February 2009

There’s been plenty written about the death spiral that America’s newspaper industry finds itself stuck in — here’s an amazing summary of the recent online debates — and I’ve spent a lot of time writing on this issue here in the past, too.  Ben Compaine, one of America’s sharpest media analysts and the co-author of the classic study Who Owns the Media?, has added his own two cents in his latest essay over at the Rebuilding Media blog. Like everything Ben writes, it is well worth reading:

If newspapers have essentially been able to thrive on the revenue from advertisers alone (again, with cost of printing more or less covered by circulation revenue), why are they having so much trouble today? The answer is not one single factor, but a major contributor is that newspapers – whether print or digital—are just worth less to advertisers than they were 20 years ago. Back then, local advertisers did not have many options for reaching the mass local audience. What was the alternative for auto dealers? For real estate agents? Supermarkets or department stores? For some, direct mail was one possible option. But that was about it. Using pre-prints instead of ROP became attractive for some large display advertisers, leaving the publishers with a piece of the cash flow. Advertisers were hit with regular rate increases. And they pretty much had to pay, The publishers made good money.

But then a double whammy. Just about the time the Internet became a real alternative for classified listings—think Craigslist, Monster.com, eBay, Autotrader.com—and for retailers—think DoubleClick, Google, et al—the boys at the cable operators had perfected the insertion of highly local spots into their feeds. Between 1989 and 2007 local cable advertising increased from $500 million to $4.3 billion—or from 0.4% of all advertising to 1.6%. Advertising in newspapers fell from 26% to 15% in this period. Although some of the highly local advertisers going to cable may have taken some of their funds from budgets for radio or other local media, it is probable that a significant share came from the hides of newspapers. I estimate perhaps up to 20% of the decline in local newspaper advertising share can be attributed to local cable spots.

The other whammy, the gorilla in the room, is Internet advertising. No need to elaborate. But its impact on newspapers is not just that it has siphoned off dollars per se. Much more importantly is that the Internet has given most advertisers greater market power against newspaper publishers. Many big advertisers—like car dealers, real estate offices and big box retailers—don’t need the newspapers as much.

Ben’s got it exactly right. The decline of newspapers comes down to the death of  “protectable scarcity” (thanks to Canadian media expert Ken Goldstein for that phrase).  There’s just too much other competition out there online already for our eyes and ears.  We’re witnessing substitution effects on a scale never seen in the media world, with disruptive digital technologies and networks splintering our attention spans.  That de-massification of media means that high fixed cost endeavors like daily newspapers are not going to be able to sustain the cross-subsidies they’ve long gotten from advertisers.

If you want to boil the newspaper death spiral down to an equation, it would look something like this:

Continue reading →

I’ve got a new PFF paper out today entitled, “Who Needs Parental Controls? Assessing the Relevant Market for Parental Control Technologies.” In this piece, I address the argument made by some media and Internet critics who say that government intervention (perhaps even censorship) may be necessary because parental control technologies are not widely utilized by most Americans. But, as I note in the paper, the question that these critics always fail to ask is: How many homes really need parental control technologies? The answer: Far fewer than you think. Indeed, the relevant universe of potential parental control users is actually quite limited.

I find that the percentage of homes that might need parental control technologies is certainly no greater than the 32% of U.S. households with children in them. Moreover, the relevant universe of potential parental control users is likely much less than that because households with very young children or older teens often have little need for parental control technologies. Finally, some households do not utilize parental control technologies because they rely on alternative methods of controlling media content and access in the home, such as household media rules. Consequently, policymakers should not premise regulatory proposals upon the limited overall “take-up” rate for parental control tools since only a small percentage of homes might actually need or want them.

If you don’t care to read the whole nerdy thing, I’ve created this short video summarizing the major findings of the paper.

And the document is embedded below the fold in a Scribd reader.
Continue reading →

Looks like we can count on another tax landing on our cell phones soon thanks to the taxaholics in the Obama Administration.  According to Jeff Silva of RCR Wireless:

Though details on the Obama budget are few and far between, some information was made available. The administration estimates that spectrum license fees would raise $4.8 billion over the next 10 years.

Don’t be fooled into thinking that wireless carriers will just eat those fees.  Those fees will be coming to bill near you soon in the form of another stupid government tax burden on our wireless phones.

You know, because we’re not already paying enough in taxes on our phones.

