Yesterday afternoon, the Federal Aviation Administration (FAA) finally released its much-delayed rules for private drone operations. As The Wall Street Journal  points out, the rules “are about four years behind schedule,” but now the agency is asking for expedited public comments over the next 60 days on the whopping 200-page order. (You have to love the irony in that!) I’m still going through all the details in the FAA’s new order — and here’s a summary of what the major provisions — but here are some high-level thoughts about what the agency has proposed.

Opening the Skies…

• The good news is that, after a long delay, the FAA is finally taking some baby steps toward freeing up the market for private drone operations.
• Innovators will no longer have to operate entirely outside the law in a sort of drone black market. There’s now a path to legal operation. Specifically, small unmanned aircraft systems (UAS) operators (for drones under 55 lbs.) will be able to go through a formal certification process and, after passing a test, get to operate their systems.

… but Not Without Some Serious Constraints

• The problem is that the rules only open the skies incrementally for drone innovation.
• You can’t read through these 200 pages of regulations without getting sense that the FAA still wishes that private drones would just go away.
• For example, the FAA still wants to keep a bit of a leash around drones by (1) limiting their use to being daylight-only flights (2) that are in the visual line-of-sight of the operators at all times. And (3) the agency also says that drones cannot be flown over people.
• Those three limitations will hinder some obvious innovations, such as same-day drone delivery for small packages, which Amazon has suggested they are interested in pursuing. (Amazon isn’t happy about these restrictions.)

Impact on Small Innovators?

• But what I worry about more are all the small ‘Mom-and-Pop’ drone entrepreneur, who want to use airspace as a platform for open, creative innovation. These folks are out there but they don’t have the name or the resources to weather these restrictions the way that Amazon can. After all, if Amazon has to abandon same-day drone delivery because of the FAA rules, the company will still have a thriving commercial operation to fall back on. But all those small, nameless drone innovators currently experimenting with new, unforeseeable innovations may not be so lucky.
• As a result, there’s a real threat here of drone entrepreneurs bolting the U.S. and offering their services in more hospitable environments if the FAA doesn’t take a more flexible approach.
• [For more discussion of this problem, see my recent essay on “global innovation arbitrage.”]

Impact on News-Gathering?

• It’s also worth asking how these rules might limit legitimate news-gathering operations by both journalistic enterprises and average citizens. If we can never fly a drone over a crowd of people, as the rules stipulate, that places some rather serious constraints on our ability to capture real-time images and video from events of societal importance (such as political protests or even just major events like sporting events or concerts).
• [For more discussion about this, see this September 2014 Mercatus Center working paper, “News from Above: First Amendment Implications of the Federal Aviation Administration Ban on Commercial Drones.”]

Still Time to Reconsider More Flexible Rules

• Of course, these aren’t final rules and the agency still has time to relax some of these restrictions to free the skies for less fettered private drone operation.
• I suspect that drone innovators will protest the three specific limitations I identified above and ask for a more flexible approach to enforcing those rules.
• But it’s good that the FAA has finally taken the first step toward decriminalizing private drone operations in the United States.

___________________________

Additional  Reading

• Permissionless Innovation & Commercial Drones, February 4, 2015.
• DRM for Drones Will Fail, January 28, 2015.
• Regulatory Capture: FAA and Commercial Drones Edition, January 16, 2015.
• Global Innovation Arbitrage: Commercial Drones & Sharing Economy Edition, December 9, 2014.
• How to Destroy American Innovation: The FAA & Commercial Drones, October 6, 2014.
• Filing to FAA on Drones & “Model Aircraft”, Sept. 23, 2014.
• Private Drones & the First Amendment, Sept. 19, 2014.
• [TV interview] The Beneficial Uses of Private Drones, March 28, 2014.
• Comments of the Mercatus Center to the FAA on integration of drones into the nation’s airspace, April 23, 2o13.
• Eli Dourado, Deregulate the Skies: Why We Can’t Afford to Fear Drones, Wired, April 23, 2013.
• Permissionless Innovation: The Continuing Case for Comprehensive Technological Freedom (2014).
• [Video] Cap Hill Briefing on Emerging Tech Policy Issues (June 2014).

This morning, the Federal Communications Commission (FCC) released its eagerly-awaited “Future of Media” report. The 475-page final report is entitled, “The Information Needs of Communities: The Changing Media Landscape in a Broadband Age.”  [Here’s a 2-page summary and the official press release.]  The report is a bit overdue; the effort was supposed to be wrapped up late last year. Comments in the proceeding were filed over a year ago. Here are some of the major ones. Also, here is the 80-page monster filing that I submitted with my former PFF colleagues Berin Szoka and Ken Ferree.

Quick refresher… Federal policymakers have been taking a greater interest in the health of media and journalism in recent years. In 2009, the Senate held hearings about “the future of journalism,” and Senator Benjamin L. Cardin (D-MD) introduced the “Newspaper Revitalization Act,” which would allow newspapers to become tax-exempt non-profits in an effort to help them stay afloat. In 2010, the Federal Trade Commission hosted two workshops asking “How Will Journalism Survive the Internet Age?” and also released a staff report on “Potential Policy Recommendations to Support the Reinvention of Journalism.” (As I noted here and here, the FTC was blasted for that report and quickly backed off the issue. The agency has since gone radio silent on the issue.) The FCC also launched its “Examination of the Future of Media and Information in a Digital Age” in 2010, and today’s report wraps up their work on this front.

My first reaction after scanning the FCC’s final report is one of relief. For those of us who care about the First Amendment, media freedom, and free-market experimentation with new media business models, it feels like we’ve dodged a major bullet. The report does not recommend sweeping regulatory actions that might have seen Washington inserting itself into the affairs of the press or bailing out dying business models.

By contrast, when the FCC and FTC started their respective proceedings, things looked very grim from a policy perspective. The discussion was being completely dominated by groups like Free Press and their founders, the neo-Marxist media scholar Robert W. McChesney and Nation editor John Nichols.  Here are some old essays and papers that summarize the radical “media reform” agenda they set forth over the past few years:

• A “Public Option” for Media? The Free Press Plan to Put Journalists on the Public Dole
• Free Press, Robert McChesney & the “Struggle” for Media
• Socializing Media in Order to Save It
• The Wrong Way to Reinvent Media, Part 1: Taxing Devices & Networks to Subsidize Media, by Adam Thierer & Berin Szoka, March 24, 2010
• The Wrong Way to Reinvent Media, Part 2: Broadcast Spectrum Fees for Public Media, by Adam Thierer, March 29, 2010
• The Wrong Way to Reinvent Media, Part 3: Media Vouchers, by Adam Thierer & Berin Szoka, April 14, 2010
• The Wrong Way to Reinvent Media, Part 4: Expanding Postal Subsidies, by Adam Thierer & Berin Szoka, April 20, 2010
• The Wrong Way to Reinvent Media, Part 5: Media Bailouts & Welfare for Journalists, by Adam Thierer & Berin Szoka, April 30, 2010

To the FCC’s great credit, the agency’s final report didn’t fall for most of these gimmicks or those radical calls for state intervention. The report’s recommendations are actually quite limited in scope and relatively innocuous in nature (although some of them are extremely amorphous and could be open to expansionist interpretations later on). Here are the major recommendations:

• Accelerate move from paper to online disclosure. Disclosure information required by the FCC should be moved online from filing cabinets to the Internet so the public can more easily gain access to valuable information.  FCC should eliminate burdensome rules and streamline disclosures about local programming by moving files online.
• Remove barriers to innovation and online entrepreneurship by pushing for universal broadband deployment and adoption.  Achieving this goal would remove cost barriers,strengthen online business models, expand consumer pools and ensure that the news and information landscape serves communities to the maximum possible benefit of citizens.
• Target existing federal spending at local media.  Existing government advertising spending, such military recruiting and public health ads, should be targeted toward local media whenever possible. Each year, the federal government spends roughly $1 billion in advertising without maximizing potential benefits to local media.
• Repeal Fairness Doctrine, terminate localism proceeding and replace “enhanced disclosure” with a new streamlined system of online disclosure. Broadcasters would disclose amount of programming about the community and other important information.
• Discourage “pay-for-play” arrangements – in which TV stations allow advertisers to dictate on-air content without disclosing to viewers – by requiring online disclosure of such arrangements.
• Re-assess whether the satellite TV’s set-aside for educational programming and cable TV leased access systems are working; put satellite disclosure online.
• There should be state-based C-SPAN in every state. Cable and satellite operators, public broadcasters and PEG channels should work toward that goal, and policymakers should consider offering incentives for those media organizations that take such steps, or to those that provide support for local cable news operations.
• Re-establish tax certificate program for small businesses including minorities and women.
• Policymakers should consider clarifications or changes in tax rules that would make it easier for nonprofit news operations to develop sustainable business models.
• Focus on historically underserved when policymakers craft strategies and rules.

While I can’t endorse all of these recommendations — especially those that involve more spending or tax code tinkering — I think most of these policy proposals are relatively unobjectionable. Again, this is pretty far removed from the radical Free Press / McChesney agenda that guided the Federal Trade Commission’s controversial report.  I will likely have more to say about the FCC’s specific policy recommendations after getting through the entire 475-page report this weekend.

Even without having finished the entire report, I feel comfortable saying this: The FCC’s “Information Needs of Communities” report is an impressive achievement and will be used as a reference document for decades to come.  The report offers an excellent overview of the state of the media marketplace and provides a relatively balanced assessment of both the good and bad trends shaping media and journalism today.

I congratulate Steve Waldman and the entire team experts that the FCC brought together to compile this report. But most of all I am relieved to see that the agency generally restrained itself here and avoided going down the dangerous path I once feared it might.

Finally, I am just a happy camper any day I see the Federal Communications Commission send out a Tweet like this:

In a post here last month on “Two Paradoxes of Privacy Regulation,” I discussed some of the interesting — and to me, troubling — similarities between rising calls for online privacy regulation and ongoing attempts to enact various types of controls on online speech or expression.  In that essay, I argued that while most privacy advocates are First Amendment supporters as it pertains to content regulation, they abandon their free speech values and corresponding constitutional tests when it comes to privacy regulation. When the topic of debate shifts from concerns about potentially objectionable content to the free movement of personal information, personal responsibility and self-regulation become the last option, not the first.  Privacy advocates typically ignore, downplay, or denigrate user-empowerment tools, even though many of those same advocates endorse “self-help” efforts as the superior method of dealing with objectionable speech or media content. In essence, therefore, they are claiming self-help is the right answer in one context, but not the other.  Ironically, therefore, privacy advocates and moral conservatives actually share much in common in that they are using the same playbook to advance their goals:  They are rejecting personal responsibility and user-empowerment tools and techniques in favor or government control for their respective issues.

Keeping that insight in mind, I want to take this comparison a step further and suggest that what really unites these two movements is a general conservatism about how our online lives and online business should be governed.  For the moral conservatives, that instinct is well-understood. They want hold the line against what they believe is a decaying moral order by restricting access to potentially objectionable speech or content — dirty words, violent video games, online porn, or whatever else.   The conservatism of the modern privacy movement is less obvious at first blush.  I suspect that many privacy conservatives would not consider themselves “conservative” at all, and they might even be highly offended at being grouped in with moral conservatives who seek to wield government power to control online speech and expression. Nonetheless, the two groups share a common trait — an innate hostility to the impact of technological / social change within the realm of “rights” or values they care about.  In their respective arenas, they both rejected the evolutionary dynamism of the free marketplace and they long for a return to a simpler and supposedly better time.

For the privacy conservatives, we see this instinct on display in discussions about “targeted advertising” and “behavioral marketing.”   Most privacy regulation advocates want to slow or stop the advancement of online advertising techniques for a variety of reasons.  Some say privacy — however they define it — is an inalienable human right and that data collection and targeted marketing betrays “human dignity.”  Others just despise commercialism and advertising in all its forms and hope to take steps to stop its spread or evolution. Still others say they want regulation to help give users more control over their personal information. Or, some combination of all of the above factors motivates their desire to see advertising and marketing practices curtailed.

On Defining Harm

Privacy conservatives and moral conservatives share another common trait: The struggle to identify or prove a tangible harm exists that justifies government regulation that would foreclose the evolution or markets and/or speech. “Privacy” has long been a controversial, ambiguous term, much like the terms “obscenity” or “indecency” in the speech context. My response in both cases is not that “harm” never exists, but rather that:

1. “harm” is extremely user-specific;
2. such “harms” should not necessarily be elevated to actionable legal / regulatory matters; especially when..
3. the better approach is user-empowerment and personal responsibility instead of collectivized political responsibility for such matters.

Stated differently, precisely because of the eye-of-the-beholder problem we face in both speech and privacy contexts, I believe the better approach is to rely on “household standards” (user-level controls + personal responsibility) instead of “community standards” (government regulation for the entire universe of consumers / users).  Thus, in light of the diverse nature of the citizenry and the importance of the evolution of online markets and speech, freedom should generally trump control.

Journalism provides a good case study for why that should be the general rule.  When it comes to the concerns about what should or should not be aired or reported by journalists, most of us would come down in favor of press freedoms and greater freedom of speech.  We don’t allow concerns about violent media images or salty language to trump the rights of journalists to report on wars, for example.  In a similar sense, we don’t allow privacy rights to trump freedom of speech as it relates to the collection of private facts about individuals by journalists.  Think about it; the job of a good journalist is to be a nosy son-of-a-bitch.  They pry into every corner of the private lives of individuals. They not only get paid to do, but they win awards for doing it well!  The First Amendment generally protects their ability to gather and reveal all this information about individuals and organizations.  Again, speech rights trump privacy rights.  That isn’t always the case, of course, but it is 9 times out of 10.  So, for purposes of our discussion here, the interesting question is: How far would privacy conservatives be willing to go to undermine speech rights since — if enforced aggressively — a privacy “right” would essentially become “a right to stop people from speaking about you” (to borrow the memorable subtitle of a 2000 Eugene Volokh law review article)?

The Case for Transparency, and the Futility of It

Like moral conservatives, privacy conservatives are on their strongest footing in advocating greater transparency.  Before jumping to direct government regulation of speech or content, some moral conservatives are willing to give greater transparency a shot.  For example, they push for content creators to reveal more details about the nature of their products using labels or ratings so that consumers can better understand what they will see or hear. Similarly, before advocating comprehensive Internet regulation, some privacy conservatives at least give lip service to the idea of industry self-regulation and they encourage sites and services to be more transparent about the information they collect about users for advertising / marketing purposes.

Such transparency generally doesn’t restrict innovation and progress. In fact, in some ways, it can help create a more vibrant market if consumers act upon the information they are given.  However, whether we are talking about objectionable media content or privacy-related matters, it doesn’t seem like many consumers are willing to do much to change their behavior once supplied with better product or service information — at least not in the way the regulatory advocates desire. In both cases, moral conservatives and privacy conservatives can’t seem to come to grips with the fact that the world isn’t made of people who share their hostile knee-jerk reaction to these things.

For example, there are some outstanding rating and labeling systems out there for movies and games, and those content descriptors really do give people (especially parents) a good idea of what they can expect to see, hear or play.  But the existence of those ratings and labels doesn’t deter millions upon millions of people from rushing to watch or buy a controversial new movie or video game that many moral conservatives probably find offensive.  Same goes for language.  We can warn people nasty talk is coming, or even channel it to later hours of the day, but a lot of people will still consume it anyway.  Many people probably recoiled upon first hearing a George Carlin monologue back in the 70s.  But while the moral conservatives couldn’t get over it — and still enforce regulations based on one particularly famous Carlin monologue — the rest of the world moved on. In fact, in 2008, Carlin was awarded the Mark Twain Prize for American Humor as one of our country’s most revered satarists.  Society evolved not just to accept, but embrace, Carlin’s wicked wit and even much of his billingsgate.

Similarly, privacy conservatives — who tend to think the multitudes share their general aversion to almost any form of data collection or commercial advertising — often seem mystified that the masses aren’t in open revolt against the likes of Facebook, Google, or online advertising networks.  To hear many privacy regulatory advocates talk, you’d think online advertising innovation should have been frozen in the pop-up ad era.  Some of them still can’t get over the fact that cookies weren’t regulated out of existence a decade ago.  Yet, despite their fundamentalist views about privacy rights and supposed violations of those rights, progress has marched on. Privacy expectations — much like cultural / speech expectations — have evolved. New baselines have emerged. And while there’s an occasional flashpoint over something particularly inflammatory — for speech, think of the Janet Jackson incident or the Grand Theft Auto “Hot Coffee” incident; and for privacy, think Facebook Beacon and Google Buzz — the reality is that most people have adapted to technological and social change.  Stated differently, regardless of what any poll or survey might suggest, citizens have generally rejected the fundamental conservatism of both the moral conservatives on content issues and the privacy conservatives on advertising / marketing issues.

Strange Bedfellow Alliances?

Are formal alliances between privacy conservatives and moral conservatives likely?  I think they are possible, but highly unlikely.  On occasion, some moral conservatives will reach across the aisle and work with Left-leaning groups when it works to their advantage.  A prime example came back in 2003-04 during the media ownership reform debates, when social conservatives like Brent Bozell aligned the Parents Television Council with the radical regulatory group Free Press and its neo-Marxist founder Robert McChesney.  Bozell’s contempt for entertainment companies was so extreme that he was willing to make peace with extremists like Free Press, who are always happy to string up the capitalists in the content community.

But that’s an unusual example.  It’s unlikely we’ll see the extreme poles of moral and privacy conservatism making many alliances because they generally don’t play well together.  That is, most moral conservatives don’t necessarily have a big beef with online advertisers, and few privacy conservatives care about free speech issues (and, to the extent they do care, they probably favor greater First Amendment freedoms).

However, whether they broker formal alliances or not, what should be clear is that moral conservatives and privacy conservatives are unwittingly working together as they both strive to bring greater government control to cyberspace and end evolutionary dynamism in their respective arenas.

To hails of derision in some quarters—I’m looking at you, Adam—I have talked about how social media will occupy some of the space being ceded by traditional news reporting, which is struggling to find a business model. Perhaps with validation from an official, vetted, professional, dead-tree news source, it will seem less ridiculous to talk about news reporting being generated spontaneously by people “on the scene” or with the greatest knowledge of facts and conditions in a particular area.

Think of the mental habit that has us calling police and fire personnel “first responders.” They are almost always, in fact, second responders, with first response undertaken by average citizens, who often do a pretty good job of it. Think of the true first responders to recent attempted bombings on transatlantic flights: ordinary citizens who thwarted the underwear and shoe bombers. (I risk painting too heroic a picture . . . .)

Newspaper reporters and photographers are intellectual second responders, who come in after the fact, as generalists, to summarize events and trends for us. Yet these are who we look to as authorities on what happened, and how to think about it? That doesn’t seem to make sense if there are other options for being informed. And now there are.

I’ll take a cue from Adam’s good work in debunking the Internet pessimists who argue that “closed” access and technology models are strangling the open/’generative’ Internet: There’s plenty of room for both—both traditional journalism, as it finds its new niche, and reporting by ordinary people who are on the scene and who have superior knowledge in a particular domain.

I suspect that we’ll find better media and filters than Twitter’s firehose of info-pellets by which to learn about things like the hostage-taking in the D.C. area. There may even be a business model in it. Go to it, technology and markets!

