The Newsrooms Vs. The Monopsony

Two weeks ago, I questioned the news industry’s efforts to pay their reporters and other staff fairly, risking losing talent to online platforms or other industries looking to lure them with better compensation packages. Today I’m here with another problem newsrooms face as their plight becomes more complex than ever.

Unless you’ve been living in a cave, you’re aware of how quickly and deeply the newspaper industry is being decimated. You’re also likely aware that newspapers are having a massive challenge trying to get paid fairly for their content that appears on Big Tech platforms — primarily in the form of Facebook and Google. This consistent underpayment to newspapers may have a much more detrimental effect than any of the industry’s other current challenges.

At the heart of the problem is the fact that an ever-growing number of consumers are reading news stories on social media — and in particular, Facebook. Social media sites have perfected a means to curate newspaper content alongside advertisements, which has been proven to decrease clicks on the news content and increase the likelihood of readers clicking on ads. When that happens, the revenue goes to Facebook, not to the original news site whose journalist wrote the piece. That’s the reason Pew Research reports that the news industry has lost advertising revenue every year since 2006 — even during years when newspaper circulation increased.

Hal Singer, managing director of Econ One, an economic consulting firm, adjunct professor at Georgetown’s McDonough School of Business, and consultant to the News Media Alliance, provides a compelling argument why Congress needs to act now to protect the news industry in his article “The Power Imbalance,” which appears in the current issue of TFM, the magazine for members of the Media Financial Management Association.

You may already be familiar with the two pieces of legislation designed for such protections, which are in various stages of markup or passage in Congress: One bill is the American Innovation and Choice Online Act (AICOA), which seeks to police the dominant platforms’ acts of “self-preferencing,” or favoring their affiliated content or merchandise over that of independent rivals.

The second bill, the Journalism Competition and Preservation Act (JCPA), would grant an exemption to antitrust laws for news publishers so they can better coordinate their dealings with the tech giants, among other protections for news publishers. Just yesterday, the Senate voted for and completed its markup of the bill, passing it to the House Judiciary Committee for a vote, ideally next week.

Certain members of Congress — and certainty Big Tech itself — are against the bills. By inaccurately labeling them as “antitrust reform,” their opponents want to portray the news industry as conspiring to create a “newspaper cartel, “as Sen. Mike Lee (R-Utah) goaded a Republican witness into calling it during a JCPA hearing where Singer testified as an economic expert.

Singer knows newspapers are far from being in that sort of nefarious position. He explains that “antitrust exemptions are rare, and that’s a good thing. Powerful entities should not be immunized from antitrust scrutiny. In some limited circumstances, however, coordination among small suppliers, when dealing with a large buyer, is necessary to overcome a power imbalance that is causing input prices and employment to fall below competitive levels.”

In addition, the fear that if Big Tech increased its payments to newspapers would lead to higher prices for consumers is unfounded, Singer explains. Basic pricing theory says that an increase in a company’s fixed costs, such as a lump sum transfer payment that doesn’t change with output, will not affect a firm’s pricing. He likens it to NCAA schools that, despite having to pay college athletes for the rights to use their name, image and likeness, haven’t raised ticket prices or television license fees. Thus, Google and Facebook would have no reason to begin charging users for search or social media (and I’d expect users would revolt if that happened).

These payments to newspapers wouldn’t go up with each click; they’d be a lump sum fixed payment for the right to access the content. And after making the access payment, the platforms would be free to monetize newspaper content in additional ways, assuming they adhere to applicable copyright law.

Singer was somewhat surprised that some traditionally anti-monopoly organizations have shown opposition to the two bills — but then noted that Big Tech provide funding for some of these groups. Their stated argument that the legislation would ultimately cost consumers more simply doesn’t hold water, he says.

Some detractors have suggested that rather than put the JCPA in place, it would be more effective to double down on antitrust laws against Google or Facebook. But lawsuits against Big Tech are problematic, Singer counters. In addition to recovering only a fraction of underpayments, such lawsuits can target just one platform at a time, and are likely to get tied up in the courts for years. During that time, newsrooms may just bleed out.

You only need look as far as the statistics around Big Tech’s massive buying power, which Singer accurately calls a monopsony, over news publishers. These eMarketer statistics are widely used as a reality check:  Facebook and Google account for well over half of U.S. digital display advertising in 2022, with Facebook notching a 42.5% share and Google (including YouTube) accounting for 10.2%. Another Pew study found that employment among newspaper employees fell from 71,000 in 2008 to 31,000 in 2020.

Singer ties Big Tech’s underpayment to underemployment of journalists and other news employees. He also maintains that it can cause a host of social ills associated with local news deserts, including less competent local governments; greater spread of partisanship and misinformation; removal of economic stimulus to local economies; and a reduction in the diversity of viewpoints, particularly among minority populations.

The time for Congress to act is now, Singer says, since this fall’s midterm elections may flip Democratic Senate and House majorities, making it highly unlikely any legislation to protect newsrooms will pass.

Singer’s article in TFM is a more detailed and more worthy read than what I’m able to fit into this column. For me the bottom line is fairness. And I’m hopeful that members of Congress see through the high-powered lobbying efforts and smokescreens to reach the same conclusion. I highly recommend you take the time to understand the gravity of the situation, and put your own muscle behind these two pieces of legislation that could make the difference between life and an increasingly likely death of more and more local newsrooms across the country.

Joe Annotti is president and CEO of the Media Financial Management Association and its BCCA subsidiary, the media industry’s credit association. He can be reached at [email protected] and via the association’s LinkedIn, Facebook, Instagram and Twitter accounts.