(P.S.  I’m actually a little surprised that the “progressives” in this administration would support this proposal since a tax on mobile phones will end up being about as regressive as taxes can get.)

In December, the Fourth Circuit upheld the conviction and 20-year sentence of a man who downloaded pictures, drawings, and text emails depicting minors engaged in sexual acts. Receiving obscene depictions of “a minor engaging in sexually explicit conduct” is prohibited by 18 U.S.C. § 1466A(a). The court held the statute constitutional on its face, and as applied to downloading materials from the internet.

Receiving via the internet, the court said, is unlike mere possession in one’s home, as is protected by the First Amendment and Stanley v. Georgia, but is rather trafficking in commerce and so can be constitutionally prohibited. Of course, it is very easy to inadvertently “receive” obscene materials through the internet, whether in one’s Spam folder or on a pop-up, but the court simply hoped that inadvertent access would not be targeted for prosecution, because the statute requires knowing access. Continue reading →

Over at Computerworld, Ben Rothke makes the case for “Why Information Must Be Destroyed.”  “Given the vast amount of paper and digital media that amasses over time,” he argues, “effective information destruction policies and practices are now a necessary part of doing business and will likely save organizations time, effort and heartache, legal costs as well as embarrassment and more.”  He continues:

Every organization has data that needs to be destroyed. Besides taxes, what unites every business is that they possess highly sensitive information that should not be seen by unauthorized persons.  While some documents can be destroyed minutes after printing, regulations may require others to be archived from a few years to permanently.  But between these two ends of the scale, your organization can potentially have a large volume of hard copy data occupying space as a liability, both from a legal and information security perspective.  Depending on how long you’ve been in business, the number of physical sites and the number of people you employ, it’s possible to have hundreds of thousands, if not millions, of pages of hard copy stored throughout your company — much of which is confidential data that can be destroyed.

He’s no doubt correct that it makes good business sense to routinely purge data — both physical and digital — to guard against theft, misplacement, leaks, abuse, or whatever else.  Of course, in the context of digital information, there are many folks who would like to see digital records purged more frequently to avoid growing concerns about online privacy.  I think most of those concerns are over-stated, but it can’t hurt to destroy most collected information after a certain period to play it safe and keep customers happy.

Problem is, as we discussed here last week, if some lawmakers in Washington get their way, it might be illegal to do that!  Quite obviously, data retention mandates are at odds with data destruction efforts.  [Mitch Wagner has more coverage of the data retention debate over at Information Week and he quotes my PFF colleague Sid Rosenzweig.]

Acting FCC Chairman Michael Copps declared yesterday in a speech celebrating the 75th anniversary of the FCC and the Communications Act, that it was time to think “more rigorously” about the impact of the migration of communications to the Internet and “how to ensure that as the Internet becomes our primary vehicle for communicating with one another, it protects the public interest and informs the civic dialogue that America depends on.”

“In the beginning was the Word,” said John Something-or-other.  Well, the word here is “public interest” and—make no mistake about it—this is the beginning of a wholesale attempt to impose the regulatory regime of the broadcast era onto the Internet.

As Adam Thierer has pointed out, the “public interest” is really no standard at all—just so much hot air.

Harvard’s Jonathan Zittrain has launched an interesting new project called “HerdictWeb,” which “seeks to gain insight into what users around the world are experiencing in terms of web accessibility; or in other words, determine the herdict.”  It’s a useful tool for determining whether governments are blocking certain websites for whatever reason.  Here’s Zittrain’s sock puppet video with all the details!

The website is quite slick and very user-friendly, and they’ve even created a downloadable Firefox button that will automatically check site accessibility while you’re surfing the Net.

The information gathered from this effort will be useful for the OpenNet Initiative that Zittrain and John Palfrey co-created (with others from Univ. of Toronto, Oxford Univ., and Univ. of Cambridge) and wrote about in their excellent book, Access Denied: The Practice and Policy of Global Internet Filtering, which was one of my favorite technology policy books of the past year.  The data collected will give them, and us, a fuller picture of just how widespread global filtering and censorship efforts really are.  I encourage you to take a look and spread the word, especially to those in foreign countries who could probably use it more than us. (Of course, their governments will likely block Herdict once the word gets around!)