I’m late to the party, but I wanted to say a few things about the District Court’s decision in the Viacom v. YouTube case this week and.  This will be a four-part post, covering:

1.  The holding

2.  The economic principle behind it

3.  The next steps in the case

4.  A review of the errors in legal analysis and procedure committed by reporters covering the case

I’ve written before (see “Two Smoking Guns and a Cold Case”, “Google v. Everyone” and “The Revolution will be Televised…on YouTube”) about this case, in which Viacom back in 2007 sued YouTube and Google (which owns YouTube) for $1 billion in damages, claiming massive copyright infringement of Viacom content posted by YouTube users.

There’s no question of the infringing activity or its scale.  The only question in the case is whether YouTube, as the provider of a platform for uploading and hosting video content, shares any of the liability of those among its users who uploaded Viacom content (including clips from Comedy Central and other television programming) without permission.

The more interesting questions raised by the ascent of new video sites aren’t addressed in the opinion.  Whether the users understood copyright law or not and whether their intent in uploading their favorite clips from Viacom programming was to promote Viacom rather than to harm it, were not considered.   Indeed, whether on balance Viacom was helped more than harmed by the illegal activity, and how either should be calculated under current copyright law, is not relevant to this decision, and are saved for another day and perhaps another case.

That’s because Google moved for summary judgment on the basis of the Digital Millennium Copyright Act’s “safe harbor” provisions, which immunize service providers from any kind of attributed or “secondary” liability for user behavior when certain conditions are met.  Most important, a service provider can dock safe from liability only if it can show that it :

– did not have “actual knowledge that the material…is infringing,” or is “not aware of facts or circumstances from which infringing activity is apparent” and

– upon obtaining such knowledge or awareness “acts expeditiously to remove…the material” and

– does not “receive a financial benefit directly attributable to the infringing activity, “in a case in which the service provider has the right ability to control such activity,” and

– upon notification of the claimed infringement, “responds expeditiously to remove…the material that is claimed to be infringing….”

Note that all four of these elements must be satisfied to benefit from the safe harbor

The question for Judge Stanton to decide on YouTube’s motion for summary judgment was whether YouTube met all the conditions, and he has ruled that they did so.

1.  The Slam-Dunk for Google

The decision largely comes down to an interpretation of what phrases like “the material” and “such activity” means in the above-quoted sections of the DMCA.

Indeed, the entire opinion can be boiled down to one sentence on page 15.  After reviewing the legislative history of the DMCA at length, Judge Stanton concludes that the “tenor” of the safe harbor provisions leads him to interpret infringing “material” and “activity” to mean “specific and identifiable infringements of particular individual items.”

General knowledge, which YouTube certainly had, that some of its users were (and still are) uploading content protected by copyright law without permission, is not enough to defeat the safe harbor and move the case to a determination of whether or not secondary liability can be shown.  “Mere knowledge of prevalence of such activity in general,” Judge Stanton writes, “is not enough.”

To defeat a safe harbor defense at the summary judgment stage, in other words, a content owner must show that the service provider knew or should have known about specific instances of infringement.  Such knowledge could come from a service provider hosting subsites with names like “Pirated Content” or other “red flags.”  But in most cases, as here, the service provider would not be held to know about specific instances of infringement until informed of them, most often from takedown notices sent by copyright holders themselves.

Whether ad revenue constitutes “direct financial benefit” was not tested, because, again, that provision only applies to “activity” the service provider has the right to control.  “Activity,” as Judge Stanton reads it, also refers to specific instances of illegal content distribution.

As Judge Stanton notes, YouTube users currently post 24 hours of video content every minute, making it difficult if not impossible, as a practical matter, for YouTube to have any idea which ones are not authorized by rights holders.  And when Viacom informed the site of some 100,000 potentially-infringing clips, YouTube removed nearly all of them within a day.  That is how the DMCA was intended to work, according to Judge Stanton, and indeed demonstrates that it is working just fine.

Viacom, of course, is free to pursue the individuals who posted its content without permission, but everyone should know by now that for many reasons that’s a losing strategy.

2.  The Least-Cost Avoider Principle

On balance, Judge Stanton is reading what is clearly an ambiguous statute with a great deal of common sense.  To what extent the drafters of the DMCA intended the safe harbor to apply to general vs. specific knowledge is certainly not clear from the plain language, nor, really, from the legislative history.  (Some members of the U.S. Supreme Court believe strongly that legislative history, in any case, is irrelevant in interpreting a statute, even if ambiguous.)

To bolster his interpretation that the safe harbor protects all but specific knowledge of infringement, interestingly, Judge Stanton points out that this case is similar to one decided a few months ago in the Second Circuit.  In that case, the court refused to apply vicarious liability for trademark infringement to eBay for customer listings of fake Tiffany’s products.

Though trademark and copyright law are quite different, the analogy is sensible.  In both cases, the question comes down to one of economic efficiency.  Which party, that is, is in the best position to police the rights being violated?

Here’s how the economic analysis might go.  Given the existence of new online marketplaces and video sharing services, and given the likelihood and ease with which individuals can use those services to violate information rights (intentionally or otherwise, for profit or not), the question for legislators and courts is how to minimize the damage to the information rights of some while still preserving the new value to information in general that such services create.

For there is also no doubt that the vast majority of eBay listings and YouTube clips are posted without infringing the rights of any third party, and that the value of such services, though perhaps not easily quantifiable, is immense.  EBay has created liquidity in markets that were too small and too disjointed to work efficiently offline.  YouTube has enabled a new generation of users with increasingly low-cost video production tools to distribute their creations, get valuable feedback and, increasingly, make money.

That these sites (and others, including Craigslist) are often Trojan Horses for illegal activities could lead legislators to ban them outright, but that clearly gets the cost-benefit equation wrong.  A ban would generate too much protection.

At the same time, throwing up one’s hands and saying that a certain class of rights-holders must accept all the costs of damage without any means of reducing or eliminating those costs, would be overly generous in the other direction.  Neither users, service providers, nor rights holders would have any incentives to police user behavior.  The basic goals of copyright and trademark might be seriously damaged as a result.

The goal of good legislation in situations like this—where overall benefit outweighs individual harm and where technology is changing the equation rapidly–is to produce rules that are most likely to get the balance right and do so with the least amount of expensive litigation.  The DMCA provisions described above are one attempt at creating such rules.

But those rules, given the uncertainties of emerging technologies and the changing behaviors of users, can’t possibly give judges the tools to decide every case with precision.  Such rules must be a least a little ambiguous (if not a lot).  Judges, as they have done for centuries, must apply other, objective interpretive tools to help decide individual cases even as the targets keep moving.

Judge Stanton’s interpretation of the safe harbor provisions follows, albeit implicitly, one of those neutral tools, the same one applied by the Second Circuit in the eBay case.  And that is the principle of the least-cost avoider.

This principle encourages judges to interpret the law, where possible, such that the burden of reducing harmful behavior falls to the party in the best position, economically, to avoid it.  That way, as parties in similar situations in the future evaluate the risk of liability, they will be more likely to choose a priori behaviors that not only reduce the risk of damages but also the cost of more litigation.

In the future, if Judge Stanton’s ruling stands, rights holders will be encouraged to police video sites more carefully.  Service providers such as YouTube will be encouraged to respond quickly to legitimate demands to remove infringing content.

Given the fact that activities harmful to rights holders are certain to occur, in other words, the least cost avoider principles says that a judge should rule in a way that puts the burden of minimizing the damage on the party who can most efficiently avoid it.  In this case, the choice would be between YouTube (preview all content before posting and ensure legal rights have been cleared), Viacom (monitor sites carefully and quickly demand takedown of infringing content) or the users themselves (don’t post unauthorized content without expecting to pay damages or possible criminal sanctions).

Here, the right answer economically is Viacom, the rights holder who is directly harmed by the infringing behavior.

That may seem unfair from a moral standpoint.  For, after all, Viacom is the direct victim of the users’ clearly unlawful behavior and the failure of YouTube, the enabler of the users, to stop it.  Why should the victim be held responsible for making sure they are not caused further damage in the future?

But there’s a certain economic logic to that decision, though one difficult to quantify (Judge Stanton made no effort to do so; indeed he did not invoke the least cost avoider principle explicitly.)  The grant of a copyright or a trademark is the grant of a monopoly on a certain class of information, a grant that itself comes with inherent economic inefficiencies in the service of encouraging overall social value–encouraging investment in creative works.

Part of the cost of having such a valuable monopoly is the cost of policing it, even in new media and new services that the rights holder may not have any particular interest in using itself.

By interpreting the DMCA as protecting service providers from mere general knowledge of infringing behavior, Judge Stanton has signaled that Viacom can police YouTube more efficiently than YouTube can.  Why?  For one thing, Viacom has the stronger incentive to ensure unauthorized content stays off the site.  It alone also has the knowledge both of what content it has rights to and when that content appears without authorization.  (Several examples arose in the course of discovery of content Viacom ordered YouTube to remove that, it turned out, had been posted by Viacom or its agents masquerading as users in order to build buzz.)

The cost of monitoring and stopping unauthorized posting is not negligible, of course.  But YouTube, eBay and other service providers increasingly provide tools to make the process easier, faster, and cheaper for rights holders.  They may or may not be obligated to do so as a matter of law; for now, their decision to do so represents an organic and efficient form of extra-legal rulemaking that Judge Stanton is eager to encourage.

No matter what, someone has to bear the bulk of the cost of monitoring and reporting violations.  Viacom can do it cheaper, and can more easily build that cost into the price it charges for authorized copies of its content.

And where it cannot easily issue takedown orders to large, highly-visible service providers like YouTube, it retains the option, admittedly very expensive, to sue the individuals who actually infringed.  It can also try to invoke the criminal aspect of copyright law, and get the FBI (that is, the taxpayer) to absorb the cost.

To rule the other way–to deny YouTube its safe harbor–would encourage service providers to overspend on deterrence of infringing behavior.  In response, perhaps YouTube and other sites would require, before posting videos, that users provide legally-binding and notarized documentation that the user either owns the video or has a license to post it.  Obtaining such agreements, not to mention evaluating them for accuracy, would effectively mean the end of video sites.  Denying the safe harbor based on general knowledge, to put it another way, would effectively interpret the DMCA as a ban on video sites.

That would be cheaper for Viacom, of course, but would lead to overall social loss.  Right and wrong, innocence and guilt, are largely excluded from this kind of analysis, though certainly not from the rhetoric of the parties.  And remember that actual knowledge or general awareness of specific acts of infringement would, according to Judge Stanton’s rule, defeat the safe harbor.  In that case, to return to the economic terminology, the cost of damages—or, if you prefer, assigning some of the blame—would shift back on YouTube.

3.  What’s Next?

Did Judge Stanton get it right as a matter of information economics?  It appears that the answer is yes.  But did he get it right as a matter of law—in this case, of the DMCA?

That remains to be seen.

Whether one likes the results or not, as I’ve written before, summary judgment rulings by district courts are never the last word in complex litigation between large, well-funded parties.  That is especially so here, where the lower court’s interpretation of a federal law is largely untested in the circuit and indeed, as here, in any circuit.

Judge Stanton cites as authority for his view of the DMCA a number of other lower court cases, many of them in the Ninth Circuit.  But as a matter of federal appellate law, Ninth Circuit cases are not binding precedent on the Second Circuit, where Judge Stanton sits.  And other district (that is, lower) court opinions cannot be cited by the parties as precedent even within a circuit.  They are merely advisory.  (A Ninth Circuit case involving Veoh is currently on appeal; the service provider won on a “safe harbor” argument similar to Google’s in the lower court.)

So this case will certainly head for appeal to the Second Circuit, and perhaps from there to the U.S. Supreme Court.  But a Supreme Court review of the case is far from certain.  Appeals to the circuit court are the right of the losing party.  A petition to the Supreme Court, on the other hand, is accepted at the Court’s discretion, and the Court turns down the vast majority of cases that it is asked to hear, often without regard to the economic importance or newsworthiness of the case.  (The Court refused to hear an appeal in the Microsoft antitrust case, for example, because the lower courts largely applied existing antitrust precedents.)

A circuit court reviewing summary judgment will make a fresh inquiry into the law, accepting the facts alleged by Viacom (the losing party below) as if they were all proven.  If the Second Circuit follows Judge Stanton’s analogy to the eBay case, Google is likely to prevail.

If the appellate court rejects Judge Stanton’s view of specificity, the case will return to the lower court and move on, perhaps to more summary judgment attempts by both parties and, failing that, a trial.  More likely, at that point, the parties will reach a settlement, or an overall licensing agreement, which may have been the point of bringing this litigation in the first place.  (A win for Viacom, as in most patent cases, would have given the company better negotiating leverage.)

4.  Getting it Right or Wrong in the Press

That brief review of federal appellate practice is entirely standard—it has nothing to do with the facts of this case, the parties, the importance of the decision, or the federal law in question.

Which makes it all the more surprising when journalists who regularly cover the legal news of particular companies continually get it wrong when describing what has happened and/or what happens next.

Last and perhaps least, here are a few examples from some of the best-read sources:

The New York Times – Miguel Helft, who covers Google on a regular basis, commits some legal hyperbole in saying that Judge Stanton “threw out” Viacom’s case, and that “the ruling” (that is, this opinion) could have “major implications for …scores of Internet sites.”  The appellate court decision will be the important one, but technically it will apply only to cases brought in the Second Circuit.  The lower court’s decision, even if upheld, will have no implications for future litigation.  Helft also quotes from counsel at both Viacom and Google which are filled with legal errors, though perhaps understandably so.

The Wall Street Journal –Sam Schechner and Jessica E. Vasellaro make no mistakes in their report of the decision.  They correctly explain what summary judgment means, and summarize the ruling without distorting it.  Full marks.

The Washington Post – Cecilia Kang, who covers technology policy for the Post, incorrectly characterizes Judge Stanton’s ruling as a “dismissal” of Viacom’s lawsuit.  A dismissal, as opposed to the granting of a motion for summary judgment, generally happens earlier in litigation, and signals a much weaker case, often one for which the court finds it has no jurisdiction or which, even if all the alleged facts are true, doesn’t amount to behavior for which a legal remedy exists.  Kang repeats the companies’ statements, but also adds a helpful quote from Public Knowledge’s Sherwin Siy about the balance of avoiding harms.

The National Journal – At the website of this legal news publication, Juliana Gruenwald commits no fouls in this short piece, with an even better quote from PK’s Siy.

CNET News.com – Tech news site CNET’s media reporter Greg Sandoval suggests that “While the case could continue to drag on in the appeals process, the summary judgment handed down in the Southern District of New York is a major victory for Google . . . .”  This is odd wording, as the case will certainly “drag on” to an appeal to the Second Circuit.  (A decision by the Second Circuit is perhaps a year or more away.)  Again, a district court decision, no matter how strongly worded, does not constitute a “major victory” for the prevailing party.

Sandoval (who, it must be said, posted his story quite quickly), also exaggerates the sweep of Google’s argument and the judge’s holding.  He writes, “Google held that the DMCA’s safe harbor provision protected it and other Internet service providers from being held responsible for copyright infringements committed by users.  The judge agreed.”  But Google argued only that it (not other providers) was protected, and protected only from user infringements it didn’t know about specifically.  That is the argument with which Judge Stanton agreed

Perhaps these are minor infractions.  You be the judge.

So, I’m sitting here at today’s Federal Trade Commission (FTC) workshop, “Will Journalism Survive the Internet Age?” and several panelists have argued that private “professional” media is toast, not just because of the rise of the Net and digital media, but also because the inherent cross-subsidy that advertising has traditionally provided is drying up.  It very well could be the case that both statements are true and that private media operators are in some trouble because of it. But what nobody seems to be acknowledging is that our government is currently on the regulatory warpath against advertising and that this could have profound impact on the outcome of this debate.

As Berin Szoka and I noted in a recent paper, “The Hidden Benefactor: How Advertising Informs, Educates & Benefits Consumers,” the FTC, the FCC, the FDA, and Congress are all considering, or already imposing, a host of new rules that will seriously affect advertising markets.  This article in AdAge today confirms this:

The advertising industry is heading for a “tsunami” of regulation and is at a “tipping point” of greatly increased scrutiny, warned a panel on social media and privacy at the American Advertising Federation conference here [in Orlando].

The reason this is so important for the ongoing debate about the future of media and journalism is because, as Berin and I argued in our paper:

an attack on advertising is tantamount to an attack on media itself, and media is at a critical point of technological change. As we have pointed out repeatedly, the vast majority of media and content in this country is supported by commercial advertising in one way or another–particularly in the era of “free” content and service.

So, before policymakers give up on the commercial media that have been supported by advertising in America for generations (or centuries!), they might want to pause for just a moment as they skip down the Yellow Brick Road to a “post-corporate,” taxpayer-supported media Oz to ask just how much damage increased regulation is doing to advertising revenues for private media companies and the journalists and editors they employ.  Anyone who believes the Wizard behind the curtain (politicians and unelected bureaucrats) won’t call the shots in that Oz fantasyland is just kidding themselves. So perhaps if policymakers stopped strangling advertising, it could continue to fund reporting, creativity and innovation.

Just a reminder that tomorrow the Federal Trade Commission (FTC) will be hosting the 3rd workshop in its ongoing event series, “Will Journalism Survive the Internet Age?” This workshop will feature various experts discussing the FTC’s 47-page “staff discussion draft,” which outlines “Potential Policy Recommendations to Support the Reinvention of Journalism.” In these two recent essays, I discussed the controversy surrounding some of the recommendations in that discussion draft:

• Growing Opposition to FTC “Saving Journalism” Media Takeover Blueprint, by Adam Thierer, June 9, 2010
• FTC Draft Plan to “Save Journalism” Drawing Scrutiny; Raising Concern, by Adam Thierer, June 4, 2010

According to this press release announcing the event,”The workshop is free and open to the public, but space is limited and attendees will be admitted on a first-come basis. The workshop will be held at: The National Press Club, 549 14th Street NW, 13th Floor, Washington, DC. Members of the public and press who wish to participate but who cannot attend can view a live webcast.  A link will be available on the day of the workshop at: http://www.ftc.gov/opp/workshops/news/index.shtml.”

Unless I am missing something, the FTC has still not posted an agenda or list of speakers, which is a bit strange. But apparently Rick Edmonds of the Poynter Institute will be participating. He’s got a nice piece up over at Poynter Online (“FTC Future-of-Journalism Inquiry Wraps Up With Little Momentum for Major Intervention“) summarizing some of what he’ll say tomorrow. I particularly liked his conclusion, which echoes the call Berin Szoka and I have made for allowing continuing marketplace evolution and experimentation:

Right now is a great time, though, for letting nature, creative destruction and innovation take their course. Will newspapers and other traditional media recommit to an adequate news effort and find new revenue streams as advertising budgets continue to move to all things digital?  Which of the start-ups will demonstrate financial stability and success with news audiences and marketers?  With these free market dynamics playing out at warp speed, later is the better time for deciding whether government invention is needed and if so, what kind.

Amen, brother.  [For more background about what the FTC and FCC have been up to on this front, see this ongoing series list of essays about, “Should Government Bailout Media, Subsidize the Press & Seek to “Save Journalism”?]

As I pointed out here last week, the Federal Trade Commission’s (FTC) recently released 47-page document outlining “Potential Policy Recommendations to Support the Reinvention of Journalism” has been raising eyebrows in many different quarters. Even though it is just a “discussion draft” and the agency hasn’t formally endorsed any of the recommendations in it yet, the sweeping scope and radical nature of many of the proposals in the document has already raised the blood pressure for many folks. It doesn’t help that the document reads like the CliffsNotes for the recent media-takeover manifesto, The Death and Life of American Journalism, by the neo-Marxist media scholar Robert W. McChesney and Nation editor John Nichols. Their book is horrifying in its imperial ambitions since it invites the government become the High Lord and Protector of the Fourth Estate. [For an in-depth look at all of McChesney’s disturbing views on these issues, see: “Free Press, Robert McChesney & the “Struggle” for Media.”]

