Newspapers Need New Business Models, Not Permission to Collude

Newspapers Need New Business Models, Not Permission to Collude

“The news business is suffering, but not because people don’t want news,” according to the News Media Alliance. Rather, they argue, Google and Facebook are responsible for newspapers’ financial problems. Their solution: convince the government to grant an antitrust exemption so they can create a price-fixing cartel.

With the American public’s trust in traditional media at a low point, lobbying for permission to collude does not seem like a promising strategy to regain that trust.

Perhaps more importantly, the Alliance’s ire is misplaced. Google and Facebook are not responsible for the financial woes of newspapers. The proximate cause for the collapse in newspaper revenues is the internet itself. Newspaper advertising revenues started collapsing in 2006 as newspapers lost much of their classified advertising business to websites like Craigslist—well before Google and Facebook became the powerhouses they are today.

Nevertheless, the Alliance is campaigning for antitrust immunity, which would allow newspapers to negotiate collectively with Google, Facebook and others. A bill allowing such behavior has just been introduced in the House. The Alliance characterizes the bill as a “low regulation, pro-market way to unleash the news industry’s negotiating power.” But allowing competitors to collude, which is what an antitrust exemption does, is the opposite of a pro-market solution. Antitrust economists and lawyers are virtually unanimous that these exemptions are bad for consumers and the economy.

Moreover, if an antitrust exemption enabled newspapers to increase prices, it would not necessarily help the industry, and may in fact be counterproductive. Many news sources would not be members of the proposed newspaper “cartel.” Raising prices and advertising rates above competitive levels for newspaper websites may simply invite greater competition from these other news sources.

According to the Alliance, the U.S. antitrust laws are “designed to promote fair competition and prevent consolidation.” This is an incomplete, and therefore misleading, interpretation. In the U.S., protecting competition does not mean protecting competitors themselves. Instead, it means protecting the competitive process and consumers.

The disruption the newspaper industry has experienced does not seem to have harmed consumers. The Alliance points to Pew data showing that while newspaper ad revenues have declined, the web traffic for the top 50 newspapers increased 42% from 2014 to 2016. Consumers are getting a lot of news from newspaper web sites, social media, messaging aps, texts and email. TV is still the primary news source overall, particularly for older Americans.

The Alliance indicates that local news is most at risk from the decline in revenues, which may be true. Yet, according to Pew, almost 80% of Americans say they follow local news regularly—the same percentage who say they follow national news—so they must be getting their news somewhere.

The news media landscape will almost certainly be different in five years, which is reason enough not to intervene. Rather than seeking what amounts to a government bailout, newspapers need to develop business models tailored to this new environment. It is also in the interest of Google and Facebook to help develop viable news business models. After all, if Google and Facebook users are unable to access high-quality news on their platforms, then the value of those platforms will fall. There should be a win-win where traditional newspapers see platforms like Google and Facebook as partners rather than adversaries.

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