I was over at the Federal Communications Commission (FCC) the other day chatting with someone about various regulatory issues and Rush Limbaugh’s WSJ editorial came up.  The person I was speaking with made a comment about how conservatives have really been energized and unified in opposition to the re-imposition to the Doctrine.  I reminded them, however, that it wasn’t always the case that conservatives stood together in the fight over the Fairness Doctrine.  In fact, when I first came to town almost 20 years ago, there were still plenty of conservatives who actually favored it.  I was reminded of that fact when reading a new piece in Engage about “Broadcast ‘Fairness’ in the Twenty-First Century” by my friend Robert Corn-Revere.  Bob is one America’s great First Amendment defenders and his new essay offers an excellent history of efforts to micro-manage speech on the broadcast airwaves over the years.  In it, he reminds us that:

Given the recent vocal opposition to the Fairness Doctrine in the interest of preserving conservative talk radio, it is easy to forget that many prominent conservatives championed the doctrine before its demise. Phyllis Schlafly was a vocal proponent of the Fairness Doctrine because of what she described as “the outrageous and blatant anti-Reagan bias of the TV network newscasts,” and she testified at the FCC in the 1980s in support of the policy “to serve as a small restraint on the monopoly power wielded by Big TV Media.” Senator Jesse Helms was another long-time advocate of the Fairness Doctrine, and conservative groups Accuracy in Media and the American Legal Foundation actively pursued fairness complaints at the FCC against network newscasts.

Likewise, in our book, A Manifesto for Media Freedom, Brian Anderson and I note that some other prominent right-leaning politicians, such as Sen. Trent Lott, favored the Fairness Doctrine.  Moreover, even though most of those conservative individuals and groups have now turned against the Fairness Doctrine, some Republicans still defend (or even seek to expand) the same underlying regulatory concepts that served as the foundation of the Fairness Doctrine.  As Corn-Revere notes: Continue reading →

There was a hearing today in the House Energy and Commerce Committee on “Reauthorization of the Satellite Home Viewer Extension and Reauthorization Act,” which got into the sticky of issue of whether must carry mandates should be applied to satellite television (DBS) operators. My boss, Ken Ferree, president of the Progress & Freedom Foundation, testified in opposition to that notion. Here’s what he had to say about proposals that would require satellite operators to carry local broadcast TV stations from even the smallest markets:

Because Congress cannot repeal the laws of physics, there are only two ways in which a satellite company might comply with such a mandate: 1) it may add capacity (i.e., launch new satellites and build associated ground equipment), or 2) it may convert capacity currently used for other purposes to local television carriage in the most sparsely populated parts of the country. Neither approach makes economic sense. That is, these proposals, if they were to become law, would impose considerable costs on satellite operators while generating no appreciable revenue.

Continue reading →

A classic piece here by Farhad Manjoo of Slate about how “the Internet of 1996 is almost unrecognizable compared with what we have today.”  It’s a fun look back at just how far the Internet has come over the past 13 years.  I love this passage:

We all know that the Internet has changed radically since the ’90s, but there’s something dizzying about going back to look at how people spent their time 13 years ago. Sifting through old Web pages today is a bit like playing video games from the 1970s; the fun is in considering how awesome people thought they were, despite all that was missing. In 1996, just 20 million American adults had access to the Internet, about as many as subscribe to satellite radio today. The dot-com boom had already begun on Wall Street– Netscape went public in 1995 — but what’s striking about the old Web is how unsure everyone seemed to be about what the new medium was for. Small innovations drove us wild: Look at those animated dancing cats! Hey, you can get the weather right from your computer! In an article ranking the best sites of ’96, Time gushed that Amazon.com let you search for books “by author, subject or title” and “read reviews written by other Amazon readers and even write your own.” Whoopee. The very fact that Time had to publish a list of top sites suggests lots of people were mystified by the Web. What was this place? What should you do here? Time recommended that in addition to buying books from Amazon, “cybernauts” should read Salon, search for recipes on Epicurious, visit the Library of Congress, and play the Kevin Bacon game.

God, do you remember those days?  I sure do.  I penned a piece last month about the amazing technological progress we have witnessed over the past decade.

Meanwhile, we have a whole town full of clowns here in DC looking to regulate the Internet and digital technology for one reason or another.  All these would-be regulators need to step back and appreciate just how well markets have been working and why regulation would be a disaster for technological progress. Viva la (Technology) Revolution!