The FTC’s seeming infatuation with McChesney’s proposals has many rightly concerned about where exactly the Obama Administration’s FTC (and FCC) may be taking us in the name of “saving journalism.”  In an editorial this week, Investors Business Daily worries that the feds are “Seizing The News Business“ and wonders “why, as the administration contemplates a federal takeover of their business, [there is] such thundering silence” from journalists and media executive themselves.  The good news, however, is that a recent survey found plenty of skepticism among news executives regading government subsidies and regulatory meddling in their business. According to this April survey by the Pew Research Center’s Project for Excellence in Journalism in association with the American Society of News Editors (ASNE) and the Radio Television Digital News Association (RTDNA), revealed that, “Fully 75% of all news executives surveyed—and 88% of newspaper executives—said they had ’serious reservations,’ or the highest level of concern, about direct subsidies from the government.” A smaller percentage (only 46%) had serious reservations about tax credits for news organizations, then again, only 13% said they “would welcome such funding” and just 6% said they were “enthusiastic” about it.

And now there’s this new survey by Rasmussen Reports which finds that average Americans find some of the FTC’s proposed recommendations pretty silly:

• 84% oppose a 5% tax on the purchase of consumer electronic items such as computers, I-pads and Kindles to help support newspapers and traditional journalism.
• 74% oppose a 3% tax on monthly cell phone bills to help support newspapers and traditional journalism.
• 76% oppose placing an additional tax on internet news sites to help support newspapers and traditional journalism.
• 71% oppose the government creating a taxpayer-funded program that would hire and pay young reporters to work for newspapers around the country.

Those are pretty lopsided numbers, but I don’t find those results all that surprising.  These FTC recommendations, which were pulled almost verbatim from the McChesney-Nichols media takeover manifesto, don’t past the laugh test with most Americans.  Seriously, next time you see someone whip out their smartphone, ask them if they’d be willing to pay a 5% tax on it to funnel money into an FCC- or FTC-led corporate welfare program for favored media entities.  You won’t find many takers.

The FTC still has time to right the ship, of course. It will be interesting to see if someone high up in the Obama Administration gets control of this situation before it gets completely out of hand. It’s fairly clear from those surveys that their is little appetite among those within the news business or among its consumers for the sort of radical recommendations that the FTC sketched out it is “reinventing journalism” blueprint. Let’s just hope the Obama Administration still listens to common sense and is ready to reject a media marketplace takeover.

Further Reading :

• FTC Draft Plan to “Save Journalism” Drawing Scrutiny; Raising Concern, by Adam Thierer, June 4, 2010
• PFF’s Mega-Filing in the FCC’s “Future of Media” Proceeding, by Adam Thierer & Berin Szoka, May 5, 2010
• The Wrong Way to Reinvent Media, Part 5: Media Bailouts & Welfare for Journalists, by Adam Thierer & Berin Szoka, April 30, 2010
• The Wrong Way to Reinvent Media, Part 3: Media Vouchers, by Adam Thierer & Berin Szoka, April 14, 2010
• Steve Forbes on Free Press & Coming “Chavez-Style Media Crackdown”, by Adam Thierer, March 2010
• The Wrong Way to Reinvent Media, Part 1: Taxing Devices & Networks to Subsidize Media, by Adam Thierer & Berin Szoka, March 24, 2010
• summary of remarks at “Crisis in Journalism” event, by Adam Thierer, Feb. 2010
• We’re from Government and We’re Here to Help (Save Journalism) by Adam Thierer, March 6, 2010
• A “Public Option” for Media? The Free Press Plan to Put Journalists on the Public Dole, by Adam Thierer, Nov. 2009
• Public Option for Press Should Get the Red Pen, by Adam Thierer, The Daily Caller, Jan. 2010
• Free Press, Robert McChesney & the “Struggle” for Media, by Adam Thierer, Aug. 2009
• What the Media Reformistas Really Want, by Adam Thierer, Aug. 2008
• Socializing Media in Order to Save It, by Adam Thierer, City Journal, March 2009
• Obama Should Just Say No To Newspaper Bailouts, Adam Thierer, Sept. 2009
• The Dangers of Government-Subsidized News, by Adam Thierer, Oct. 2009

As I’ve noted here before, the Federal Trade Commission (FTC) has an ongoing proceeding asking “How Will Journalism Survive the Internet Age?” The agency has hosted two workshops on the issue and a third is scheduled for June 15th at the National Press Club. Recently, the FTC released a 47-page staff discussion draft entitled “Potential Policy Recommendations to Support the Reinvention of Journalism,” which outlines dozens of proposals that have been set forth in recent years to “save journalism,” “reinvent media,” or support various forms of so-called “public interest programming.”  [I’ve embedded the document down below.] Although the FTC makes it very clear on the first page of the discussion draft that it “does not represent final conclusions or recommendations by the Commission or FTC staff [and] it is solely for purposes of discussion,” the document is drawing scrutiny and raising concern since it might foreshadow where the FTC (and Obama Administration) could be heading on this front.

Some of those raising a stink about the FTC draft include: Jeff Jarvis (“FTC Protects Journalism’s Past“); Rob Port (“Federal Government Considering “iPad Tax” To Subsidize Journalism“); Mark Tapscott: “(Will Journalists Wake up in Time to Save Journalism from Obama’s FTC?”); and Andrew Malcolm of the Los Angeles Times (“Obama’s FTC Plan to Reinvent America’s News Media“), who says, “this FTC study is rated R for anyone who thinks the federal government, the object of copious news coverage itself, has no business deciding which sectors of the private media business survive and thrive through its support, subsidies and encouragement with things like tax incentives. Yet that’s what this Obama administration paper is suggesting as another of the ex-community organizer’s galactic reform plans.”   Ouch!

I’ve spent a great deal of time considering many of the “reform” proposals that the FTC outlines in its discussion draft and, along with Berin Szoka, recently released a 5-part series of papers and filed 80 pages of comments with the Federal Communications Commission (FCC) in its “Future of Media” proceeding, which shares much in common with the FTC’s “Will Journalism Survive?” proceeding. Not all of the ideas floated in the FTC’s draft document are toxic, but some are very troubling and fit squarely in the red or yellow zone of that chart above, which plots a range of media policy options that the FTC or FCC might pursue.

As the FTC draft is structured currently, it appears to have been heavily influenced by the radical activist group Free Press and its founder Robert McChesney, the prolific neo-Marxist media scholar from the University of Illinois. I’ve explained in detail here before the dangerous ideas floated by McChesney and Free Press. For background, see:

• Free Press, Robert McChesney & the “Struggle” for Media, Aug. 2009
• A “Public Option” for Media? The Free Press Plan to Put Journalists on the Public Dole, Nov. 2009
• What the Media Reformistas Really Want, Aug. 2008
• Socializing Media in Order to Save It, March 2009

McChesney and his Free Press disciples have called for a “post-corporate” media world in which the state essentially serves as both a benefactor and partner of the press. Their “public option” for the press would essentially upend private media and toss the First Amendment into the dustbin of history. I encourage everyone who thinks I am exaggerating to read Chapter 4 (“Subsidizing Democracy”) of McChesney’s new book with John Nichols, The Death and Life of American Journalism as well as the “National Journalism Strategy” that Free Press released last year.

Those two works read like a Soviet-style 5-Year Plan for the Press. Massive subsidies. Massive taxes. Massive state meddling into virtually every aspect of the media marketplace and journalistic profession. And if, after reading those documents, you still don’t think they are out to destroy the private provision of media in America, you might want to check out this interview McChesney did with the Canadian-based “Socialist Project” in which he confessed that “the ultimate goal is to get rid of the media capitalists,” and noted that, “unless you make significant changes in the media, it will be vastly more difficult to have a revolution.” Similarly, in his book with Nichols, he concludes by noting that “We have responded in a time of crisis not with tinkering reforms but with revolution.”  They sure have!

For some reason, the FTC seems enamored with these dangerous ideas. McChesney and Free Press are cited over a dozen times and their proposals show up almost verbatim throughout the FTC’s discussion draft. Moreover, McChesney was recently invited to one of the FTC’s workshops to deliver a major address on these issues. Finally, what makes me particularly nervous is that Susan DeSanti, the person running the FTC’s effort, has praised McChesney and Nichols’ “excellent book” despite its call for radical steps that would essentially hobble private media and impose crushing taxes on just about everyone in sight to subsidize public, state-blessed media.

I sincerely hope that the FTC’s “discussion draft” is just that, and nothing more.  I’m fine with discussing kooky Marxist ideas all day long. I just hope our government isn’t getting ready to start imposing them upon us.

New FTC Staff Discussion

I’m keeping tabs on who filed “major” comments (more than a 10-15 pages) in the Federal Communications Commission’s “Future of Media” proceeding (GN Docket No. 10-25).  As I noted last week, The Progress & Freedom Foundation submitted almost 80 pages of comments (single-spaced!) in the matter, so it’s something I care deeply about and will be tracking closely going forward.

Incidentally, the general consensus of those who filed (especially if you count “minor” comments) is fairly overwhelming: Bring on Big Government! Seriously, I only found a handful of comments that object strenuously to government meddling in media markets or that raised concerns about the potential for the State’s increasing involvement in the journalism profession. Even many of the affected industries appear to be suffering from a bit of Stockholm syndrome here.  Most of them just play up the good things they are doing but barely utter a peep about the dangers of federal encroachment into the affairs of the Press.

Anyway, for those of you who care to track the gradual federalization of media and journalism, I think what you see below is a fairly comprehensive listing of the major filings submitted thus far in the FCC’s “Future of Media” proceeding. I’ll try to add more as I find them. You might also want to track what was filed in the Federal Trade Commission’s workshops on “How Will Journalism Survive the Internet Age.”  Finally, if you care to learn more of this issue, I’m hosting an event on the morning of May 20th to discuss these issues in more detail.

• American Community Television
• American Legislative Exchange Council (ALEC)
• American Public Media
• Association of Independents in Radio
• broadcast TV stations coalition
• Center for Social Media (Patricia Aufderheide & Jessica Clark) [+ attachments 1, 2, 3]
• Communications Workers of America & The Newspaper Guild
• Communications Workers of America & Media Council Hawaii
• Competitive Enterprise Institute (CEI)
• CPB – PBS – NPR – APTS
• Free Community Paper Industry
• Free Press, New America Foundation, Media Access Project & others
• Good Life Broadcasting, Inc.
• Institute for Policy Integrity (New York Univ. School of Law)
• LIN Television
• The Media Consortium
• Media Working Group, Inc.
• Minority Media and Telecommunications Council
• National Association of Broadcasters (NAB)
• National Cable & Telecommunications Association (NCTA)
• National Hispanic Media Coalition
• Native Public Media
• National Association of Telecommunications Officers and Advisors
• National Religious Broadcasters
• National Public Radio (NPR)
• National Federation of Community Broadcasters
• New Media Rights
• Newspaper Association of America (NAA)
• Nexstar Broadcasting, Inc
• Progress & Freedom Foundation (PFF)
• Public Broadcasting Service (PBS)
• Radio Television Digital News Association
• Station Resource Group (+attachment)
• Society of Professional Journalists
• J. Brian Hudson (J.D. candidate at Villanova Law School)

The Progress & Freedom Foundation today filed comments in the Federal Communication Commission’s (FCC) “Future of Media” proceeding. Berin Szoka, Ken Ferree, and I urged the FCC to “reject Chicken Little-esque calls for extreme media ‘reform’ solutions,” and counseled policymakers to move cautiously so that media reform can be “organic and bottom-up, not driven by heavy-handed, top-down industrial policies for the press.”

Our 79-page filing covers a wide range of ideas being examined by Washington policymakers to help struggling media outlets and unemployed journalists, or to expand public media / “public interest” content and regulation. Among the major issues explored in our filing:

• First Amendment concerns implicated by government subsidies;
• The pitfalls of imposing new “public interest” obligations on media operators;
• How advertising restrictions could harm the provision of media and news;
• Taxes, fees and other regulations to be avoided;
• The limited role in reform that public media subsidies can play; and
• Positive steps government could take.

We note that as “With many operators struggling to cope with intensifying competition, digitization, declining advertising budgets, and fragmenting audiences, some pundits and policymakers are wondering what the ‘future of media’ entails. The answer: Nobody knows.”  While this uncertainty has put concerned policymakers at the ready to “help” the press, we warn that: “There is great danger in rash government intervention.” Instead, policymakers should be “careful to not inhibit potentially advantageous marketplace developments, even if some are highly disruptive.” Marketplace meddling, or government attempts to tinker with private media business models in the hopes that something new and better can be created, are misguided. Moreover, “Our constitutional traditions warn against it, history suggests it would be unwise, and practical impediments render such meddling largely unworkable, anyway.”

We address several specific proposals to use public coffers to prop up the media—such as media vouchers, taxing broadcast spectrum, and expanding postal subsidies, among others. They believe that most of these stand on shaky ground, especially as they relate to press independence; First Amendment values; political strings, pressure and meddling; taxpayer promotion of failed models; and taxpayer-compelled funding of unwanted or offensive content.

The PFF comments also focus on the integral role advertising plays in supporting free media: “Advertising has been the hidden, unappreciated benefactor that has sustained a free press historically and policymakers should understand that an attack on advertising is tantamount to an attack on media itself.” Accordingly, if Washington wages a war on advertising, media providers will suffer greatly.

We examine non-commercial media options, too. Though limited support can work at the margins, “policymakers should not view public media as a substitute for private media operations.” If the government truly wants to help ailing media outlets and journalism, policymakers could relax media ownership regulations; allow non-profit status for media enterprises; and provide far greater transparency into its own affairs.

We conclude that the Commission should ignore sky-is-falling rhetoric and avoid “destroy[ing] the important wall between State and Press.”  Instead of imposing an industrial policy on the press, we urge policymakers to exercise patience and let creative destruction in the media marketplace play out.

While working on our FCC filing, we released a series of essays over the last month entitled “The Wrong Way to Reinvent Media” (see Parts 1, 2, 3, 4 and 5).You can find all those papers, our big filing, and other related materials on this new PFF page dedicated to “Future of Media” issues.

Also, on May 20th, PFF will host an event covering these and competing ideas, called “Can Government Help Save the Press?” That event will be keynoted by the FCC’s Ellen Goodman.  RSVP here today. Comments of Progress and Freedom Foundation in FCC Future of Media Proceeding (GN Docket No 10-25) http://d1.scribdassets.com/ScribdViewer.swf

Thought you all might be interested in this upcoming PFF event on “Can Government Help Save the Press?” It will take place on Thursday, May 20, 2010 from 8:30 a.m. – 12:00 p.m. in the International Gateway Room, Mezzanine Level of the Ronald Reagan Building on 1300 Pennsylvania Ave, N.W. here in DC.   This event will consider the FCC’s “Future of Media” proceeding (comments are due this Friday) and debate what role the government should play (if any) in sustaining struggling media enterprises, “saving journalism,” or promoting more “public media” or “public interest” content. [You can find all our essays about this here.]

The event will feature a keynote address by Ellen P. Goodman of the FCC’s Future of Media team. Ellen is one of the sharpest minds in the media policy universe today, and a real asset to the FCC team. She is a Distinguished Visiting Scholar at the FCC, a Research Fellow at American University’s Center for Social Media, and a Visiting Scholar at the University of Pennsylvania’s Annenberg School of Communications.  She is also a Professor at Rutgers University School of Law at Camden, specializing in information law and policy. She has spoken before a wide range of audiences around the world on media policy issues, has consulted with the U.S. government on communications policy, and served as an advisor to President Obama’s presidential campaign and transition team.

After Ellen Goodman brings us up to speed with where the FCC’s Future of Media process stands, we’ll hear from a diverse panel of experts that I am still busy assembling. But so far it includes Charlie Firestone of the Aspen Institute, who will be on hand to discuss the work he’s been doing with the Knight Commission on this front.  I’ve also invited a rep from the Newspaper Association of America to come and talk about the diversity of new media monetization models that they have been aggregating.  (Check out the appendix of their outstanding FTC filing last Nov.) And Kurt Wimmer of Covington & Burling, who represents broadcasters among others, will talk about the need for regulatory flexibility / forbearance, especially on ownership issues.  Again, more panelists to come. But please sign up now!

PFF today released the fifth installment in our ongoing series on “The Wrong Way to Reinvent Media.” This series of papers explores various tax and regulatory proposals that would have government play an expanded role in supporting the press, journalism, or other media content. In the latest essay, Berin Szoka, Ken Ferree, and I discuss proposals for direct subsidies for failing media outlets and out-of-work journalists.

We argue taxpayer support for failing outlets and unemployed journalists implicates significant First Amendment concerns. On the whole, subsidies can make “journalists and media operators more dependent upon the State; compromise press independence and diminish public trust in the free press; and result in government discrimination in the politically inescapable dilemma of determining eligibility for subsidies.” Such an agenda would also entail huge cost to taxpayers—initially about $35 billion per year according to advocates—and would represent “a massive wealth transfer from one class of speakers to another…”

We warn that calls for seemingly beneficent bailouts “to save” the media and journalism may actually be driven by those who have something more nefarious in mind: a “post-corporate” world shorn of media capitalists, and “such radicalism must be rejected if we hope to sustain a truly free press and uphold America’s proud tradition of keeping a high and tight wall of separation between Press and State.”

The ideas within these and other essays in the series will be worked into a major PFF filing in the Federal Communications Commission’s (FCC) proceeding on the “Future of Media” on May 7. The paper may be viewed online here and I’ve attached it down below in a Scribd reader.

Wrong Way to Reinvent Media Part 5 – Media Bailouts [Thierer Szoka Ferree – PFF] http://d1.scribdassets.com/ScribdViewer.swf

As I’ve mentioned here previously, PFF has been rolling out a new series of essays examining proposals that would have the government play a greater role in sustaining struggling media enterprises, “saving journalism,” or promoting more “public interest” content. We’re releasing these as we get ready to submit a big filing in the FCC’s “Future of Media” proceeding (deadline is May 7^th).  Here’s a podcast Berin Szoka and I did providing an overview of the series and what the FCC is doing.

In the first installment of the series, Berin and I critiqued an old idea that’s suddenly gained new currency: taxing media devices or distribution systems to fund media content. In the second installment, I took a hard look at proposals to impose fees on broadcast spectrum licenses and channeling the proceeds to a “public square channel” or some other type of public media or “public interest” content.

In our latest essay, “The Wrong Way to Reinvent Media, Part 3: Media Vouchers,” Berin and I consider whether it is possible to steer citizens toward so-called “hard news” and get them to financially support it through the use of “news vouchers” or “public interest vouchers”?  We argue that using the tax code to “nudge” people to support media — while less problematic than direct subsidies for the press — will likely raise serious issues regarding eligibility and be prone to political meddling.  Moreover, it’s unlikely the scheme will actually encourage people to direct more resources to hard news but instead just become a method of subsidizing other content they already consume.

I’ve attached the entire essay down below.

The Wrong Way to Reinvent Media, Part 3: Media Vouchers

by Adam Thierer & Berin Szoka*

PFF Progress on Point 17.4 [PDF]

Should the government play a greater role in the media sector in the name of sustaining struggling media enterprises, “saving journalism,” or promoting public media?  In this ongoing series of essays, we’ve been analyzing proposals that would have public policymakers use taxes, subsidies, or regulations to accomplish those objectives.

