional analysis, context, entertainment, or Mr. Masnick's beloved "community" or from reduced risk to the reader that the news, an experience good, will be an inefficient allocation of attention (i.e., super boring)--the more an aggregator can charge for its advertising, and the less the original publication's advertising rates will be depressed. The second is that the pressure that advertising coupled with highly value-added rewrites puts on the advertising coupled with original articles seems like a wildly complicated empirical puzzle--a puzzle rather more tangled than traditional microeconomic theory can handle. This seems like a problem for practically minded courts.

     

    reply to this | link to this | view in chronology ]


Add Your Comment

Have a Techdirt Account? Sign in now. Want one? Register here
Get Techdirt’s Daily Email
Save me a cookie
  • Note: A CRLF will be replaced by a break tag (<br>), all other allowable HTML will remain intact
  • Allowed HTML Tags: <b> <i> <a> <em> <br> <strong> <blockquote> <hr> <tt>
Follow Techdirt
A word from our sponsors...
Essential Reading
Techdirt Reading List
Techdirt Insider Chat
A word from our sponsors...
Recent Stories
A word from our sponsors...

Close

Email This