Media, Regulators, and Big Tech; Indulgences and Injunctions; Better Approaches

Good morning,

Exponent — as promised! — will be back tomorrow, talking about podcasting, Spotify, and working from home.

On to the update:

Media, Regulators, and Big Tech

From Ben Smith in the New York Times:

[Chairman of the Australian Competition and Consumer Commission Rod] Sims and a like-minded regulator in France, Isabelle de Silva, are challenging a universally accepted fact of the internet: that Google and Facebook can carry content created by news organizations without directly paying the organizations for creating it. Last month, as the coronavirus put hundreds of publishers out of business around the world, the Australian government instructed Mr. Sims to force the platforms to negotiate payments with newspaper publishers — making it the first country to do so.

I hesitated to write about this article for two reasons: first, I have written on multiple occasions about how the free distribution enabled by the Internet is what hurt the newspaper business, rendering geographic monopolies predicated on owning printing presses and delivery trucks obsolete, dramatically increasing competition for attention even as new platforms predicated on delivering consumers individualized content turned out to be massively superior options for advertisers looking to target individual users. Does it need to be said again?

The second reason, though, works against the first: the sheer number of flat-out wrong statements in this article is so overwhelming that I seriously despair about the long-term effects: unintended consequences are always a concern when it comes to creating new regulation; they are inevitable when regulation is rooted in facts completely unmoored from reality.

Take this paragraph: it is just assumed that Google and Facebook ought to be paying publishers for their content, but any sort of rational evaluation would suggest that money should flow in the opposite direction. Google and Facebook direct traffic to publishers, and in Facebook’s case in particular, that traffic comes from the publishers themselves and their readers placing links on the service. Google does, of course, crawl the web for its search results and for Google News (which it doesn’t monetize), but we already know what happens if Google simply stops crawling publications: they start losing money, and lots of it (more on this in a moment).

Mr. Sims, a pugnacious 69-year-old who has spent much of his career tangling with railroads, ports and phone companies, sees echoes of those classic monopolies in this battle: “The digital platforms need media generally, but not any particular media company, so there is an acute bargaining imbalance in favor of the platforms. This creates a significant market failure which harms journalism and so, society.”

Not really. Facebook, again, is the extreme example here: the service got started with user-generated content and has continually retrenched over the last few years to have more user-generated content and less professionally produced content; every time they have done so, publishers have cried foul over all of the traffic they were losing. Google, meanwhile, does rely nearly entirely on third-party content, but the content it actually monetizes is around mundane subjects like insurance, travel, shopping, etc., not news. Moreover, Sims’ point is the same as mine: the issue for media is that it is forced to compete for attention instead of rely on geographic monopolies; the fact of the matter is that every media entity has a URL that consumers can go to directly. That many choose not to is a problem for media companies, not Google. To put it another way, a background in railroads and ports is to have experience with the exact opposite kind of problem as that presented by the Internet.

The battle between platforms and publishers is at once a matter of economic principle and an old-fashioned political brawl between powerful industries. For a decade, tech’s transformative power, glamour and enormous lobbying spending allowed it to dominate, resulting in a system in which the platforms could feature and profit off the content news publishers create without paying them directly for it.

Google won because it leveraged the web — specifically the link — to become a better search engine the larger the web became, in direct contrast to its syntax-based competitors. Facebook won because it provided a means for users to generate their own content and read the content of their friends and family, digitizing offline networks into an online network effect. Neither had anything to do with power, glamour, or lobbying — indeed, like nearly all startups, Google and Facebook were ignored, dismissed, mocked, and only then hailed as irrepressible monsters by publications like the New York Times.

Indulgences and Injunctions

The most astounding part of Smith’s article, though, is striking in its clarity:

While much of the American media rejects the idea that it is crusading in its pages to support its publishers’ business agenda, most news executives in this country share a viewpoint on the platforms, having seen them pull advertising dollars from the news business and spread misinformation at the expense of professional journalism. And even as the platforms employ armies of powerful lobbyists, politicians remain eager to please the press that covers them.

“All governments are responsive to media in some way or another, because in all countries media is the filter through which things are seen,” Mr. Sims said.

Facebook and Google have approached new regulatory aggressiveness differently. Facebook, after taking a huge public beating for its role amplifying misinformation and disseminating user data in the 2016 election, has moved to give publishers what they want: money, mostly. The company began its news tab last October writing checks in the seven figures to publishers in exchange for three-year licensing deals. Facebook’s attempts to make amends culminated with Mark Zuckerberg submitting to an onstage interview with a triumphant News Corp C.E.O., Robert Thomson, who began by asking drolly, “What took you so long?” And publishers believed that Facebook had legitimately begun to address an important issue by compensating news organizations for their work.

I have tried to remain out of the culture war between tech and media that has dominated Twitter the past few months in particular; I am a big believer in the importance of journalism — I rely on it for every post I write, for one — and am very concerned with figuring out a business model that is sustainable. Moreover, tech, particularly now, needs the accountability that comes from an independent media.

That, though, is why this section of Smith’s article is so illuminating, and so depressing. Just look at the logic chain Smith lays out: media crusades against tech —> governments respond to media —> Facebook has taken a beating —> Facebook pays media companies —> media approves. Again, this is Smith’s logic chain, not mine! At what point do we believe him?