Part 1 of this series examined proposals to fund media content via a tax on consumer electronics, broadband service, or cell phone bills.^[1] Part 2 critiqued proposals to impose fees on broadcast spectrum licenses and channeling the proceeds to a “public square channel” or some other type of public media or “public interest” content.^[2] Other essays in this series will address proposals to tax private advertising revenues to support public media; expand postal subsidies; directly subsidize out-of-work journalists; and to prop up or bail out failing media entities.  A wrap-up essay will then focus on some potentially constructive policy reforms that could assist media enterprises without a massive infusion of state support or regulation of the press.

In this installment, we will consider whether it is possible to steer citizens toward so-called “hard news” (“serious” journalism)—and get them to financially support it—through the use of “news vouchers” or “public interest vouchers”?  We will argue that using the tax code to nudge people to support media—while less problematic than direct subsidies for the press—will likely raise serious issues regarding eligibility and be prone to political meddling.  Moreover, it’s unlikely the scheme will actually encourage people to direct more resources to hard news but instead just become a method of subsidizing other content they already consume.

Funding Hard News is Hard

Funding “hard news” has always been challenging.  Financing a team of dedicated local beat reporters, investigative journalists, national desks, foreign bureaus, and all the associated production facilities and support staff is an extremely expensive undertaking.[3] And, for all that trouble and expense, hard news rarely turns a healthy profit.  Often it has been considered a “loss leader” for media companies and has been cross-subsidized by other types of content or services.[4] This is why “bundling” has been such a popular model for many media operations such as newspapers, magazines, and cable television.  By tying news production to other types of content or services, media operators have been able to sustain the production of hard news, despite its general unprofitability on its own.

It’s worth recalling that a business model to sustain hard news production and dissemination on a mass scale really only developed mid-way through our Republic.  The early history of media in this country was characterized by the “partisan press” due to the heavy reliance on a patronage model and direct association with political parties and figures. This changed with the rise of large daily newspapers in the mid-1800s and then broadcast radio and television in the early half of the 20 ^th century.[5] Media providers were able to cross-subsidize news production independent of private or political patronage thanks to three things: (1) high-speed printing presses or broadcast facilities, (2) geographic-based market and pricing power, and (3) the widespread advertising base that was made possible by (1) and (2).

Over just the past 15-20 years, we’ve seen this traditional model upended.  Increased competition and technological/platform proliferation are placing an enormous strain on traditional media operations and business models. Schumpeterian “creative destruction” is at work in a serious, and for many, painful, way.

This is what is keeping the Federal Communications Commission,[6] the Federal Trade Commission,[7] some in Congress,[8] and many media worrywarts up at night: the fear that, as traditional financing mechanisms falter (advertising, classifieds, subscription revenues, etc.), many traditional news-gathering efforts and institutions will disappear.  And that’s leading to calls for government intervention or assistance of some sort to prop up struggling entities or directly subsidize the hard news that many of them have traditionally provided but may not be able to for much for longer.

Can Vouchers “Nudge” Citizens to Support Hard News?

One much-discussed proposal would create a “public interest voucher” or what Robert W. McChesney & John Nichols, authors of the new book The Death and Life of American Journalism, call a “Citizenship News Voucher.”^[9] This is a variant on the “artistic freedom voucher,” an idea first put forward in 2003 by economist Dean Baker as an alternative to copyright law as a means of incentivizing artistic creation.[10] The regulatory activist group Free Press, which McChesney founded, has also endorsed a news voucher scheme.[11]

The idea is fairly straightforward: give every American a voucher (McChesney and Nichols propose $200) to support the non-profit news entities of their choice by listing those entities on their tax return.  (If half of all adult Americans actually used their voucher, that would cost at least $20 billion/year.[12])  They assume this would be an efficient way of channeling money to hard news providers while avoiding the serious concerns that arise when government officials or agencies are the ones providing or steering the subsidies.  McChesney and Nichols go so far as to call their tax-and-redistribute proposal “a libertarian’s dream,” since “people can support whatever political viewpoint they prefer or do nothing at all.”[13]

McChesney and Nichols seem to be building on the approach popularized by Richard Thaler and Cass Sunstein in their highly influential 2008 book Nudge: Improving Decisions about Health, Wealth, and Happiness.^[14] Based on behavioral economics studies, Thaler and Sunstein argue that both government and private actors must inevitably make decisions about “choice architecture” and that, by setting defaults, incentives and rules smartly, “choice architects” can and should improve private decision-making—but only where they can do so without blocking, fencing-off or significantly burdening choices.^[15] While their proposal might not qualify as a nudge in the strict sense defined by Thaler and Sunstein, the essential similarity between the concepts lies in trying to restructure the choices Americans make about media consumption by changing how they spend money on media—with the declared goal of “improving” both media consumption and the media itself (by “freeing it” of supposedly evil corporate influences).

Problems with the News Voucher Proposal

While nudges might be less objectionable in circumstances where it’s objectively evident what’s really “good” for us, the same can hardly be said for media consumption.  “Nudging” consumers towards better media choices isn’t based on clear science about, say, eating better or getting more exercise, but on highly subjective decisions about what kind of information consumption is really good for individuals, communities, and polities.  For policymakers to imagine that they can steer the public’s tastes or behavior in more desirable directions through law (including media subsidy schemes) is a profoundly elitist enterprise.^[16] In the case of “news vouchers,” the hope is that the public can be encouraged to at least channel some additional support to news-gathering activities and institutions.  The problem, however, is that some people just don’t much like being “nudged” by officials from afar and they’ll often take steps to evade such paternalism—however ostensibly “libertarian” it might be.  And it could lead to a host of unintended consequences, discussed further below.[17]

As a general matter, it simply isn’t possible to make consumers choose the “right” media in an age of information abundance.^[18] With so many voices competing for our attention, it’s impossible make people watch, listen, or read if they don’t want to.  That’s especially true with hard news, which has never netted major ratings.  As Ellen P. Goodman of the Rutgers-Camden School of Law has noted: “Given the proliferation of consumer filtering and choice, these kinds of interventions are of questionable efficacy.  Consumers equipped with digital selection and filtering tools are likely to avoid content they do not demand no matter what the regulatory efforts to force exposure.”[19] As Goodman rightly argues, “regulation cannot, in a liberal democracy, force viewers to consume media products they do not think they want in the name of the public interest.”[20] There’s no reason to believe this situation has ever been different or will ever change:  Writing in 1922, famed journalist Walter Lippmann noted that, “it is possible to make a rough estimate only of the amount of attention people give each day to informing themselves about public affairs,” but “the time each day is small when any of us is directly exposed to information from our unseen environment.”[21]

McChesney and Nichols’ effort to sell this scheme as “a libertarian’s dream” is a huge stretch.  There aren’t too many libertarians—or anyone else for that matter—who favor sending more money to the federal government only to win back the right to spend it on “qualifying media entities.”  And regarding their claim that “people can support whatever political viewpoint they prefer or do nothing at all,” well, people are already free to do whatever they want with their money when it comes to media products!  Why do we need to send money to Washington first and then have policymakers tell us how we can spend it?  This seems like a needless nudge—and one that would likely result in government bureaucracy taking a cut of the money or meddling in media markets.

Analogies to educational vouchers don’t work because we long ago decided to treat education as a public good and force everyone to pay for it.  “Voucherization” may make sense as a more efficient and “libertarian” way to fund such traditional public goods, when we absolutely have to force people to spend money on certain goods or services.  While McChesney and Nichols claim that the time has come for the government to fund media as such a public good, most people probably wouldn’t agree, since the private provision of media services has worked quite well for some time—being funded by a mix of advertising and subscription revenues for centuries.  They repeatedly claim that era is over (with little substantiation) but, in reality, it is their policies that would end private, for-profit media by taxing and regulating it to death.[22]

Second, what counts as a “qualifying media entity,” and how will the IRS make that call?  Can just any outlet that purports to gather and report “news” draw support from this new federal program?  McChesney and Nichols aren’t clear: They want the IRS to “determine eligibility—according to universal standards that err on the side of expanding rather than constraining the number of serious sources covering and commenting on issues of the day.”[23] They specify only that the entity must be a non-profit (though not necessarily a federally-recognized 501(c)(3)); not accept advertising; “do exclusively media content”; “cannot be part of a larger organization or have any non-media operations”; and that everything the medium produces must be made available immediately upon publication on the Internet and made available for free to all.”[24] But, anticipating objections about the dangers of political meddling, they also insist that “the government will not evaluate the content to see that the money is going toward journalism.  Our assumption is that these criteria will effectively produce that result, and if there is some slippage so be it.”[25] The only mechanism they can suggest for reducing fraud and ensuring “seriousness” is that, “for a medium to receive funds it would have to get commitments for at least $20,000 worth of vouchers” (100 full donations of the $200 voucher).[26]

But will policymakers really let citizens redeem their vouchers on The National Inquirer or People magazine?  How about the satirical The Onion or Jon Stewart’s Daily Show?  “This is a risk we are more than willing to take,” McChesney and Nichols say since they are “operating on a gut instinct that people will use their vouchers to fund serious media while reaching into their pockets to pay for copies of The National Inquirer at the supermarket checkout.”^[27] Of course, it’s always easier to take such risks when you are playing with other people’s money!  (Nearly half of all Americans don’t pay any Federal income taxes,[28] so their $200 news voucher is definitely coming out of someone else’s tax bill.)

But it’s naïve to believe this idea is going to change the face of journalism in any serious way.  Most people will spend their vouchers on whatever media outlets and content they are currently consuming, which probably isn’t what McChesney and Nichols (or most policymakers) would prefer.  “The program may not develop exactly the type of journalism our greatest thinkers believe is necessary,” McChesney and Nichols admit.[29] But the real question is: What sort of demands will policymakers begin making if the voucher program ends up channeling money into media entities that don’t measure up to their standards or desires?  Qualification criteria would inevitably become the tool of political meddling.

The Inevitable Strings & the Political/Constitutional Paradox

This raises a fourth concern: How long will it be before government starts attaching more strings to the vouchers?  To borrow a recent headline from The Wall Street Journal, how long will it be before the “Economic Policy ‘Nudge’ Gives Way to a Shove?”^[30] Although, in theory, the news voucher idea lets consumers figure out how to steer the funds, it’s unlikely much of those funds would go toward hard news, civic-minded or “high brow” content if consumers were actually free to choose.  How do we know this?  Because we already know what consumers choose today—and those “poor” choices are part of the supposed “problem” to be solved by media vouchers.  Once people start redirecting taxpayer dollars to content that the elites and policymakers don’t like, the nudge will become a shove and more interventions will follow in the form of “voucher guidance and compliance” hearings, rules, etc.

But the pressure for strings won’t just come from the top down because, as Thomas Jefferson famously put it in the 1786 Virginia Act for Establishing Religious Freedom, “to compel a man to furnish contributions of money for the propagation of opinions which he disbelieves, is sinful and tyrannical.”[31] That is, we naturally—and rightly—resent subsidizing speech that is antithetical to our own values.  McChesney and Nichols dismiss this natural (presumably bourgeois?) indignation by saying, “people will have to accept that some of the vouchers are going to go to media that they detest.”^[32] In one sense, they are dead wrong: People won’t just accept that.  They may accept subtle, indirect subsidies, but the more clear it becomes that they are being forced to pay for media they detest—and that could scarcely be more clear than with a refundable tax credit “voucher”—they will protest and demand that certain viewpoints, or at least kinds of content, be deemed out of bounds.

But in another sense, McChesney and Nichols are probably correct: For such a scheme to work, it probably can’t come with any content strings, because this is probably what the First Amendment would require.  Yet they don’t actually explain that point, stopping only to say that we all just have to become more tolerant of “dissent”— i.e., subsidize those who disagree with us!  In this sense, news vouchers therefore would likely fall prey to a common paradox faced by proposals for the government to subsidize speech: What’s politically feasible is unconstitutional and what’s constitutional is politically impossible.  Specifically, the kinds of eligibility restrictions necessary to push a voucher scheme through Congress would probably cause the courts to strike down the whole scheme.  Even if the courts were willing to strike down only the eligibility provisions as “severable” from the rest of the scheme, the whole scheme would likely die in the very next federal budget if the courts require the funding of “offensive” or “frivolous” content.  Understanding why this is the case requires a brief overview of key First Amendment case law.

In general, “when the Government appropriates public funds to establish a program it is entitled to define the limits of that program.”^[33] Thus, in its 1991 Rust v. Sullivan decision, the Supreme Court upheld a law forbidding federal funding for family planning services to go to abortion counseling.^[34] But the Supreme Court later clarified that such viewpoint discrimination is permissible only “[w]hen the government disburses public funds to private entities to convey a governmental message.”^[35] By contrast, where subsidies are “designed to facilitate private speech,” government may not discriminate against viewpoints it does not like.^[36] Thus, the government may not fund legal services but bar funding for defendants trying to amend or otherwise challenge existing welfare law.^[37]

The First Amendment prohibits not only such viewpoint discrimination but content discrimination as well.  In 2003, the Supreme Court held that the University of Virginia could not exclude religious groups from drawing on the University’s Student Activity Fund, even though the Fund’s eligibility requirements did not discriminate against any particular religion.^[38] Yet in 1995, the Court had upheld another content restriction: a requirement that the National Endowment for the Arts (NEA) “take into consideration general standards of decency and respect for the diverse beliefs and values of the American public” when making grants to “help create and sustain not only a climate encouraging freedom of thought, imagination, and inquiry but also the material conditions facilitating the release of . . . creative talent.”^[39] The Court concluded, in an 8-1 majority, that the “’decency and respect’ criteria do not silence speakers by expressly threaten[ing] censorship of ideas.”^[40] This decision rested largely on the fact that “Educational programs are central to the NEA’s mission” and “it is well established that ‘decency’ is a permissible factor where ‘educational suitability’ motivates its consideration.”^[41] The Court left the door open to future First Amendment challenges to the statute “as applied,” such as “[i]f the NEA were to leverage its power to award subsidies on the basis of subjective criteria into a penalty on disfavored viewpoints.”^[42]

What explains these starkly different outcomes is that the Court decided that the University of Virginia’s Student Activity Fund constituted a “limited public forum”^[43] intended to “encourage a diversity of views from private speakers,” but the NEA did not.  The University had funded all speech except “religious editorial viewpoints” from its Student Activities Fund, into which every student paid a $14 mandatory fee each semester.  By contrast, the NEA made only a limited number of grants through a “competitive process” according to principles of inherently content-based principles of “excellence” as well as “geographic, ethnic, and esthetic diversity.”  Thus, it was permissible, in principle, for the NEA to exclude “indecent” content.

The Supreme Court’s decision in U.S. v. American Library Association, Inc. (2003) also suggests that content restrictions regarding Citizen News Vouchers would be struck down.  The Court held that the First Amendment did not bar Congress from requiring in the Children’s Internet Protection Act (CIPA) that “a public library may not receive federal assistance to provide Internet access unless it installs software to block images that constitute obscenity or child pornography, and to prevent minors from obtaining access to material that is harmful to them.”^[44] Critically, the Court held that libraries were not public fora:

A public library does not acquire Internet terminals in order to create a public forum for Web publishers to express themselves, any more than it collects books in order to provide a public forum for the authors of books to speak. It provides Internet access, not to “encourage a diversity of views from private speakers” … but for the same reasons it offers other library resources: to facilitate research, learning, and recreational pursuits by furnishing materials of requisite and appropriate quality.^[45]

But what is the purpose of the news voucher scheme if not to “encourage a diversity of views from private speakers?”  Indeed, this is precisely how McChesney and Nichols attempt to sell their scheme—as a “libertarian’s dream.”  But, paradoxically, the more “libertarian” and broader subsidies for speech are, the more likely the political/constitutional paradox mentioned above is to arise.

The Citizenship News Voucher Fund proposed by McChesney and Nichols strongly resembles the University of Virginia’s Student Activity Fund:  In both cases, consumers are taxed to finance a fund that is, in theory, available to any entity that meets certain basic eligibility criteria.  No attempt is made in either case to ensure the quality of content or activities being funded.  Indeed, McChesney and Nichols explicitly reject such oversight of voucher spending and insist that taxpayers must accept that much of the fund will simply be wasted on media that falls well short of the “hard” or “serious” news they’re trying to save.  (By contrast, the Corporation for Public Broadcasting, whose budget McChesney and Nichols propose increasing nine-fold to fund more public media,[46] more closely resembles the NEA as a selective grant-maker.)

Also distinguishing the Court’s decision upholding CIPA’s content-based restrictions is the fact that both Justice Kennedy in his concurrence and Justice Souter in his dissent (joined by Justice Ginsburg) agreed that First Amendment problems could be solved to the extent that adults could opt-out of filtering.^[47] But with news vouchers, the government either restricts the eligibility of certain publications to receive vouchers depending on their eligibility or it does not.

Furthermore, unlike with CIPA or the NEA, the Citizenship News Voucher wouldn’t be related to educational settings, so it’s not even clear a “decency” requirement like that Congress imposed on the NEA’s grant-making could be imposed on voucher eligibility.[48] Magazines like Playboy offer a mix of pornography and thoughtful commentary on the news, proving that there is a market for such combination of journalism and controversial entertainment and photography.  Going even further, “Naked News” is a daily show whose buxom anchors strip while delivering the news.^[49] Why wouldn’t millions of Americans, especially younger men, use their voucher for such content?  Who’s going to draw the line between porn-spiced news and “serious” content?

The typical taxpayer will be outraged by having to subsidize some media outlet, whether because of its objectionable viewpoint or indecent or unserious content.  He will fiercely resist being compelled “to furnish contributions of money for the propagation of opinions which he disbelieves and abhors,” as Jefferson put it.  Good luck getting even the most “tolerant” gay voters, for example, to accept being taxed to pay for fundamentalist Christian perspectives on the news—or vice versa!  McChesney and Nichols don’t actually say anything about the First Amendment, but do recognize that, for their program to be accepted, the American people will have to swallow the “hard pill” of accepting that “some of the vouchers are going to go to media that they detest” and “embrace dissent in reality and not just rhetoric.”^[50] They seem to think this “hard pill” is a benefit of their scheme because it would teach us all to be more tolerant of “dissent.”  That’s easy for an endowed professor at a taxpayer-funded university and avowed neo-Marxist like Robert McChesney to say, but it’s not likely to fly with most Americans.  Disputes over “qualifying entity” eligibility will only add new rancor to the Culture Wars (over sex, abortion, religion, politics, etc.).

Realistically, it would likely take years for a news voucher bill to make its way through Congress, and if it ever did pass, it would likely be tied up in the courts for years, requiring at least one visit to the Supreme Court.  If any content strings are included, the law could well lead to the same kind of ordeal as with the 1998 Child Online Protection Act, which spent nearly 9 years in litigation and went up to the Supreme Court twice.^[51] Yet somehow McChesney and Nichols imagine their proposal will save media today at this critical moment of technological transition.

Down with Copyright, Down with Capitalism?

There’s another problematic caveat to the McChesney-Nichols variant of the news voucher idea: They would disallow any copyright protection or advertising support for an entity who receives voucher funds.  That’s an effort by the authors to steer even more media activity away from the commercial sphere and toward what might be thought of as a “public option” for the press—what McChesney and Nichols euphemistically (and repeatedly) call “post-corporate” media.

