Should publishers be allowed to collectively bargain with Facebook and Google?

Source: Wikimedia

In 2017, The Wall Street Journal published an op-ed titled “How Antitrust Undermines Press Freedom.” It was written by David Chavern, the head of the News Media Alliance, a trade group that represents over 2,000 publishers.

In it, he argues that Facebook and Google have effectively cornered the digital ad market, eating up all its growth, and that this has come at the expense of the very content creators that these two companies rely on, content creators Facebook and Google refuse to fairly compensate.

“The only way publishers can address this inexorable threat is by banding together,” wrote Chavern. “If they open a unified front to negotiate with Google and Facebook — pushing for stronger intellectual-property protections, better support for subscription models and a fair share of revenue and data — they could build a more sustainable future for the news business.”

Earlier this decade, several book publishers banned together to negotiate ebook prices with Apple in a direct effort to undermine Amazon’s command of the market, and they were slapped with a lawsuit from the Department of Justice for violating antitrust laws, hence why the News Media Alliance is seeking a special exemption.

But do publishers deserve one? And even if they do, would they be able to get such legislation passed through such a divided Congress? These are the questions I asked David Chavern for this week’s episode.

To listen to the interview, subscribe to The Business of Content on your favorite podcast player, or you can play the YouTube video below. If you scroll down you’ll also find a transcript of the interview.

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Simon Owens: Hey David, thanks for joining us.

David Chavern: Great Simon, thanks very much for having me.

You’re the CEO of the News Media Alliance. What is that?

We’re 2,000 news publishers around the U.S., and some in Europe. We were historically the Newspaper Association of America, but we changed the name a few years ago to reflect our digital only membership and the fact that the news has a primarily digital future. So we very much want to represent everybody who is delivering news in every way you can to the public. I always say that the connective tissue in my membership is we hire and pay reporters.

When you were the Newspaper Association of America, I think at some point you required that members have at least a print component of some sort, right?

Yeah, it was the newspaper business, and it was the association for that business, which was primarily a print business. That’s the historic nature of the membership, but the reality is that they’re all digital businesses now. They still mostly have print components, and that’s important, and much more lucrative than people think. But it’s also not considered the future of the business.

What’s the criteria for joining?

It’s really that you do journalism. You hire and pay reporters and deliver it to the public, either digitally, print, through tablets — my aspiration for the association is to represent everyone who is producing journalism for the public.

Your background isn’t in journalism. How did you come to get the job?

I was a lawyer for a long time, and then I was in the association business at the U.S. Chamber. Groups go back and forth between: do we need someone who’s from the industry or someone who knows how to run associations? There was a feeling when they hired me that the association needs to be revitalized, so they wanted someone with that experience. But I’ve been super excited to dive into the media world and to learn a huge amount about the news and media business, and to explain that business to people who aren’t in the media world.

This is a tumultuous time for the industry right now. We have a looming recession possibly coming up. After years of optimism we’ve seen VC money drying up. Publishers like Mic going up in fire sales. BuzzFeed, Vice, and Vox are missing their revenue numbers. Platforms like Facebook and Google are causing anxiety. What kind of concerns are you hearing most about from your members over the past year?

Two things. First of all, I think there’s been a big change — and this is about the news business but also anyone in the content business — we forget how common it was to have the view that the internet was going to be a primarily ad-supported medium for content. People were going to get all this great content for free, and it was all going to be supported by advertising. And I’m old enough to have lived through the first tech bubble, where every business was pitched as an ad supported business.

I think what people didn’t realize until a couple years ago, is that there are only a couple winners in online advertising. There’s Google and Facebook and maybe Amazon and a handful of others. Those folks are going to get all of the online ad dollars over time, and therefore you need to have a much different kind of engagement with your readers online. We’re just sort of in the midst of trying to figure out what kind of engagement that is.

