osewalrus (osewalrus) wrote,

Reinventing the business of writing, newspapers.

Newspapers are dying. Unsurprisingly, this prompts a great deal of back and forth about who is to blame and what should be done. I hope to write more on this later, but wanted to stash away a few quick things now.

This Beckner-Posner piece advocates changing copyright law to prevent search engines and aggregators from using newspaper content. I find several notions wrong with this theory. First, if we accept that "the internet" is killing the newspaper business, the real enemy is not Google News but Craiglist or, perhaps, our crappy model for internet advertising. Newspapers have never made their money from subscriptions or purchases (this is why there is a whole industry for free newspapers). They make money through advertising. Subscriptions and sales are important to advertisers because you can charge for advertising based on audience size or audience demographic. The loss of 10,000 readers hurts a bit from lost subscriber revenue -- but the real hardship is that you can't charge advertisers as much for ads. Worse, advertisers are moving to venues where they get more bang for the buck -- like the aforementioned Craigslist.

So how would changing the copyright law to prevent aggregation save newspapers? It would not prevent the flight to online advertising. The next argument is that it would force people to buy subscriptions rather than read their news online. The problem with that argument is that newspapers already have a perfectly adequate solution: don't put content online. Or do what Wall St. journal did and put it behind a wall and require an additional subscription.

The problem is those stupid consumers prefer to get news online, and for free. As newspapers discovered, the refusal to put your content online just meant that all those readers went to other news sites that DID put their content online -- including English language newspapers in other countries and folks not terribly worried about preserving the 20%+ profit margins to which newspapers became accustomed. As much as any given paper may not have wanted to give away content, they still lost readers, and advertising. Worse, investors wanted to know what their "internet strategy" was, because sitting on one's ass hoping it will go away was not much of a strategy -- especially when advertisers kept migrating to Craigslist. At least putting the content online attracted visitors, allowing for modest sale of online ads and collection of visitor information to sell to behavioral advertising firms.

Usually the argument against aggregators is that it is somehow unfair for aggregators to make money off "my work." But, as noted above, if you actually didn't want to have "your work" available online, you would put it behind a wall or not put it on at all. What most newspapers actually mean is that they want to collect money for the work done by aggregators. Maintaining a search engine like Google News or Yahoo News is not free. These companies provide a service people want and have figured out how to get paid for it. Now the newspapers, which individually contribute an infinitesimal portion of the value, want a taste. And, if the music industry and Hollywood models are any judge, what it really means is "those big enough to force their terms on others will get big slices, and everyone else will get crumbs if they are lucky."

Which, of course, brings us to the real reason copyright reform would help existing newspapers. It makes it much harder to find competitors. What newspapers (and lots of others) want is to be able to have all the perceived benefits of the internet but still maintain their existing business model derived from when they were the only players in town. Heck, if I were in a business where I used to make ridiculous amounts of money while racking up debt and laying off reporters, I'd want that gravy train to run forever as well. As Robert Heinlien observed in the short story Life-Line:
There has grown in the minds of certain groups in this country the idea that just because a man or corporation has made a profit out of the public for a number of years, the government and the courts are charged with guaranteeing such a profit in the future, even in the face of changing circumstances and contrary to public interest. This strange doctrine is supported by neither statute or common law. Neither corporations or individuals have the right to come into court and ask that the clock of history be stopped, or turned back.

Interestingly enough, Posner took a somewhat different view some years earlier in this essay. I think he was right the first time.

This debate is also going on more broadly, informative is this review by Malcolm Gladwell of Chris Anderson's new book Free. Here is Anderson's response. Both are respectful of one another, which makes for a pleasant change in this debate. As it happens, I think Anderson has the better of the argument.

I start from the premise that, as usual, we have some flexibility in our policy choices. We can have policies that favor one set of business models over another, one class of creator over another, or any other sort of combination we try to balance. A hundred years ago, no one worried that automobiles would put farriers out of business and sought to regulate automobiles to protect the thousands of skilled craftsmen who lost their livelihoods. But the wealthier publishing companies worried about how piano rolls could eliminate their business proved more successful in getting copyright law changed.

So which way will our policy choices take us? Beating up aggregators certainly seems attractive this month. But I would suggest newspapers take a lesson from the music business. The music business got what it wanted when it forced Apple to license music on its terms, with incredibly restrictive digital rights management and taking 2/3 of each download as licensing fee (66 cents of every song downloaded is licensing fee). They created a monster. iTunes became the dominant music portal, with the DRM creating a lock-in effect that prevented rivals such as Zune from ever taking off. When music labels went to renegotiate their contracts for higher licensing fees, Jobs invited them to pull their songs from iTunes. That didn't happen, because by that time iTunes was a major revenue source for the labels and, if they pulled out, people would buy music through iTunes anyway. They would just buy other people's music.

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