Let’s not forget that McChesney has argued (during an interview on the Canadian-based “Socialist Project”) that “the ultimate goal is to get rid of the media capitalists,” and that, “unless you make significant changes in the media, it will be vastly more difficult to have a revolution.”  So, it’s important to keep his true intentions in mind when he starts claiming to have found “a libertarian’s dream” of a solution to what ails America’s media sector.^[52] It sounds more like a central planner’s dream.  The true “libertarian’s dream” would be to leave Americans free to make their own choices about media without additional meddling from the State, and to look to innovation to fund media through a combination of advertising, sponsorship, subscriptions and micropayments.

Related PFF Publications

• The Wrong Way to Reinvent Media, Part 2: Broadcast Spectrum Taxes to Subsidize Public Media , Adam Thierer, Progress on Point 17.2, March 2010.
• The Wrong Way to Reinvent Media, Part 1: Taxes on Consumer Electronics, Mobile Phones & Broadband, Adam Thierer & Berin Szoka, PFF Progress on Point 17.1, March 2010.
• Testimony at FCC’s Hearing on “Serving the Public Interest in the Digital Era”, Adam Thierer, March 2010.
• Public Option for Press Should Get the Red Pen, Adam Thierer, The Daily Caller, Jan. 2010.
• Chairman Leibowitz’s Disconnect on Privacy Regulation & the Future of News, Adam Thierer & Berin Szoka, Progress Snapshot 6.1, Jan. 13, 2010.
• Socializing Media in Order to Save It, Adam Thierer, City Journal, March 2009.
• A Manifesto for Media Freedom, Adam Thierer and Brian Anderson, 2008.
• Media Ownership Proceedings, W. Kenneth Ferree, Testimony before the Federal Communications Commission, Nov. 3, 2009.
• Media Myths: Making Sense of the Debate over Media Ownership, Adam Thierer, June 2005.

[1] Adam Thierer & Berin Szoka, The Progress & Freedom Foundation, The Wrong Way to Reinvent Media, Part 1: Taxes on Consumer Electronics, Mobile Phones & Broadband, PFF Progress on Point 17.1, March 2010, www.pff.org/issues-pubs/pops/2010/pop17.1-the_wrong_way_to_reinvent_media.pdf.

[2] Adam Thierer, The Progress & Freedom Foundation, The Wrong Way to Reinvent Media, Part 2: Broadcast Spectrum Taxes to Subsidize Public Media, Progress on Point 17.2, March 2010, www.pff.org/issues-pubs/pops/2010/pop17.2-wrong_way_part_2.pdf

[3] “Until now, the iron core of news has been somewhat sheltered by an economic model that was able to provide extra resources beyond what readers—and advertisers—would financially support. This kind of news is expensive to produce, especially investigative reporting.” Alex S. Jones, Losing the News: The Future of the News that Feeds Democracy (2009) at 4.

[4] “For a long time, publishers have used news as a ‘loss leader,’ a product sold below costs to create other sales.” The Media Consortium, The Big Thaw: Charting a New Future for Journalism, July 2009, at 36, www.themediaconsortium.org/thebigthaw.

[5] James T. Hamilton notes that, “nonpartisan reporting emerged as a commercial product in American newspaper markets in the 1870s.  Before that time, many papers openly proclaimed association with a particular political party.”  James T. Hamilton, All the News That’s Fit to Sell (2004), at 3.

[6] The Federal Communications Commission (FCC) recently kicked off a new “Future of Media” effort with a workshop on “Serving the Public Interest in the Digital Era.” See Federal Communications Commission, FCC Launches Examination of the Future of Media and Information Needs of Communities in a Digital Age, FCC Public Notice, GN Docket No. 10-25, Jan. 21, 2010, at 2, http://hraunfoss.fcc.gov/edocs_public/attachmatch/DA-10-100A1.pdf

[7] The Federal Trade Commission (FTC) has hosted two workshops asking “How Will Journalism Survive the Internet Age?” www.ftc.gov/opp/workshops/news/index.shtml

[8] Both the Senate and House of Representatives have held hearings about “the future of journalism,” and Senator Benjamin L. Cardin (D-MD) recently introduced the “Newspaper Revitalization Act,” which would allow newspapers to become nonprofit organizations in an effort to help them stay afloat—but also curtail their political editorializing.  See http://cardin.senate.gov/news/record.cfm?id=310392.

[9] Robert W. McChesney & John Nichols, The Death and Life of American Journalism (2010) at 201-206. McChesney discussed this idea in more detail when he spoke at the recent FTC event on saving journalism.  Robert W. McChesney, Rejuvenating American Journalism: Some Tentative Policy Proposals, Presentation to FTC Workshop on Journalism, March 10, 2010, www.ftc.gov/opp/workshops/news/mar9/docs/mcchesney.pdf

[10] Dean Baker, The Artistic Freedom Voucher: An Internet Age Alternative to Copyrights, Nov. 5, 2003, www.cepr.net/documents/publications/ip_2003_11.pdf.

[11] Free Press, Saving the News: Toward a National Journalism Strategy, May 2009, at 36, www.freepress.net/files/saving_the_news.pdf.

[12] McChesney & Nichols, supra note 9 at 205.

[13] Id. at 204.

[14] Richard H. Thaler & Cass R. Sunstein, Nudge: Improving Decisions About Health, Wealth, and Happiness (2008).

[15] They define choice architecture as follows:  “A structure designed by a choice architect(s) to improve the quality of decisions made by homo sapiens. Often invisible, choice architecture is the specific user-friendly shape of an organization’s policy or physical building when homo sapiens come into contact with it. Examples of choice architecture include a voter ballot, a procedure for handling well-meaning people who forget a deadline, or a skyscraper.”  Nudge Glossary of Terms, www.nudges.org/glossary.cfm.

[16] See Adam Thierer & Berin Szoka, The Progress & Freedom Foundation, What Unites Advocates of Speech Controls & Privacy Regulation?, Progress on Point 16.19, Aug. 11, 2009, www.pff.org/issues-pubs/pops/2009/pop16.19-unites-speech-and-privacy-reg-advocates.pdf.

[17] As Glen Whitman notes in challenging such “nudging”: “the new paternalism carries a serious risk of expansion. Following its policy recommendations places us on a slippery slope from soft paternalism to hard. This would be true even if policymakers — including legislators, judges, bureaucrats, and voters — were completely rational. But the danger is especially great if policymakers exhibit the same cognitive biases attributed to the people they’re trying to help.”  Glen Whitman, The Rise of the New Paternalism, Cato Unbound, April 5, 2010, www.cato-unbound.org/2010/04/05/glen-whitman/the-rise-of-the-new-paternalism.

[18] Adam Thierer, The Progress & Freedom Foundation, Why Expansion of the FCC’s Public Interest Regulatory Regime is Unwise, Unneeded, Unconstitutional, and Unenforceable, Testimony Before the Federal Communications Commission Hearing on “Serving the Public Interest in the Digital Era,” March 4, 2010, www.pff.org/issues-pubs/testimony/2010/2010-03-04-Thierer_Remarks_at_FCC_Hearing.pdf.

[19] Ellen P. Goodman, “Proactive Media Policy in an Age of Content Abundance,” in Philip M. Napoli, ed., Media Diversity and Localism: Meaning and Metrics (2007) at 370, 374.

[20] Id.

[21] Walter Lippmann, Public Opinion (1922), at 53, 57.

[22] For example, among other things, McChesney and Nichols call for a 5% tax on consumer electronics, a 3% tax on monthly ISP & cell phone bills, a 2% sales tax on advertising, and a 7% tax on broadcasters.  See McChesney & Nichols, supra note 9 at 209-11.

[23] Id. at 202.

[24] Id.

[25] Id.

[26] Id.

[27] Id. at 205.

[28] http://www.taxpolicycenter.org/UploadedPDF/1001289_who_pays.pdf

[29] McChesney & Nichols, supra note 9 at 205.

[30] Jonathan Weisman, Economic Policy ‘Nudge’ Gives Way to a Shove, Wall Street Journal, March 8, 2010, http://online.wsj.com/article/SB10001424052748704869304575103980232739138.html.

[31] http://religiousfreedom.lib.virginia.edu/sacred/vaact.html

[32] McChesney & Nichols, supra note 9 at 205.

[33] Rust v. Sullivan, 500 U.S. 173, 194 (1991).

[34] Id. (emphasis added).

[35] Rosenberger v. Rector and Visitors of Univ. of Va., 515 U.S. 819, 833 (1995) (emphasis added).

[36] Legal Services Corp. v. Velazquez, 531 US 533, 542 (2001).  The Court in Rosenberger noted:

even in the provision of subsidies, the Government may not “ai[m] at the suppression of dangerous ideas,” Regan v. Taxation with Representation of Wash., 461 U.S. 540, 550 (1983), and if a subsidy were “manipulated” to have a “coercive effect,” then relief could be appropriate. See Arkansas Writers’ Project, Inc. v. Ragland, 481 U.S. 221, 237 (1987) (Scalia, J., dissenting); see also Leathers v. Medlock, 499 U.S. 439, 447 (1991) (“[D]ifferential taxation of First Amendment speakers is constitutionally suspect when it threatens to suppress the expression of particular ideas or viewpoints”). In addition…, a more pressing constitutional question would arise if Government funding resulted in the imposition of a disproportionate burden calculated to drive “certain ideas or viewpoints from the marketplace.” Simon & Schuster, Inc. v. Members of N. Y. State Crime Victims Bd., 502 U.S. 105, 116 (1991).

Id. at 587.

[37] 531 U.S. at 542.

[38] Rosenberger v. Rector and Visitors of Univ. of Va., 515 U.S. 819, 833 (1995).  The University’s rule prohibited funding of any group that “primarily promotes or manifests a particular belie[f] in or about a deity or an ultimate reality.”

[39] National Endowment for the Arts v. Finley, 524 U.S. 569, 574 (1998).

[40] 524 U.S. at 583 (quoting R. A. V. v. St. Paul, 505 U.S. 377 (1992) (internal quotations omitted).

[41] Id. at 584 (citing  Board of Ed., Island Trees Union Free School Dist. No. 26 v. Pico, 457 U.S. 853, 871 (1982); see also Bethel School Dist. No. 403 v. Fraser, 478 U.S. 675, 683 (1986)).

[42] Id. at 587.

[43] 515 U.S. 819 (1995).

[44] U.S. v. American Library Association, Inc., 539 U.S. 194 (2003).  See generally Robert Corn-Revere, United States v. American Library Association: A Missed Opportunity for the Supreme Court to Clarify Application of First Amendment Law to Publicly Funded Expressive Institutions, Cato Supreme Court Rev. 105, 2003, www.cato.org/pubs/scr2003/publiclyfunded.pdf.

[45] Id. at 207 (quoting Rosenberger, 515 U.S. at 834).

[46] McChesney & Nichols, supra note 9 at 192, 199.

[47] “If, on the request of an adult user, a librarian will unblock filtered material or disable the Internet software filter without significant delay, there is little to this case.” American Library Association, 539 U.S. at 214 (Kennedy, J. concurring).  Justice Souter agreed that it would ‘‘tak[e] the curse off the statute for all practical purposes’’ if adult patrons could obtain an unblocked Internet terminal ‘‘simply for the asking,’’ but doubted this would actually happen in practice.  Id. at 232.

[48] Cf. Rosenberger, 515 U.S. at 584 (“Educational programs are central to the NEA’s mission.… And it is well established that ‘decency’ is a permissible factor where ‘educational suitability’ motivates its consideration.”).

[49] See www.nakednews.com.

[50] Id. at 205.

[51] See Adam Thierer, Closing the Book on COPA?, Technology Liberation Front, Jan. 21, 2009, http://techliberation.com/2009/01/21/closing-the-book-on-copa/.

[52] Adam Thierer, The Progress & Freedom Foundation, Free Press, Robert McChesney & the “Struggle” for Media, Aug. 10, 2009, http://blog.pff.org/archives/2009/08/free_press_robert_mcchesney_the_struggle_for_media.html

Wrong Way to Reinvent Media Part 3 – Media Vouchers [Thierer & Szoka – PFF] http://d1.scribdassets.com/ScribdViewer.swf

Good to see so many media industry executives expressing skepticism about the idea of government subsidies for the press. Danny Glover brought to my attention this new survey by the Pew Research Center’s Project for Excellence in Journalism in association with the American Society of News Editors (ASNE) and the Radio Television Digital News Association (RTDNA). It revealed that, “Fully 75% of all news executives surveyed—and 88% of newspaper executives—said they had ‘serious reservations,’ or the highest level of concern, about direct subsidies from the government.” A smaller percentage (only 46%) had serious reservations about tax credits for news organizations, then again, only 13% said they “would welcome such funding” and just 6% said they were “enthusiastic” about it.

This is encouraging news as many government officials at the FCC, FTC, and in Congress are currently considering whether government should steps to prop up failing media entities or promote certainly types of content. Berin Szoka and I have been working on a series of essays about the wrong ways to go about reinventing media [see Part 1, Part 2] and plan several more installments leading up to a big filing in the FCC’s “Future of Media” proceeding (the deadline is May 7^th).

Here’s a chart from the Pew survey illustrating funding alternatives and the percentage who had “serious reservations” about each option:

Steve Forbes has an entertaining essay out today about the agenda of Free Press and its founder, the Marxist media scholar Robert McChesney. Forbes notes that McChesney has expressed a great deal of sympathy for the Venezuelan dictator Hugo Chavez and has even defended some of his tactics to control the press. This leads to his fear that McChesney and Free Press will convince the Obama Administration to use similar tactics here in the U.S.:

Once the federal government starts subsidizing our own free press, how long until the feds start revoking broadcast licenses of government opponents and bringing pesky reporters up on charges of say, “corruption” or “subversion”? According to McChesney and the Free Press folks, it apparently can’t happen soon enough.

To be fair, I haven’t heard anyone from Free Press defending Hugo Chavez or his tactics. But I do wonder why the organization continues to associate itself with such a radioactive figure like Mr. McChesney. After all, Forbes isn’t making up anything about McChesney, who is an outspoken, and self-described, Marxist media theorist. McChesney really has expressed sympathy for Chavez and said that, “If [Venezuelan broadcaster] RCTV were broadcasting in the United States, its license would have been revoked years ago. In fact its owners would likely have been tried for criminal offenses, including treason.” Far more troubling are Mr. McChesney’s views regarding how to reform media going forward, which I’ve documented in past essays in more detail. (See, “Free Press, Robert McChesney & the “Struggle” for Media,” “What the Media Reformistas Really Want,” and “Socializing Media in Order to Save It,.”) One need look no further than this lengthy interview with McChesney that appeared in an online newsletter called “The Bullet” produced by the Canada-based “Socialist Project.”

The whole thing is quite troubling to read, but here are a couple of jaw-droppers that make it clear just how radical Mr. McChesney’s worldview and agenda are:

• Media as an instrument of “revolution”: “Instead of waiting for the revolution to happen, we learned that unless you make significant changes in the media, it will be vastly more difficult to have a revolution. While the media is not the single most important issue in the world, it is one of the core issues that any successful Left project needs to integrate into its strategic program.”
• Down with commercial media: “Corporations are not in a position to generate and pay for quality journalism. The news is not a commercial product. It is a public good, necessary for a self-governing society.”
• Down with advertising, which is the engine of private media: “We need to organize against hyper-commercialism. This is an easy-sell for the Left. We understand that advertising is not something done by all people equally, but rather, done by a very small group of people working on behalf of multinational corporations. Advertising is commercial propaganda…  Advertising is the voice of capital. We need to do whatever we can to limit capitalist propaganda, regulate it, minimize it, and perhaps even eliminate it.”
• Down with private communications networks: “What we want to have in the U.S. and in every society is an Internet that is not private property, but a public utility.”
• Kill media capitalism: “the ultimate goal is to get rid of the media capitalists in the phone and cable companies and to divest them from control.”

And there’ more tripe like this to be found in this piece on “Journalism, Democracy,… and Class Struggle” in the socialist journal, Monthly Review:

• “Ultimately, we need to press for the overhaul of the media system, so that it serves democratic values rather than the interests of capital.”
• “Our job is to make media reform part of our broader struggle for democracy, social justice, and, dare we say it, socialism. It is impossible to conceive of a better world with a media system that remains under the thumb of Wall Street and Madison Avenue, under the thumb of the owning class. It is nearly impossible to conceive of the process of getting to a better world without some changes in the media status quo. We have no time to waste.”

But wait, there’s more! This from another Monthly Review essay:

• “The Big Lies protecting the corporate media system [are] that the United States had a free market media system, and that this was the system ordained as the only possible democratic one by the Founders in the Constitution.”
• “any serious effort to reform the media system would have to necessarily be part of a revolutionary program to overthrow the capitalist political economy.”
• “No one thinks any longer that media reform is an issue to solve ‘after the revolution.’ Everyone understands that without media reform, there will be no revolution.”

Now, it would be easy to dismiss McChesney has just another half-crazed, unrepentant radical from the 60’s who is still sore about the Reds losing the Cold War, but the reality is that his thinking is beginning to filter down from the ivory tower and into mainstream politics. He’s now invited to address Federal Trade Commission workshops on “how to save journalism,” and his new book John Nichols, The Death and Life of American Journalism, has even received praise from some in government [at the 10-min mark of this video we hear Susan DeSanti, who is running the FTC’s effort, praising this “excellent book”] despite its call for radical steps to essentially hobble private media and impose crushing taxes on just about everyone in sight to subsidize public, state-blessed media.

Even if Free Press, the group McChesney founded, wisely avoids the radioactive rhetoric McChesney lets slip from his tongue on occasion, the group doesn’t avoid endorsing largely the same policy recommendations that McChesney supports.  I spelled out the current Free Press “media reform” agenda in this piece on, “A ‘Public Option’ for Media? The Free Press Plan to Put Journalists on the Public Dole.” And Berin Szoka and I have just started a new series of essays on “The Wrong Way to Reinvent Media,” in which we will further detail and critique the radical McChesney / Free Press policy agenda. This is leading up to the filing deadline in the FCC’s “Future of Media” proceeding, which is May 7^th.  We plan to file, and I very much look forward to seeing the Free Press filing in that matter to see if they turn up the volume even more or if they scale back the scope of their imperial ambitions.

So stay tuned, the battle for the future of media is really heating up. While I don’t agree with Steve Forbes that we’ll be staring at a Hugo Chavez-like police and propaganda state any time soon — after all, they haven’t repealed the First Amendment yet! — I do believe that what McChesney and Free Press are doing is greasing the skids for a massive infusion of government money and meddling into almost every facet of the American media sector.  Indeed, in many ways, this has been their radical “media reformista” agenda all along. It’s just that they’ve gotten a lot bolder about it, and now they even have some people in government taking them seriously.

[For more information, see my ongoing series: “Should Government Bailout Media, Subsidize the Press & Seek to “Save Journalism”?]

By Adam Thierer & Berin Szoka

As we mentioned yesterday, in a new series of essays, we will be examining proposals being put forward today that would have the government play a greater role in sustaining struggling media enterprises, “saving journalism,” or promoting more “public interest” content. With many traditional media operators struggling, and questions being raised about how journalism in particular will be supported in the future, Washington policymakers are currently considering what role government can and should play in helping media providers reinvent themselves in the face of tumultuous technological change wrought by the Digital Revolution. We will be releasing 6 or 7 essays on this topic leading up to our big filing in the FCC’s “Future of Media” proceeding (deadline is May 7^th).