I think the biggest area of anxiety is that nobody has a perfect solution. Nobody knows the one answer for the news business or any other kind of business. Is it subscription? Is it some kind of aggregation function? As I always say, if you sit around with people in publishing long enough, eventually, over enough beers, someone’s going to say, ‘you know what? We need a Spotify for news.’ And Apple is going to come out with a new product like that this year. Is it a new platform? Is it an aggregation platform? Is it a straight subscription relationship? Is it membership? Is it events?

I think once you get away from the simple answer of ‘ads will pay for everything,’ it’s complicated and uncertain. And I think that’s the core area of anxiety right now.

I think what most people don’t realize about the news business is that it is still deeply supported by old economy delivery systems. Newspapers still get a lot of money from print, even though print is declining. The broadcasters still get the bulk of their money from TV and broadcast sources. All of this online news consumption we’ve had for a while is still really heavily subsidized by old economy stuff. And I think people don’t realize that. And I think there’s a lot of legitimate angst for how you pay for it all once the old economy parts go away.

I think there was this assumption for a few years that eventually the advertising market would catch up to online publishing, and you just needed to generate enough traffic, and eventually it would come. Over the last year, though, a lot of publishers are finally resigning themselves to the fact that it’s just not going to happen. You can have all the scale in the world, and it’s not just like you’re magically going to overcome some of those harsh economics of internet advertising where there’s just way too much supply and not enough demand.

I’m not even sure it’s the supply-demand thing. I’ve often fought with folks who say the ad inventory online is infinite. That can’t be the problem, because people’s attention isn’t infinite. Really what you’re trading in is people’s attention.

I think the bigger issue is the power of data aggregation to drive advertising. If you think about traditional advertising, newspapers or TV, there’s relatively little data that went with that. The famous saying about advertising is that ‘I know I’m wasting half of my ad dollars, I just don’t know which half.’

And so then with the whole data revolution, people have been attracted to the idea of ‘we can have this super specific data on people and just reach our core audience.’ In order to win the advertising game, you need to win the data game. And the data game is always going to be won by guys that have massive scale. Billions of people, like Facebook and Google. It’s hard for any content provider site to compete with even a portion of that.

Now I think there are still chapters to play out when it comes to data and advertising. Primarily because the elephant in the room that nobody seems to deal with is how much fake data is out there. People still be wasting half their money and not know where because there’s so much fraud in the online data system. I’m not saying it’s perfect, I’m just saying what advertisers are attracted to right now is data, and it’s just impossible to compete on the data game with folks who are Google, Facebook, and maybe Amazon.

Speaking of that, one thing you made big news about is you wrote an op-ed for The Wall Street Journal calling on Congress to pass special legislation that would allow publishers to collectively bargain against the major platforms. Can you talk a little bit about what legislation you have in mind?

We have a piece of legislation introduced in the last Congress. What we’re asking for is the ability of news publishers to band together to negotiate collectively with the platforms. The platforms have licensing deals with other content providers. They have licensing deals for music, because there are only a handful of music publishers, and music publishers have a whole system to enforce their collective rights. And there’s no system like that for news publishers.

Oddly, the antitrust laws protect Google and Facebook from us. If we try to organize collectively, there’s antitrust risk in doing that, which is perverse in its own way. And basically what we want to negotiate over is revenue sharing, subscription support, data sharing, brand suppression, and algorithmic transparency. The platforms have these secret algorithms they can change at will that have huge effects on what news people consume and how. Not only do we not have any input on that, but nobody knows what they are. Google and Facebook say a lot of things about their algorithms. They say they’re fair, they say they’re not biased in any way. And that may or may not be true, but nobody knows, because nobody knows what’s in them.

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The antitrust laws, they bar things like ‘price fixing.’ The idea that if you allow a bunch of players in the same industry to band together and negotiate together, then that stops innovation from happening, because then they’ll just be able to control the prices, and they’re not regulated by the free market, which forces them to compete with each other. But you guys are saying this is a special case, that because these platforms are so powerful, in and of themselves, that you need that collective power in order to be able to continue to survive.

Yeah, this is an industry that historically has had an incredibly direct relationship with their readers. We literally created a product every day and went and handed it to our customers. That’s kind of unusual. Goodyear doesn’t roll tires up your driveway. We had this incredibly intense relationship with our readers.