Meanwhile, as for Google:

The politics have changed drastically in the last few years, and Google’s proud defiance and lectures about technology now come across as a blend of arrogance and naïveté. And, perhaps showing the virtues of Facebook’s more conciliatory approach, the social media giant has also succeeded in France, for now: Facebook is arguing that voluntary posts by its users to social media are intrinsically different from the way a search engine scrapes the web, and negotiating to pay publishers, so far avoiding de Silva’s heavy hand. “We found the argument by Google that they would never pay any form of payment for any content inconsistent with the law,” Ms. de Silva told me in a telephone interview about her efforts.

Google executives thought they’d found a way to dodge European regulation when, in Spain in 2014, they simply removed Google News from search results there rather than respond to regulators’ demands for compensation. But, in a sign of how things are shifting, when they tried a similar maneuver in response to France’s new regulation requiring payment for copyrighted “snippets” of news, Ms. de Silva pounced, ruling that the company’s take-it-or-leave-it approach was itself an abuse of market power. “We looked at what happened in Spain,” she said. “This is not really an avenue that is open to them because in our decision we asked them to maintain the content is as it is today.”

Let’s be crystal clear about what is happening here: Google is being compelled to do business in France against its will, precisely because news publishers need Google more than Google needs them, upsetting the entire premise of this article. Moreover, in Smith’s telling, this is the alternative to simply paying up voluntarily. It sounds radical to suggest this is blackmail, but at what point is it lying to say otherwise?

Smith does note in his conclusion:

Mr. Sims and Ms. de Silva can’t, alone, save a news industry that is still struggling to meet consumers where they are on the internet. Some publications have an enduring reliance on print, and others have styles of telling and thinking about news and revenue alike that hark back to the newspaper era. At worst, forced payments from platforms could merely prop up fading newspapers at the expense of new ways of telling stories and doing business.

This is all true, but if propping up old business models unnecessarily were the extent of the damage I wouldn’t find all of this so upsetting. The real issue comes from three interrelated reasons:

  • First, as I noted, tech needs the criticism. It is the most powerful industry on earth, with leadership that is unaccountable to anyone, and said leadership is distressingly unconstrained by mere profit. The media — augmented by the amplification mechanism that is the tech platforms themselves — is essential as a check on power.
  • Second, if the media is financially dependent on Facebook (and Google), how can it be truly critical? To be fair, I don’t necessarily expect individual journalists and editors to be explicitly swayed by this on a story-by-story basis, anymore than I think they are swayed in the opposite direction today; the danger comes in the presumption of guilt being replaced by the presumption of innocence. What is missing is neutrality, but that depends on being honest about why it is the news industry is struggling.
  • Third, and most distressingly, it is hard to see why Facebook or Google will ever again care what the media says about them.

Go back to what Facebook CEO Mark Zuckerberg said on the company’s January earnings call:

We’re also focused on communicating more clearly what we stand for. One critique of our approach for much of the last decade was that because we wanted to be liked, we didn’t always communicate our views as clearly because we were worried about offending people. So this led to some positive but shallow sentiment towards us and towards the company. And my goal for this next decade isn’t to be liked, but to be understood. Because in order to be trusted, people need to know what you stand for.

One reading is that Facebook is going to be clearer about its principles; another reading is that Facebook is no longer going to concern itself with outside criticism, because it turns out that criticism is cynically motivated and can be bought off. Again, I don’t want this to be true, but it is getting harder and harder to argue that it is a mere coincidence that large media companies are criticizing big tech out of one side of their mouth and asking for money — or else! — out of the other. It sure seems like Zuckerberg might agree, and that is bad news for all of us.

Better Approaches

All of this is not to deny that there continue to be very real economic challenges facing the media, and I’m not so solipsistic — the last couple of days notwithstanding — to say that individual publishers collecting subscriptions is the answer. But neither are indulgences and indictments!

First, media organizations have to be honest with themselves about why they are struggling, and in that accounting Facebook and Google are beneficiaries of inevitable Internet trends, not creators. Only then can the search for sustainable business models begin.

Second, if governments want to fund news organizations, then they should do so explicitly, instead of deputizing Google and Facebook, destroying the concept of free enterprise along the way.

Third, instead of making massive size a prerequisite for operating in Europe, whether that be through privacy regulations like GDPR, overbearing copyright laws, or now hate speech laws that require automated monitoring and pre-emptive takedowns (which only Google and Facebook can do), governments should be encouraging more competition for attention.

Fourth, instead of punishing Aggregators for building products that consumers like to use, antitrust authorities should focus on third-party advertising markets, particularly the role played by Google. That gets at the heart of the media’s business model problem for one, and is an area where Google really has played both sides of the market to the detriment of everyone else (and had its hand strengthened by GDPR).

Finally, I believe the opportunity for a Faceless Publisher is clearer than ever, although Faceless Infrastructure might be a better way to describe what is needed. It is in the interest of multiple sides of the media market — publishers, readers, developers, curators, and regulators — to create mechanisms that let publishers of all types and sizes build new kinds of monetization opportunities that don’t depend on Facebook and Google — that’s the only way to provide a check on them in the long run.

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