In the first installment of our series, we will critique an old idea that’s suddenly gained new currency: taxing media devices or distribution systems to fund media content. We argue that such media income redistribution is fundamentally inconsistent with American press traditions, highly problematic under the First Amendment, difficult to implement in a world of media abundance and platform convergence, and likely to cause serious negative side effects.  Bottom line: Don’t tax our iPhones or broadband to subsidize media!

We’ve attached the entire text of the piece below. (Installment #2, on broadcast spectrum taxes to subsidize public media, will be released next week.)

The Wrong Way to Reinvent Media, Part I: Taxes on Consumer Electronics, Mobile Phones & Broadband

by Adam Thierer & Berin Szoka*

PFF Progress on Point 17.1 [PDF]

With many traditional media operators struggling, and questions being raised about how journalism in particular will be supported in the future,[1] Washington policymakers are currently considering what role government can and should play in helping media providers reinvent themselves in the face of tumultuous technological change wrought by the Digital Revolution. For example, the Federal Communications Commission (FCC) recently kicked off a new “Future of Media” effort with a workshop on “Serving the Public Interest in the Digital Era.” Likewise, the Federal Trade Commission (FTC) has hosted two workshops asking “How Will Journalism Survive the Internet Age?”  Meanwhile, the Senate has already held hearings about “the future of journalism,” and Senator Benjamin L. Cardin (D-MD) recently introduced the “Newspaper Revitalization Act,” which would allow newspapers to become tax-exempt non-profits in an effort to help them stay afloat.

In a series of forthcoming essays leading up to the May 7 filing deadline for the FCC’s “Future of Media” proceeding, we will discuss and critique some of the leading proposals being put forward that would have the government play a greater role in sustaining struggling media enterprises, “saving journalism,” or promoting more “public interest” content.

In this essay, we discuss an old idea that‘s gained new currency: taxing media  devices or distribution systems to fund media content. We argue that such media income redistribution is fundamentally inconsistent with American press traditions, highly problematic under the First Amendment, difficult to implement in a world of media abundance and platform convergence, and likely to cause serious negative side effects.

The BBC Model: Taxing Devices

Taxing devices to subsidize media content has never gained much traction here in the U.S., but it’s been used by some foreign governments for many decades.  Most famously, taxes on radios, eventually replaced by taxes on televisions, have sustained the BBC in the U.K. since its inception as the world’s first national broadcasting system in 1922. According to the most recent BBC annual report, the annual “fee” was raised to £142.50/year (currently $213.43) as of April 2009.  Failure to pay the fee is, of course, a crime and punished with stiff fines up to £1000 ($1497.75)—and radio emissions from unlicensed televisions can be detected by government vans that rove Britain’s streets looking for violators.  The revenue generated by the tax is then allocated among various BBC media products, with most of it going to the BBC 1 and BBC 2 television channels.

The U.S. has taken a different approach.  We’ve not embedded a tax in the cost of new media devices to pay for the content delivered over those devices.  (Of course, that’s at least partially because we’ve had a strong tradition of free markets in media ever since we revolted against the Brits and mercantilism, their system of state-directed economic planning!)  Generally speaking, private media operators have been expected to pay their own way in this country and not look to government for direct support.

America has had some indirect subsidies in the form of reduced postal rates for print media, as well as tax treatment for advertising.  And taxpayer dollars have been channeled to the CPB/PBS/NPR regime, of course.  But such public subsidy is small potatoes when compared to private media in the U.S.  For example, the Corporation for Public Broadcasting’s 2010 budget is just $400 million.[2] While many look to CPB to fund children’s programming (among its many other activities), its entire budget is no more than a quarter of the total amount of U.S. advertising revenue produced by children’s programming from food and beverages products alone: $1.6 billion in 2006 by the FTC’s most conservative estimates.[3] That comparison illustrates the vital importance of advertising to media,[4] but subscriptions, direct sales, and private patronage have also been major economic engines of media in United States.

But the idea of more direct government support for media (and journalism, in particular) has always been lurking out there.  There’s long been a small but vociferous crowd of academics and policymakers advocating huge increases in government spending on non-commercial or public media.  And some of them have even toyed with a tax on technology to cross-subsidize the media content that flows over those devices or networks.  Most recently, Robert W. McChesney and John Nichols, authors of the new book The Death and Life of American Journalism, have proposed a 4-part tax plan to raise money ($18-21 billion) for a massive $35 billion/year “public works” program for the press (with the remainder coming from other sources):[5]

• a 5% tax on consumer electronics (they estimate it would bring in $4 billion/year)
• a 3% tax on monthly ISP & cell phone bills (estimated $6 billion/year)
• a 2% sales tax on advertising (estimated $5 to $6 billion/year)
• a 7% tax on broadcasters (estimated $3-6 billion/year)

Similarly, Leonard Downie, Jr., Vice President at Large of The Washington Post, and Michael Schudson, a Professor at the Columbia University Graduate School of Journalism, have advocated the creation of a “Fund for Local News” that “would make grants for advances in local news reporting and innovative ways to support it.”[6] The Fund would make grants to news organizations through “Local News Fund Councils” and would be financed by “fees paid by radio and television licensees, or proceeds from auctions of telecommunications spectrum, or new fees imposed on Internet service providers.”[7] (Note: Proposals to impose fees on radio and television licensees will be discussed in a subsequent installment of this PFF series.  But for purposes of this installment, we reference the Downie & Schudson plan because of its call for fees on ISPs as one method of financing media going forward.)

More Platforms, More Taxes

McChesney and Nichols don’t go into a lot of detail about their tax proposals, but the consumer electronics tax they favor appears to be based on the 1967 Carnegie Commission Report, which called for a 5% tax on all new television purchases—a variant on Britain’s annual licensing fee.  But instead of just taxing “televisions”—which would be very difficult in a world of technological convergence where consumers can “watch television” on any number of devices (PCs, mobile phones, portable gaming devices, portable media players, etc.)—they apparently want to tax all consumer electronic devices.  Thus, they seem to recognize the reality of convergence but their answer is to just tax everything!

The British themselves have struggled with technological change: In 1971, the radio fee first introduced in 1922 was abolished, and in 1972, so was the BBC’s radio monopoly, with commercial radio stations being allowed to compete with BBC Radio for the first time.  One might argue that abolishing the radio tax and relying on a single tax (on televisions) to fund the BBC’s television programming (67% of BBC spending) as well as BBC radio (17%) was simply more efficient—since most consumers had a television as well as a radio.  Indeed, actually implementing any media device tax in the U.S. could prove very difficult, since countering evasion would require imposing sales taxes on online retailers ranging from Amazon.com to TigerDirect.com to countless small operators who sell TVs, DVD players, cell phones, and a wide variety of other gadgets.  So much for the Internet sales tax moratorium!

But the evasion problem is a real one. The BBC estimates an 8.7% evasion rate, and it’s not clear how much more (or less) of a problem evasion might be when the tax is imposed at the point of sale (as McChesney and Nichols propose) rather than every year (as in Britain).  But clearly, the problem can’t be solved simply by trying to tax all consumer electronics:  The higher the tax rate, the more likely a black market will develop for discounted devices—with all the problems that generally come with black markets, such as funding organized crime. Whenever someone proposes a single-digit tax rate for anything, it’s worth remembering that the federal income tax started out at 1-7% back in 1913—and, well, we all know how that turned out!  (Top rates rose to 67-73% during World War I, fell again to the mid-20s under Coolidge, then jumped again to 63% by 1933 and didn’t fall below 50% till 1986!)  Maybe McChesney and Nichols realize how ugly black markets would get if tax rates on devices rise in the future—and perhaps that’s why they’re trying to spread the pain around by taxing broadband and wireless service, advertising and broadcasting, too.  But, as discussed next, that’s another problem with the plan.

Taxation’s Negative Disincentives

Taxes distort markets and human behavior.  Long ago, Chief Justice John Marshall taught us that “the power to tax is the power to destroy.”  As the late Clarence B. Carson noted in an article of the same name:

Any level of taxation will make some undertakings unprofitable or submarginal. In practice, any increase in taxes will drive some people out of business, prevent them from going into business, or make it difficult or impossible for them to sustain themselves by whatever they are doing.[8]

This helps us understand why raising taxes on mobile phones and broadband bills would be particularly foolish way of supporting media:  it will distort beneficial behavior by both providers and consumers of communications conduit.

The FCC just recently reported that cost is a major factor for many households who decide not to buy broadband service (even though it’s available).  Why, after the FCC spent 13 months producing a 376-page, Congressionally mandated National Broadband Report on ways to increase the utilization and affordability of broadband, would we want to do anything to boost broadband bills, even in the name of “saving journalism”?  Increased taxes on broadband bills might discourage some broadband providers from rolling out innovative new services as rapidly as planned.  And once the new service tax is passed along to consumers—as all business taxes inevitably are—they might be less likely to adopt broadband, or might even cancel existing service.  How would that benefit media and journalism?

The same goes for mobile phones. CTIA—The Wireless Association estimates that wireless users already pay an average 15% tax (local state and federal) on their cell phone bills.  Moreover, if there is one thing we can count on, it’s that taxes inevitably rise once they get on the books, whatever the intention of their initial architects.  That‘s especially true when the tax creates a new class of subsidy recipients who have a vested interest in keeping the scheme alive and growing. Thus, what starts out as 3-5% tax on phones, broadband, and consumer electronics, will likely grow to be much higher over time.  Pretty soon the FCC will look like the massively inefficient Department of Agriculture, doling out subsides to everybody and his brother who qualifies for media industry corporate welfare.

How Will the Government Spend Your Money?

But the more interesting question about such a media tax may be on the  payout side of the scheme.  Herein lies a fundamental difference between the BBC model and what McChesney and Nichols are proposing: The BBC fees have always been used to fund BBC content only, not for all media.  True, the BBC once held monopolies in radio and television, but those monopolies died long ago, and when they did, the British did not share fee revenue with the BBC’s competitors.  Instead, commercial radio and television in the UK have had to rely on subscription and advertising revenues, just as in the US.  Thus, the British model does not answer a profoundly difficult question: Even if we assume government could create a reasonably effective media tax collection regime, who would qualify for a cut of the money?

In an age of user-generated content and a wide variety of hybrid media products, it would seem that defining eligibility criteria for the subsidy might be significantly more challenging than it was in the past. Would blogs qualify?  What about live reporting via Twitter or photo-journalism via Flickr?  Who gets to decide what qualifies as news worth subsidizing, as opposed to mere opinions or aggregation?  Similarly, the “Fund for Local News” and “Local News Fund Councils” favored by Downie and Schudson would be doubly problematic.  They propose that, “The criteria for grants should be journalistic quality, local relevance, innovation in news reporting, and the capacity of the news organization, small or big, to carry out the reporting.”[9] But, again, who determines “journalistic quality” and “the capacity… to carry out the reporting” or even what constitutes “local” news?

Beyond such practical problems, determining eligibility raises profound First Amendment questions because, as the Supreme Court has held, “in the realm of private speech or expression, government regulation may not favor one speaker over another.”[10] The Court has also held that “Both tax exemptions and tax deductibility are a form of subsidy that is administered through the tax system.”[11] Thus, the government may not pick preferred classes of speakers for subsidies, just as it may not single out disfavored classes for penalties.  For example, a state university may not selectively deny funding to a gay and lesbian students association, because, as the Eighth Circuit has held:

a public body that chooses to fund speech or expression must do so even-handedly, without discriminating among recipients on the basis of their ideology.  The University need not supply funds to student organizations; but once having decided to do so, it is bound by the First Amendment to act without regard to the content of the ideas being expressed.  This will mean, to use Holmes’s phrase, that the taxpayers will occasionally be obligated to support not only the thought of which they approve, but also the thought that they hate. That is one of the fundamental premises of American law.[12]

And there’s also a First Amendment-related concern here associated with the potentially—if subtly—coercive effects of subsidies on the independent editorial discretion of news-gatherers.  Downie and Schudson insist they “understand the complexity of establishing a workable grant selection system and the need for strict safeguards to shield news organizations from pressure or coercion from state councils or anyone in government.”^[13] Yet they hope political pressure can, somehow, be kept to a minimum.  Likewise, McChesney and Nichols largely dismiss such concerns about undue political influence on subsidized entities—even though they cite several examples of politicians attempting to use the purse strings to influence PBS and NPR funding over the past four decades![14]

Regardless, these scholars fail to account for the fact that, going forward, political pressure would likely grow in proportion to dependence of media entities upon such public subsidy and the overall amount of those subsidies.  After all, we’re talking about taxpayer funding for the press on an unprecedented scale here.  Moreover, the more visible these subsidies become—especially then the funding goes to highly controversial media content or outlets ( e.g., involving pornography, vulgarity, politics, religion, abortion, homosexuality)—the more likely the public and politicians are to clamor for rules on who gets what.  We’ve already seen a microcosm of that concern with National Endowment for the Arts funding for controversial art and culture in the past.  Now imagine media subsidies on the scale that McChesney and Nichols envision coupled with Downie and Schudson’s “Local News Fund Councils” sorting out competing claims and concerns.  Media funding will quickly become a political circus—and another front in the ongoing Culture Wars.

Here’s another concern: Will this scheme lead to more or less media competition?  It would be misguided to argue that such a tax system couldn’t fund some quality journalism and even entertainment.  After all, there’s some wonderful stuff on the BBC.  But without having run the numbers for all countries, there seems to be a correlation between the level of government investment in media and the overall number of media outlets at the public’s disposal.  When visiting Europe, one is struck by how even the largest European countries have so few choices compared to what we have here in the States, and that’s true across media (video, audio, print, online).  Could that be because government spending / investment in media has had a crowding-out effect on private media?  That possibility is at least worth considering as some look to broaden public support for media here in the U.S. Government simply doesn’t have a very good track record of creating innovative, competitive businesses and markets.

How the Death of Private, For-Profit Media Becomes a Self-Fulfilling Prophecy

Which leads to a final concern: There’s just a gut-level discomfort many of us would have with the idea of government imposing even more taxes on us to support industries or interests we might find distasteful or not deserving of corporate welfare.  It’s one thing to say that the government should play a role at the margin funneling some money into public broadcasting efforts via the CPB for limited purposes, but it’s quite another to suggest that this should be the new model upon which all media should rest.  That’s essentially what McChesney and Nichols propose in their book, on the grounds that “the old order is collapsing” and private media is dead.

Of course, it’s virtually a self-fulfilling prophecy that private media operators will fail if you impose a smorgasbord of new tax burdens on them and related devices and distribution channels—and then channel the money to “public media” competitors!  As will be discussed in a future installment in this series of essays, taxing advertising is particularly harmful because those taxes come straight out of the advertising revenues upon which most publishers depend for their lifeblood.

But raising prices of innovative consumer electronics like readers ( e.g., Amazon’s Kindle, Barnes & Noble’s Nook, Sony’s Reader or Apple’s iPad) and the wireless broadband services that connect them isn’t such a bright idea either at a time when traditional publishers are hoping that new media distribution and consumption technologies will also allow them to experiment with new business models (like selling subscriptions for magazines or newspapers tailored for these devices).  Unlike the British annual license fee, a tax imposed at the point of purchase would discourage users from buying new devices.  This, in turn would slow adoption of new technologies and retard innovation in a market that has seen consumers move increasingly towards replacing their old devices every few years, due to the constant increased in processing power and functionality made possible by Moore’s Law.

Taken together, these tax proposals are a sure-fire way to achieve McChesney’s true radical end: the destruction of private, commercial media and journalism.  Let’s not forget, after all, that McChesney has argued (during this interview with the Canadian-based “Socialist Project”) that “the ultimate goal is to get rid of the media capitalists,” and that, “unless you make significant changes in the media, it will be vastly more difficult to have a revolution.”[15] And in his book with Nichols, he concludes by noting that “We have responded in a time of crisis not with tinkering reforms but with revolution.”[16]

Indeed they have!  But such radicalism must be rejected if we hope to sustain a truly free press and uphold America’s proud tradition of keeping a high and tight wall of separation between Press and State.  Americans would do well remember to remember the (other) Golden Rule: “Whoever Has the Gold, Makes the Rules!”[17] The more control politicians have over funding media, the more control they will inevitably have over media itself.

Related PFF Publications

• Testimony at FCC’s Hearing on “Serving the Public Interest in the Digital Era ,” Adam Thierer, March 2010.
• Public Option for Press Should Get the Red Pen, Adam Thierer, The Daily Caller, Jan. 2010.
• Chairman Leibowitz’s Disconnect on Privacy Regulation & the Future of News, Adam Thierer & Berin Szoka, Progress Snapshot 6.1, Jan. 13, 2010.
• Socializing Media in Order to Save It, Adam Thierer, City Journal, March 2009.
• A Manifesto for Media Freedom , Adam Thierer & Brian Anderson, 2008.
• Media Ownership Proceedings, W. Kenneth Ferree, Testimony before the Federal Communications Commission, Nov. 3, 2009.
• Media Myths: Making Sense of the Debate over Media Ownership, Adam Thierer, June 2005.

[1] The Pew Project for Excellence in Journalism reports that: “The numbers for 2009 reveal just how urgent these questions are becoming. Newspapers, including online, saw ad revenue fall 26% during the year, which brings the total loss over the last three years to 43%. Local television ad revenue fell 22% in 2009, triple the decline the year before. Radio also was off 22%. Magazine ad revenue dropped 17%, network TV 8% (and news alone probably more). Online ad revenue over all fell about 5%, and revenue to news sites most likely also fared much worse. Only cable news among the commercial news sectors did not suffer declining revenue last year.” Pew Project For Excellence in Journalism, Introduction, The State of the News Media 2010, March 2010, www.stateofthemedia.org/2010/overview_intro.php.

[2] Corporation for Public Broadcasting, FY 2010 Operating Budget, www.cpb.org/aboutcpb/leadership/board/resolutions/090915_fy10OperatingBudget.pdf.

[3] See FTC’s 2008 report, Marketing Food to Children and Adolescents: A Review of Industry Expenditures, Activities, and Self-Regulation, at ES-1-2, www.ftc.gov/os/2008/07/P064504foodmktingreport.pdf.

[4] Adam Thierer & Berin Szoka, The Progress & Freedom Foundation, The Hidden Benefactor: How Advertising Informs, Educates & Benefits Consumers, PFF Progress Snapshot 6.5, Feb. 2010, www.pff.org/issues-pubs/ps/2010/ps6.5-the-hidden-benefactor.html.

[5] Robert W. McChesney & John Nichols, The Death and Life of American Journalism (2010) at 210-11.

[6] Leonard Downie, Jr. & Michael Schudson, The Reconstruction of American Journalism, Columbia Journalism Review, Oct. 20, 2009, at 92, available at www.scribd.com/doc/21268382/Reconstruction-of-Journalism.

[7] Id.

[8] Clarence B. Carson, The Power to Tax is the Power to Destroy, The Freeman, Vol. 26, No. 10, Oct. 1976, www.thefreemanonline.org/featured/the-power-to-tax-is-the-power-to-destroy.

[9] Downie & Schudson, supra note 6 at. 93.

[10] Rosenberger, 515 U.S. 819, 828 (1995).

[11] Regan v. Taxation with Representation of Washington, 461 U.S. 540, 544 (1983).

[12] Gay & Lesbian Students Assoc, 850 F.2d 361, 362 (8th Cir. 1988).

[13] Id.

[14] McChesney & Nichols, supra note 5 at 193-99.

[15] Socialist Project, Media Capitalism, the State and 21st Century Media Democracy Struggles: An Interview with Robert McChesney, The Bullet, Socialist Project, E-Bulletin No. 246, Aug. 9, 2009, www.socialistproject.ca/bullet/246.php.