But in the digital world, there are two companies that stand between us and our readers. Google and Facebook. The U.S. government isn’t allowed to regulate the news business, but these guys are. They are our regulators. They set the rules and the terms under which we deliver and monetize our product. And really we have to lobby them now. Google, for example, had a rule called First Click Free that essentially required publishers to give some of their content away for free. And we complained about that and argued and pushed against it for years. Eventually, last year, Google changed that rule.

Understand that dynamic. Google had a rule that we had to lobby them to change. They are our regulator. Basically what I’m asking for is for us to be able to approach our regulators, collectively, in order for us to get treated fairly.

What are the politics of this? It seems like this is dead on arrival in some ways. Republicans aren’t fans of the media, but we’ve also seen a lot of skepticism from them toward the big platforms lately. Democrats are very wary of antitrust violations, monopolies. It seems like you have opponents and allies on both sides.

The politics are a lot more subtle. When you first approach the topic, you’re like, ‘yeah, politicians don’t like the news media.’ It turns out that politicians, including Republican politicians, tend to approach the news media like we approach our Congressmen, which is ‘I hate Congress, but I like my Congressman,’ which is a normal thing for people to say. It turns out that politicians on both sides of the aisle that we talk to, they may complain about the media writ large, but generally they worry about their local newspapers and local broadcasters, because they know who they are, even if they don’t agree with them, and also they worry about what happens if they go away. If you lose your local newspaper or local TV news broadcaster, what fills the void?

I’ve always said that this dreaded phrase ‘fake news’ — in the future fake news is going to be primarily a local phenomenon, because people’s curiosity about their community will still be there, but it’ll be filled with garbage and gossip. So broadly, there’s a lot more sympathy toward the news media than you might guess. And then the politics with the technology is super cross cutting. There are complaints on both sides of the aisle on the role of the platforms. I think there ultimately will be various legislative approaches to the platforms. And we want to be part of that.

My basic argument to the Republicans has been, ‘listen, we’re a low regulatory solution here.’ We’re not asking the government to come in and regulate Google and Facebook. We’re asking the government to leave us alone and let us fight for ourselves. I think that’s an attractive argument.

Can you tell me about how these negotiations would work if the legislation passed? Would it be someone from the News Media Alliance that’s approaching the platforms?

Anybody who delivers news content online would be eligible to participate. You’d have to put together an organized body of those publishers from a negotiating side to deliver a bunch of requests and engage in a large-scale negotiation about the terms of delivery and economics.

What you’d ultimately be able to do is have publishers pull content off the platforms, collectively. Would that ever happen? I certainly hope not, and there would be a lot of downsides. But if you think about what the alternative is — the alternative is you have an industry that produces stuff that’s critical to our democracy, and they basically have to engage with their regulator one-off, and aren’t able to talk collectively, and will necessarily then be pushed to some lowest marginal revenue position because there is no leverage.

Again, the whole idea that the antitrust laws protect Google and Facebook from us is ridiculous. I think it’s ultimately a way to come to a better deal. And by the way, Google and Facebook should want our quality content. As I always say, if they have a fake news problem, I tell you what, we’re in the real news business, so let’s make a deal.

I guess I want to play devil’s advocate on two fronts. The first is that companies like Facebook and Google, they’ve been able to get to the position they’re at partly because of innovation. And that competition is causing a lot of publishers to be more innovative. If you look at publishers ranging from the big players like The New York Times and The Washington Post. The New York Times came out with their innovation report a couple years ago and really started reconfiguring their business. Launched the metered paywall which was a huge step forward in innovation. Buying things like The Wirecutter, which was a game changer in terms of merging ecommerce with high quality journalism. And then you see all the way down to local outfits like The Texas Tribune. Or even companies you might not even be aware of. I’ve profiled a hyperlocal news network called Tap Into, which is a series of several dozen local news sites in New Jersey.