[16] Id.

[17] The Big Apple, Golden Rule (“He Who Has the Gold Makes the Rules”), June 13, 2009,  www.barrypopik.com/index.php/new_york_city/entry/golden_rule_he_who_has_the_gold_makes_the_rules.

Wrong Way to Reinvent Media Part 1 – Media Taxes [Thierer & Szoka – PFF] http://d1.scribdassets.com/ScribdViewer.swf

By Adam Thierer & Berin Szoka

In a series of upcoming essays, we will be examining proposals being put forward today that would have the government play a greater role in sustaining struggling media enterprises, “saving journalism,” or promoting more “public interest” content. The reason we’re working up this multi-part series is because, with many traditional media operators struggling, and questions being raised about how journalism in particular will be supported in the future, Washington policymakers are currently considering what role government can and should play in helping media providers reinvent themselves in the face of tumultuous technological change wrought by the Digital Revolution.

For example, the Federal Communications Commission (FCC) recently kicked off a new “Future of Media” effort with a workshop on “Serving the Public Interest in the Digital Era.” (The  filing deadline for the FCC’s “Future of Media” proceeding is May 7^th).  Likewise, the Federal Trade Commission (FTC) has hosted two workshops asking “How Will Journalism Survive the Internet Age?”  Meanwhile, the Senate has already held hearings about “the future of journalism,” and Senator Benjamin L. Cardin (D-MD) recently introduced the “Newspaper Revitalization Act,” which would allow newspapers to become tax-exempt non-profits in an effort to help them stay afloat.

Thus, in light of Washington’s sudden interest in the future of media and journalism, we will be taking a hard look at several issues and proposals that are being floated today, including:

• Taxes on media devices, mobile phones, or broadband bills to channel money to media enterprises / content;
• Taxes / fees on broadcasters to funnel support to their public sector competitors or to public interest programs;
• “News vouchers” or “public interest vouchers” that would encourage citizens to channel support to media providers;
• Taxes on private advertising to subsidize non-commercial / public media content;
• Expanded postal subsidies for media mail; and
• Targeted welfare programs for out-of-work journalists or corporate welfare in the form of bailouts for failing media enterprises.

You won’t be surprised to hear that we are generally quite skeptical of most of these ideas, but we promise to give each one serious consideration.  We’ll kick things off tomorrow with our essay on why taxing media devices or distribution systems to fund media content is not a particularly good idea.

Can we steer people toward hard news — and get them to financially support it — through the use  of “news vouchers” or “public interest vouchers”? That’s the subject of this latest installment in my ongoing series on proposals to have the government play a greater role in the media sector in the name of sustaining struggling enterprises or “saving journalism.”

As I mentioned here previously, last week I testified at the FCC’s first “Future of Media” workshop on “Serving the Public Interest in the Digital Era.” (@3:29 mark of video).  It was a great pleasure to testify alongside the all-star cast there that day, which included the always-provocative Jeff Jarvis of the CUNY Graduate School of Journalism.  He delivered some very entertaining remarks and vociferously pushed back against many of the ideas that others were suggesting about “saving journalism.” Jeff is a very optimistic guy–far more optimistic than me, in fact–about the prospect that new media and citizen journalism will help fill whatever void is left by the death of many traditional media operators and institutions. He had a lively exchange with Srinandan Kasi, Vice President, General Counsel and Secretary of the Associated Press, that is worth watching (somewhere after the 5-hour mark on the video).

Nonetheless, Jarvis is a enough of a realist to know that it has always been difficult to find resources to fund hard news, which he creatively refers to as “broccoli journalism.”  This is what is keeping the FCC, the FTC (workshop today), and many media worrywarts up at night; the fear that as traditional financing mechanisms falter (advertising, classifieds, subscription revenues, etc) many traditional news-gathering efforts and institutions will disappear. Of course, while it is certainly true we are in the midst of a gut-wrenching media revolution with a great deal of creative destruction taking place, it is equally true that exciting new media business models and opportunities are developing. We shouldn’t over look that, as I argued here and here.

Anyway, a lot of different proposals are being put forth by scholars and policymakers to find new ways to finance news-gathering or “save journalism.” One of the ideas that has been gaining some steam as of late is the idea of crafting a “public interest voucher” or what Robert W. McChesney & John Nichols, authors of the new book The Death and Life of American Journalism, call a “Citizenship News Voucher.”  And McChesney discussed this idea in more detail when he spoke at today’s FTC event on saving journalism. The idea is fairly straightforward: Give every American a voucher (McChesney and Nichols propose $200) to donate money to the non-profit news entity of their choice. The assumption is that this would be an efficient and safe way of channeling money to “broccoli journalism” while avoiding the serious concerns that arise when government officials or agencies are the ones steering the subsidies. McChesney and Nichols go so far as to call the notion “a libertarian’s dream” since “people can support whatever political viewpoint they prefer or do nothing at all.”

Before I critique this notion, let me just reiterate that I am sympathetic to the concern here since I began my life with a journalism degree and I’m a true lover of broccoli journalism. I certainly eat my greens when it comes to news. I’m a National Public Radio supporter and have given $10 per month ($120 per year) to my local NPR affiliate for awhile now. That’s more than I spend on almost any other media product with the exception of my almost two-decade subscription to the Wall Street Journal. And I also subscribe to The Washington Post, National Geographic, and a number of other “broccoli journalism” products. (I gave up my Economist subscription several years ago, which was also quite pricey). I make this investment because I personally love hard news and believe these media entities offer the very best of it.

Nonetheless, the “news voucher” proposal has several problems and is going to fail once implemented anyway.

First, McChesney and Nichols want to sell this scheme as “a libertarian’s dream,” but that’s utter rubbish. I don’t know of any libertarian who dreams of sending more money to the federal government only to win back the right to spend it on “qualifying media entities.” And when they say that “people can support whatever political viewpoint they prefer or do nothing at all,” well, last time I checked people were already free to do whatever they want with their money when it comes to media products! Why do we need to send it to Washington first?

And analogies to educational vouchers don’t work because we long ago decided to treat education as a public good and force everyone to pay for it. Vouchers are only sensible when we absolutely have to force people to spend money on public goods; they help make government spending a tad bit more efficient. While McChesney and Nichols claim in their book that the time has come to treat media as such a public good, most people would not agree, since the private provision of media services has worked quite well for some time—being funded by a mix of advertising and subscription revenues for centuries. They claim that era is over but, as I’ll note below and in a future essay about their book, it is their policies that would end private media by taxing and regulating it to death.

Second, what exactly counts as a “qualifying media entity,” and who makes that call? Can just anybody draw support from this program if they claim to be a “media entity”?  Are we going to let people redeem their vouchers on The National Inquirer or People magazine?  How about The Onion?  Or how about blogs like this one! “This is a risk we are more than willing to take,” McChesney & Nichols say since they are “operating on a gut instinct that people will use their vouchers to fund serious media while reaching into their pockets to pay for copies of The National Inquirer at the supermarket checkout.” (p. 205) Of course, it’s always easier to take such risks when you are playing with other people’s money! But they are fools to believe this idea is going to change the face of journalism in any serious way. The majority of people will spend their vouchers on whatever media outlets and content they are currently consuming, which probably isn’t want McChesney & Nichols (or policymakers) would prefer.

This raises a third concern: How long will it be before government starts attaching more strings to the vouchers? To borrow a headline from The Wall Street Journal from earlier this week, how long will it be before the “Economic Policy ‘Nudge’ Gives Way to a Shove?” This “Nudge” notion is popular in DC these days with the Obama crew thanks to Cass Sunstein’s book of the same name (w/Richard Thaler). But, as I’ve said here before, such “nudging” is rife with elitism since some policymakers imagine they can steer the public’s tastes or behavior in more desirable directions through law. The problem is, some people just don’t much like being nudged by officials from afar and they’ll often take steps to evade it. In this context, there is simply no way to get people to consume what you want it in an age of abundance. I talked about this problem at length in my testimony to the FCC last week. You just can’t make people watch, listen, or read if they don’t want to. As Ellen P. Goodman of the Rutgers-Camden School of Law has noted: “Given the proliferation of consumer filtering and choice, these kinds of interventions are of questionable efficacy. Consumers equipped with digital selection and filtering tools are likely to avoid content they do not demand no matter what the regulatory efforts to force exposure.” Moreover, she rightly argues, “regulation cannot, in a liberal democracy, force viewers to consumer media products they do not think they want in the name of the public interest.” Amen, sister.

So, even though, in theory, the news voucher idea lets consumers figure out how to steer the funds, I sincerely doubt that most of those funds will go toward “broccoli journalism” and other civic-minded content. And once people start  redirecting taxpayer dollars to all sorts of silly stuff that the elites and policymakers don’t like, that’s when the nudge will become a shove and more interventions will follow in the form of “voucher guidance and compliance” hearings, rules, etc.  In essence, you can file this all under the “if you build it they will come” theory of public policy. But, in this case, it’s all wishful thinking because you simply can’t force people to spend money (or pay attention) to things they don’t want to.

There’s final problematic caveat to the McChesney-Nichols variant of the news voucher idea: They would disallow any copyright protection or advertising support for an entity who receives voucher funds. That’s an effort by the authors to steer even more media activity away from the commercial sphere and toward “the public option” for the press. Let’s not forget that McChesney has argued (during this interview the Canadian-based “Socialist Project”) that “the ultimate goal is to get rid of the media capitalists,” and that, “unless you make significant changes in the media, it will be vastly more difficult to have a revolution.”  So, it’s important to keep his true intentions in mind when he starts claiming to have found “a libertarian’s dream” of a solution to what ails America’s media sector. [For more details on his intentions, see my essay from last year, “Free Press, Robert McChesney & the “Struggle” for Media.”]

In the meantime, this particular libertarian would like to keep his money and spend it on media as he sees fit, thank you very much!

“We’re from government and we’re here to help save journalism.”

That seems to be the hot new meme in media policy circles these days. Last week, it was the Federal Communications Commission (FCC) kicking off their “Future of Media” effort with a workshop on “Serving the Public Interest in the Digital Era.” This week, it’s the Federal Trade Commission’s (FTC) turn as they host the second in their series of workshops on How Will Journalism Survive the Internet Age? Meanwhile, the Senate has already held hearings about “the future of journalism,” and Senator Benjamin L. Cardin (D-MD) recently introduced the “Newspaper Revitalization Act,” which would allow newspapers to become nonprofit organizations in an effort to help them stay afloat.

I have no doubt that many of the public policymakers behind these efforts have the best of intentions and really are concerned about what many believe to be a crisis in the field of journalism. But here are my three primary concerns with Washington’s sudden interest in “saving journalism”:

1. Policymakers are largely ignoring the role they played in created the current mess, and they won’t likely be willing to undo the damage. I’m speaking mostly of the myriad ownership restrictions and assorted other “public interest” regulations that have strangled many traditional media operators over the years and limited their ability to respond to marketplace changes. I documented these rules and their anti-innovative impacts in my 2005 book, Media Myths: Making Sense of the Debate over Media Ownership. I fear that they now won’t be willing to loosen those chains that continue to bind the media sector. Moreover, it may already be too late for some of those players.
2. Many public officials are largely focused on the problems associated with change and are either ignoring–or, through their interventions could thwart–the opportunities associated with change. No doubt, many media operators are struggling. But it is equally true that exciting new media business models and opportunities are developing. As I pointed out in my recent Newseum debate, while we are in a gut-wrenching evolution with a great deal of creative destruction taking place, we should be careful to not to head off potentially advantageous marketplace developments, if even some are highly disruptive.
3. Increased “assistance” from Washington will likely come with strings attached and raise troubling First Amendment implications. Sen. Cardin’s bill, for example, serves as a good example of what makes me so nervous about Washington’s growing interest in “saving journalism.”  As a condition of any any media entity receiving non-profit tax status, the bill would disallow political endorsements on newspaper editorial pages–which, like campaign finance restrictions, would be a boon for incumbents. That should serve as fair warning to journalists about the sort of strings lawmakers will attach to press-welfare efforts going forward. What else might subsidized media entities have to put up with? Free campaign ads for politicians? Fairness Doctrine or mandatory right of reply for printed editorials? Censorship for “negative” political satire or comics? Moreover, how do we define a “media entity” or “journalist” in terms of how is eligible for support?  Taken together, these considerations raise some rather profound First Amendment questions.

Stay tuned because this debate is just getting started. I suspect that policymakers will significantly step up their interest in the issue as more traditional media entities begin failing. What will be interesting is the extent to which some policymakers begin to embrace the “media reformista” agenda of greater public control that some fringe groups like Free Press favor. I’ve documented their radical agenda here before in my essays:

• A “Public Option” for Media? The Free Press Plan to Put Journalists on the Public Dole
• Free Press, Robert McChesney & the “Struggle” for Media
• What the Media Reformistas Really Want
• Socializing Media in Order to Save It

And I’m currently finishing up the new book by Robert McChesney & John Nichols, The Death and Life of American Journalism, which is a blueprint for how to convert media into wards of the State.  As part of their effort to create a massive “public works” program for the press, they advocate that public subsidies for media be funded by everything from a 5% tax on consumer electronics to a 3% tax on monthly ISP & cell phone bills to taxes on commercial advertising.  Truly frightening stuff. Anyway, I’ll have a complete review done shortly.

Further reading:

• summary of remarks at “Crisis in Journalism” event, by Adam Thierer, Feb. 2010
• Public Option for Press Should Get the Red Pen, by Adam Thierer, The Daily Caller, Jan. 2010
• A “Public Option” for Media? The Free Press Plan to Put Journalists on the Public Dole, by Adam Thierer, Nov. 2009
• Free Press, Robert McChesney & the “Struggle” for Media, by Adam Thierer, Aug. 2009
• What the Media Reformistas Really Want, by Adam Thierer, Aug. 2008
• Socializing Media in Order to Save It, by Adam Thierer, City Journal, March 2009
• Obama Should Just Say No To Newspaper Bailouts, Adam Thierer, Sept. 2009
• The Dangers of Government-Subsidized News, by Adam Thierer, Oct. 2009
• A Bailout For The First Amendment?, by Wayne Crews, Aug. 2009
• testimony at FCC’s Hearing on “Serving the Public Interest in the Digital Era”, by Adam Thierer, March 2010
• A Manifesto for Media Freedom, by Adam Thierer and Brian Anderson, 2008
• Chairman Leibowitz’s Disconnect on Privacy Regulation & the Future of News, by Adam Thierer & Berin Szoka, Progress Snapshot 6.1, January 13, 2010
• Media Ownership Proceedings, by W. Kenneth Ferree, Testimony before the Federal Communications Commission, November 3, 2009
• Media Myths: Making Sense of the Debate over Media Ownership, by Adam Thierer, June 2005

Just a reminder about tomorrow’s Georgetown Center for Business and Public Policy event on, “The Crisis in Journalism: What Should the Government Do?” It will be held at 9:30am tomorrow at the Newseum (Knight Conference Center) located at 555 Pennsylvania Ave here in Washington, DC. Breakfast will be served. (You can RSVP please by emailing: cbpp@msb.edustrong>cbpp@msb.edu</strong).  Here’s the event description:

This roundtable discussion will bring together academics, government officials and industry leaders to consider the future of the journalism industry. Specifically, what does a future economic model for the journalism industry look like? What is the role of new media in modern journalism? How can news papers integrate web-based news into their business models? How can government entities, particularly the Federal Trade Commission and the Federal Communications Commission, help to form a sustainable 21st century model for journalism in the United States?

Mark MacCarthy of Georgetown Univ. will moderate the panel, which includes:

• Steven Waldman, senior advisor to FCC Chairman Julius Genachowski, who is heading up the FCC’s new effort on “The Future of Media and the Information Needs of Communities in a Digital Age.
• Susan DeSanti, Director of Policy Planning at the Federal Trade Commission. (The FTC has also been investigating whether journalism will survive the Internet age and what government should do about it.)
• Andy Schwartzman of the Media Access Project;
• me!

Hope you can make it. Below I’ve listed a few things I’ll be drawing from for my remarks tomorrow:

• Adam Thierer – A “Public Option” for Media? The Free Press Plan to Put Journalists on the Public Dole
• Adam Thierer – Chairman Leibowitz’s Disconnect on Privacy Regulation & the Future of News
• Adam Thierer – The Dangers of Subsidized News, Continued
• Adam Thierer – Public Option for Press Should Get the Red Pen
• Adam Thierer – Free Press, Robert McChesney & the “Struggle” for Media
• Ken Ferree – Another Naïve Proposal for Government Entanglement with the Fourth Estate
• Ken Ferree –  A Chill Wind Blows

I was just reading this interesting Broadcasting & Cable interview with Steven Waldman, senior advisor to FCC Chairman Julius Genachowski, who is heading up the FCC’s new effort on “The Future of Media and the Information Needs of Communities in a Digital Age.” The FCC’s Future of Media website says that “The goal of this project: to help ensure that all Americans have access to vibrant, diverse sources of news and information that will enable them to enrich their families, communities and democracy.” In the interview with B&C, Waldman promises that “we are not in the business of providing bailouts or encouraging bailouts to particular companies or industries,”and that “we can absolutely, definitively say that we have no plans to take over the media, and we have no plans to reinstitute the fairness doctrine while I am at it.” I’m certainly glad to hear that. As I’ve pointed out here many times before (1, 2, 3, 4), the prospect of greater government involvement in the news business raises profoundly troubling implications for an independent press and the First Amendment.

Anyway, I’ll be debating these issues with Mr. Waldman and others next week at this Georgetown Center for Business and Public Policy event on, “The Crisis in Journalism: What Should the Government Do?”  It will be held on Wednesday, February 17, 2010 at 9:30am at the Newseum (Knight Conference Center) located at 555 Pennsylvania Ave here in Washington, DC.  Breakfast will be served. (You can RSVP please by emailing: cbpp@msb.edustrong>cbpp@msb.edu</strong)  Here’s the event description:

This round table discussion will bring together academics, government officials and industry leaders to consider the future of the journalism industry. Specifically, what does a future economic model for the journalism industry look like? What is the role of new media in modern journalism? How can news papers integrate web-based news into their business models? How can government entities, particularly the Federal Trade Commission and the Federal Communications Commission, help to form a sustainable 21st century model for journalism in the United States.

Mark MacCarthy of Georgetown Univ. will moderate the panel, which includes me, Steve Waldman, Andy Schwartzman of the Media Access Project, and Susan DeSanti, Director of Policy Planning at the Federal Trade Commission.  (The FTC has also been investigating whether journalism will survive the Internet age and what government should do about it.)

I testified this morning in the House Energy and Commerce Committee’s Subcommittee on Communications, Technology, and the Internet at a hearing titled, “An Examination of the Proposed Combination of Comcast and NBC Universal.” Among those testifying were Comcast Chairman and CEO Brian L. Roberts, and NBC Universal President and CEO Jeff Zucker.  Down below I have attached my brief remarks (we only had 5 minutes), but see the Scribd doc at the very bottom to also see the embedded charts. I also wrote a paper about the proposed deal back in December entitled, “A Brief History of Media Merger Hysteria: From AOL-Time Warner to Comcast-NBC” as well as this editorial for Forbes.

____________

Mr. Chairman and members of the Committee, thank you for inviting me here today. My name is Adam Thierer and I am the President of The Progress & Freedom Foundation (PFF).