You see companies building really sustainable business models in this new ecosystem, and I think it’s because they’re being forced to innovate and forced to diversify their revenue. I kind of wonder if you get to the point where they’re not forced to innovate, and the platforms aren’t forcing them to think more like tech companies, that this innovation isn’t going to happen.

First of all, I represent a really innovative industry. This whole frame that the news business is old and backward looking is old and tired. I represent primarily digital businesses. If you had given me that list a few years ago, I assume that Mic and BuzzFeed, Vice, Vox would be on that list. And they should be because they’re doing super innovative stuff.

But at the end of the day, you have to pay the bills. And for a lot of those folks you were talking about, they still get a lot of money from traditional distribution sources that are slowly going away. The idea that we’re going to be able to hold on with our white knuckles onto old business models, I think, is ridiculous.

And the idea that we have the boot of Google and Facebook on our necks as an incentive to innovate. Music publishers have been forced to innovate, but they also have licensing deals with Google and Facebook. Where’s the licensing deal for news?

If Facebook or Google actually utilizes a publisher’s IP on YouTube or Facebook Watch or Facebook Instant Articles, they’re certainly licensing that content and paying money for it.

First of all, there’s huge amounts of fair use fraud that goes on. Facebook has a licensing deal where if you post a video of your grandkids on Facebook and it has a Britney Spears song on in the background, there’s a licensing deal where Facebook’s paying for that right. There is no underlying licensing deal for news content. And Instant Articles, that’s a whole different set of arguments about delivering content into Facebook and then letting them take a chunk of the ad revenue for that. That’s very different than the whole range of ways in which news content is pirated and stolen and rewritten and forwarded in ways that result in no compensation back to publishers.

This idea that it will keep us from innovating, I just don’t get it. Other people get paid, and that seems to go OK, but we’re not allowed to be paid.

The second thing that worries me about this kind of legislation is that you now have millions of independent content creators. People who run a podcast or a YouTube channel or maybe just an Instagram account. And we see the platforms already giving preferential treatment to the big publishers. When Facebook rolls out a new tool, they’re giving the preferred distribution to the BuzzFeeds and New York Times. When I was at US News & World Report, we got all sorts of free preferential treatments from the big platforms. Now that I’m an independent content creator, I don’t get access to that.

So what happens to us independent content creators when the News Media Alliance suddenly has all this bargaining power? What happens to my distribution when you’re able to negotiate better deals for The New York Times and The Washington Post? Some would look at the media ecosystem today, and where you might see depressing news, we see a million flowers blooming. We see new content creators. YouTubers making a living who might have otherwise been marginalized and never would have had their own TV shows 20 years ago, now they’re able to reach millions of viewers through their YouTube channel. What do you say to those independent content creators who may not qualify for your organization, do you think we should be worried about these established players having bargaining power that we don’t have access to?

First of all, I’m not arguing all of this just for my own members. I’ll send you the legislation, but the terms say anybody can participate who delivers journalism online, digitally. But I think the bigger question is, don’t you want someone representing you with these guys? All of the folks you talked about — all this intense, imaginative explosion of activity — is also subject to the rulemakings of Google and Facebook. They change the rules, they change the algorithm, and you can all of a sudden disappear.

Look at what happened with the algorithm changes and how they affected a whole range of small publishers. They crushed them. And so shouldn’t you have a voice with the platforms? Shouldn’t you have some input into these rules that determine whether you live or die? I guess that’s all I’m asking for.

I guess the question is would I have that voice as such a small player?

I think you would, because I think we’d be making the case for everyone doing journalism online. But also, if you don’t feel that way, you’re going to need to figure out a way to organize separately, because you’re going to need to figure out a way to organize. Because if it’s just going to be you waiting to see what Google and Facebook do with their algorithm today and the way it affects your business, at some point you’re just dancing on the wind. And that isn’t a way for you to build a business.

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Simon Owens is a tech and media journalist living in Washington, DC. Follow him on Twitter, Facebook, or LinkedIn. Email him at simonowens@gmail.com. For a full bio, go here.

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