Although we are still early in this process, there has already been a great deal of hand-wringing and even some dire predictions about the pending merger of Comcast and NBC Universal. I hope to put this proposed marriage in some historical context and explain why the deal certainly won’t have the detrimental impact some critics fear, and also explain why it might even be one potential model for how to sustain traditional media going forward.

Beware Media Merger Hysteria

First, let’s remember that we’ve been here before. Paranoid predictions of a media apocalypse have accompanied the announcements of many previous media mergers, from AOL-Time Warner to News Corp.-DirecTV to XM-Sirius.[i] In these cases and almost all others, however, the “sky is falling” claims proved to be greatly overstated.[ii] The only “harm” that one could reasonably claim came from those mergers was not to consumers or content providers, but to the merging firms themselves and their shareholders. That’s because many mergers simply fail to create the sort of synergies and benefits originally hoped for and consequently die of natural causes over time.

Other firms, however, have found ways to make deals work and deliver important new services that previously were unimaginable or simply too expensive to offer alone.[iii] Regardless, the point here is that we’ll never know what works unless we permit marketplace experimentation with new and innovative business models.

“Gatekeeper” Myths: Why Restricting Content Options is Economic Suicide

Second, the fear that Comcast-NBCU will act as a “gatekeeper” over video content is also largely overblown—especially in light of the preemptive concessions they have already made on program access and carriage. But it’s important to realize that the merger will only marginally affect vertical integration in the cable marketplace. Currently, the percentage of cable channels owned by video distributors is in the single digits, and even after this merger it will only be in the teens.[iv] (See Exhibit 1) Stated differently, the vast majority of cable channels will be independent of Comcast-NBCU control.

More importantly, it’s hard to believe the new firm would restrict its content to just Comcast-owned distribution networks since they would be losing the eyeballs, advertisers, and revenues that would accompany the carriage of their content on other video platforms. Likewise, it would make little sense for the firm to block new or competing channels on their own platform since they would incur the wrath of the programmers and the viewing public alike. And those channels will likely quickly find a home elsewhere, which could incentivize subscribers to switch video service providers. (See Exhibits 2-6)

Indeed, the great thing about the modern media marketplace is that there is always another place for consumers to turn to find what they want. Comcast faces increasingly robust competition in the video programming marketplace from satellite and telco providers, as well as from Internet-based video providers.^[v] (See Exhibit 7) And NBC Universal’s stable of programming, while impressive, is a mere trickle in an ocean of content that consumers can choose from.^[vi]

Meanwhile, many consumers are increasingly “cutting the cable cord” altogether and instead getting the video they want from a bewildering array of online video services.[vii] Netflix, Hulu, Joost, Roku, Apple, the Sony PlayStation Store, the Microsoft Xbox store, and others offer traditional TV fare while sites like YouTube, Vimeo and Justin.TV offer a mix of professional and amateur content.

In sum, there has never been so much competition for our eyes and ears, and audiences and advertising dollars have become increasingly fragmented as a result.[viii] (See Exhibits 8-10)

What Future for Broadcasting & Local News in Turbulent Times?

Finally, we need to realize that the ongoing digital revolution is upending many traditional media business models—especially advertising supported over-the-air broadcasting—and that alliances like Comcast-NBCU may be one blueprint for how traditional media operators can evolve and compete going forward.  With both the FCC and FTC currently investigating whether journalism is in trouble and what it might take to “save the news,” many media economists and industry analysts seem to agree that at least some degree of consolidation or collaboration might be necessary.

Consider last week’s news that NBC Universal saw quarterly profits plunge by a whopping 30% in the fourth quarter of 2009.[ix] This is indicative of the general downturn the entire media sector has been experiencing as of late.  Why not then let Comcast help NBCU try to get back on track rather than force them to make it on their own in a radically uncertain future?  And it goes without saying that Comcast might be better positioned to protect NBC Universal’s copyrighted content from digital piracy, at least over its own pipes.

Those who are concerned about the future of broadcasting and local news should remember that news—and local broadcast news in particular—isn’t cheap. Unless we want to embark on a massive government subsidization scheme to bailout traditional media providers, Congress and regulatory officials must be willing to grant private media operators the flexibility to restructure their business affairs so they can continue to provide important public needs while also turning a profit.[x] That can’t happen unless we allow media markets to evolve and let operators experiment with new business models and ownership structures.[xi] Although there are no guarantees, creator/distributor alliances like Comcast-NBCU may be one model that helps firms create, extend, and then also monetize their media content.  But, again, regulatory flexibility is crucial so we can figure out what works and what doesn’t.

Thank you again for inviting me here to testify.

[ii] Adam Thierer, A Media Morality Play, Forbes, Dec. 15, 2009, www.forbes.com/2009/12/14/media-merger-antitrust-opinions-contributors-adam-thierer.html

[iii] A good example: Disney’s seamless and successful integration of ABC Television Group (ABC + Disney cable properties), Walt Disney Studios, the Walt Disney Internet Group, its many ESPN properties, and its parks and resorts.

[iv] 2006 is the last for which the FCC has made data available, but as of that time the overall number of national programming networks available in America stood at 565 channels. That is up from just 70 channels in 1990, an astonishing increase in program choices.  The FCC noted that, “Of the 565 networks, 84 (14.9 percent) were vertically integrated, or affiliated, with at least one cable operator.” Federal Communications Commission, FCC Adopts 13^th Annual Report to Congress on Video Competition and Notice of Inquiry for the 14^thAnnual Report, Nov. 27, 2007, at 4, http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-278454A1.pdf What that summary fails to mention, however, is that vertical integration has fallen steadily since the FCC’s first Annual Video Competition Report was issued, when over 50 percent of all channels were affiliated with a cable operator. Indeed, the video marketplace exhibits less vertical integration than ever before. As far as vertically integrated industries go, no impartial observer would conclude that this industry is being controlled by “gatekeeper,” pay TV platforms, as some critics suggest. Most new pay TV channels today are independently owned and offer an unprecedented diversity of programming options. This trend is a strong sign of how healthy and vibrantly competitive this marketplace is today. Finally, these numbers do not take into account the split between Time Warner Entertainment and Time Warner Cable, which represented a significant portion of the 15% of vertically owned channels before 2006. That is the percentage of cable channels owned by video distributors is in the single digits today.

[v] Adam Thierer, The Progress & Freedom Foundation, Video Competition in a Digital Age, Testimony before the Subcommittee on Communications, Technology and the Internet, U.S. House Committee on Energy and Commerce, Oct. 22, 2009, www.pff.org/issues-pubs/testimony/2009/10-22-09-thierer-testimony-video-competition-digital-age.pdf

[vi] Adam Thierer, The Media Cornucopia, City Journal, Vol. 17, No. 2, Spring 2007, at 84-89, www.city-journal.org/html/17_2_media.html

[vii] See generally The Progress & Freedom Foundation, “Cutting the Video Cord,” PFF Blog Ongoing Series, http://blog.pff.org/archives/ongoing_series/cutting_the_video_cord/

[viii] Adam Thierer and Grant Eskelsen, The Progress & Freedom Foundation, Media Metrics: The True State of the Modern Media Marketplace, PFF Special Report, Summer 2008), www.pff.org/mediametrics

[ix] David B. Wilkerson, NBC Quarterly Profit Plunges 30%, MarketWatch, Jan. 22, 2010.

[x] W. Kenneth Ferree, The Progress & Freedom Foundation, Another Naïve Proposal for Government Entanglement with the Fourth Estate, PFF Blog, Feb. 1, 2010, http://blog.pff.org/archives/2010/02/another_naive_proposal_for_government_entanglement.html;  Adam Thierer, Socializing Media in Order to Save It, City Journal, March 27, 2009, www.city-journal.org/2009/eon0327at.html; Adam Thierer, The Progress & Freedom Foundation, Public Option for Press Should Get the Red Pen, Progress Snapshot 6.4, Jan. 25, 2010, www.pff.org/issues-pubs/ps/2010/ps6.4-OP-ED-for-Daily-Caller-A-Public-Option-for-the-Press.html

[xi] W. Kenneth Ferree, The Progress & Freedom Foundation, Media Ownership Proceedings, Testimony before the Federal Communications Commission, Nov. 3, 2009, www.pff.org/issues-pubs/testimony/2009/11-03-09-ferree-media-ownership-testimony.pdf; Adam Thierer, Media Myths: Making Sense of the Debate over Media Ownership (The Progress & Freedom Foundation, 2005), www.pff.org/issues-pubs/books/050610mediamyths.pdf

Testimony of Adam Thierer – House Hearing about Comcast-NBC Merger 2-4-10 http://d1.scribdassets.com/ScribdViewer.swf

The Annenberg School at the University of Southern California recently released a paper by Geoffrey Cowan and David Westphal entitled, “Public Policy and Funding the News.” In it, Cowan and Westphal join the growing chorus of voices advocating a substantial role of government in propping up struggling media entities or investing in news production going forward.

I can’t say that I disagree with everything in the report, especially the contention that many traditional news-gathering institutions face serious challenges to their survival. But as I have noted here before, there are three big problems with recommendations to greatly expand the role of government in the media sector or journalistic profession as a solution:

1. While public media & subsidies may have a role, that role should be tightly limited and focused on filling specific niches or unfilled needs within certain communities. Public subsidies should not be viewed as a replacement for traditional private media sources. Moreover, public subsidies will not begin to make up the shortfall from traditional private funding source, unless we plan on having Congress spend hundreds of billions of dollars (like the radical regulatory advocates at Free Press advocates) to subsidize news.
2. If we do end up taking that path, it will raise profound fairness questions since it will leave taxpayers footing the bill for things they might not want or could find objectionable, even offensive. (Conservatives wouldn’t like funding Bill Moyers, and liberals wouldn’t be too keen on supporting Rush Limbaugh).
3. Any plan to have government step up its role in supporting journalism will raise profound questions about press independence and threaten core First Amendment values. Putting journalists on the public dole is a serious threat to the integrity of the profession.

My PFF colleague Ken Ferree echoes many of these concerns in an essay today about the Annenberg report. (“Another Naïve Proposal for Government Entanglement with the Fourth Estate.”) I think Ken’s concerns about the First Amendment issues at stake here are worth quoting extensively. Ken argues:

I question the underlying assumption that the government has any role — at all — in enhancing or protecting the news media. The authors of the report take that role for granted, but it strikes me as fundamentally inconsistent with the First Amendment freedoms. The framers of our founding document were well aware of the dangers of government entanglement with the press. At the time of the country’s founding, there were about three-dozen newspapers in all of the colonies. Those publications were, for the most part, highly commercial and extremely partisan. The founders did not, however, craft a basic law that would allow for regulation to increase “fairness” or enhance diversity of viewpoints, or to change the way the papers were packaged or sold. Instead they came up with the elegantly simple: “Congress shall make no law . . . abridging the freedom of speech, or of the press. . . .” As Justice Black famously said, “no law means no law.” Congress and our elected officials may sincerely believe that a healthy media is essential to a democratic state, but the Constitution expressly carves the areas speech and press out of the sphere of appropriate government action. A truly free press must be truly free of the government’s tentacles.

Indeed, any attempt to socialize media in order to save it won’t likely work and in the process it will create a grave risk to private media, free speech, and vibrant democratic exchange.

Additional Reading:

• A “Public Option” for Media? The Free Press Plan to Put Journalists on the Public Dole
• The Dangers of Government-Subsidized News
• Public Option for Press Should Get the Red Pen
• Shall We Save Media by Socializing It?

by Adam Thierer & Berin Szoka, Progress Snaphot 6.1

Stephanie Clifford of the  New York Times posted a very interesting article this week summarizing a recent “on-the-record chat” the Times staff had with Federal Trade Commission (FTC) chairman Jon Leibowitz and FTC Bureau of Consumer Protection chief David Vladeck.  The interview [discussed by Braden here] is profoundly important in that it reveals an alarming disconnect regarding the relationship between “privacy” regulation and the future of media, which were the subjects of their discussion with Times staff.  Namely, Leibowitz and Vladeck apparently fail to appreciate how the delicate balance between commercial advertising and journalism is at risk precisely because of the sort of regulations they apparently are ready to adopt.  Because the value of online advertising depends on data about its effectiveness and consumers’ likely interests, and because advertising is indispensable to funding media, what’s ultimately at stake here is nothing short of the future of press freedom.

The “Day of Reckoning” Is Upon Us

Leibowitz and Vladeck spend the first half of The Times interview wringing their hands about “privacy policies,” the declarations made by websites and advertising networks about their data collection and use practices (for which the FTC can and must hold them accountable).  But the two feel that privacy policies don’t adequately inform consumers.  Chairman Leibowitz claims that online companies “haven’t given consumers effective notice, so they can make effective choices.”  And Mr. Vladeck states that advise-and-consent models “depended on the fiction that people were meaningfully giving consent.” But he and the FTC seem ready to abandon the notice and choice model because the “literature is clear” that few people read privacy policies, Vladeck told the Times.  He and Leibowitz continue:

“Philosophically, we wonder if we’re moving to a post-disclosure era and what that would look like,” Mr. Vladeck said. “What’s the substitute for it?” He said the commission was still looking into the issue, but it hoped to have an answer by June or July, when it plans to publish a report on the subject. Mr. Leibowitz gave a hint as to what might be included: “I have a sense, and it’s still amorphous, that we might head toward opt-in,” Mr. Leibowitz said.

This clearly foreshadows the regulatory endgame we have long suspected was coming.  When the FTC released its “Self-Regulatory Principles for Online Behavioral Advertising” eleven months ago, we asked: “What’s the Harm & Where Are We Heading?”  Their answers to both questions have become clearer with each new calculated comment—all apparently intended to slowly “turn up the heat” on the advertising industry so that the proverbial frog will stay in the pot until the water finally boils.  Leibowitz’s FTC has simply dodged the “harm” question with a four-part strategy:

1. Cobble together a “record” full of sympathy-evoking anecdotes submitted by advocates of regulation in comments and the FTC’s ongoing “Exploring Privacy” Roundtables;
2. Let the most extreme Chicken Littles fulminate about the grand conspiracy of “neuromarketing manipulation” and the like (and sometimes even shout down FTC staff in panel discussions) in order to redefine the “reasonable center” of the debate;
3. Define-down “harm” as purely a matter of “consumer expectations” or consumers’ “dignity interests” (whatever that vague and infinitely elastic term means); and
4. Attack the effectiveness of “consent” itself by suggesting that consumers cannot be trusted to understand privacy policies or be expected to make any effort to protect their own privacy.

Conveniently, this strategy leads right back to the “day of reckoning” Chairman Leibowitz threatened was coming last February: We are heading precisely where he told us we would be—to full-on, opt-in regulation.  The writing on the wall becomes more apparent every day: Leibowitz set out to bring online advertising to heel even before becoming Chairman, and his Commission is reprising almost precisely the same approach that led to the passage of the Children’s Online Privacy Protection Act (COPPA) of 1998: building a case for new authority, dismissing industry self-regulation as ineffective, and finally presenting a report to Congress intended to produce a rapid legislative response.  After the FTC presented its report on the need for regulation in congressional testimony in June 1998, it took Congress just four months to pass COPPA—and much of that time was consumed by the summer recess.  In short, Leibowitz is mounting a carefully choreographed campaign for increased regulation.

The only real question is whether Leibowitz will somehow try to use the FTC’s existing authority over “unfair or deceptive” trade practices or wait for expanded authority from Congress.  While most observers typically assume that such expanded authority would come in the form of a privacy-specific bill—be it a broad “baseline” privacy bill or one specifically focused on online data collection for advertising purposes—the authority Leibowitz yearns for could just as easily come in the form of increased rulemaking authority as part of a broader bill that allows the FTC to preemptively regulate practices that are not deceptive but merely deemed “unfair.”

This would take the agency “ Back to the Future”—to the late 1970s, when the agency reached the height of its efforts to regulate purely on “unfairness” grounds by trying to ban advertising to children.  The agency’s behavior earned it the moniker “National Nanny” from the Washington Post, hardly a bastion of regulatory skepticism.[1] That outpouring of popular resentment caused a heavily Democratic Congress to cut-off the Democratic-led agency’s regular funding and prohibit it from regulating advertising merely on the grounds of “unfairness.”  In essence, they told the agency to “go back to its knitting” and focus on protecting consumers from demonstrated harms.^[2] Duly chastened (and actually shut down for several days), the FTC formulated a meaningful legal standard for “unfairness,” which Congress codified in 1994: for a practice to be unfair, the injury it causes must be (1) substantial, (2) without offsetting benefits, and (3) one that consumers cannot reasonably avoid.

Under this statutory standard, as FTC Commissioner Thomas Rosch has argued, the commission must carefully consider:

[the] legitimate pro-consumer and pro-competitive benefits that result from [targeted advertising]. Absent hard data weighing these benefits against the limited “invasion of privacy interests” involved, it would seem difficult to conclude that treating that practice as an actionable violation of the “unfairness” prong of Section 5 will pass muster.[3]

So Leibowitz and Vladeck either need to get serious about weighing the costs and benefits of targeted advertising—or, in the absence of such actually measuring these trade-offs, get Congress to give them the authority to regulate.  But one thing is clear from their past statements: they are in a hurry to do  something. As Vladeck told The Times last August, “There is a sense of urgency around here… Consumers, I don’t think are sufficiently protected under the current regime.”  Apparently, the case is closed in their minds.

“Left Hand, Meet Right Hand”

The second half of the  Times interview concerns the future of news. Chairman Leibowitz is not optimistic:

“There are some areas where you clearly see positive creative destruction,” Mr. Leibowitz said, giving the example of travel agents who were replaced by Orbitz and other online-booking systems. The news, he said, was not one of those. “When you’re dealing with something as critical as news is to a democracy, you need to ensure, certainly, that it’s independent, but also that it’s vibrant going forward,” he said. Areas like investigative reporting, foreign and domestic bureaus, and state-house reporting, he said, would likely falter under blog operations because of “economies of scale.”

He said he wasn’t sure what the solution was, but threw out a few ideas discussed at the conference: maybe special tax treatment for newspapers, a Corporation for Public Broadcasting-like fund, or for the newspaper industry to charge fees for the re-use of its content, similar to the model that the American Society of Composers, Authors and Publishers uses. [emphasis added]

Mr. Chairman, with all due respect, haven’t you forgotten about the solution that has powered private media for a few centuries in this country?  You know— advertising!  Indeed, what’s stunning about these comments is the complete disconnect with what Leibowitz and Vladeck said earlier in the interview.  It certainly may be the case that they said more on the subject than what The Times has reported, but given their escalating rhetoric, it seems likely that significantly increased FTC regulation is on the horizon.  And, yet, as Chairman Leibowitz marches us into this brave new world of regulating Internet media through their key funding source, he and Mr. Vladeck seem to have little appreciation of the vital role played by advertising in sustaining a truly free and vibrant press.

An Attack on Advertising Is an Attack on Media Itself

Let’s step back and revisit Media Economics 101.  Almost every serious scholar in the field acknowledges this truism: Advertising cross-subsidizes media platforms and the creation of valuable information—especially news.  “Advertising is the mother’s milk of all the mass media,”  Wall Street Journal technology columnist Walt Mossberg has noted.  Similarly, Harold L. Vogel, author of Entertainment Industry Economics, the leading text in the field, has noted, “Advertising is the key common ingredient in the tactics and strategies of all entertainment and media company business models.  Indeed, it might further be said that advertising has substantively subsidized the production and delivery of news and entertainment throughout the last century.”[4] Mossberg agrees and notes, “Without ads, most editorial products and other programming would be either unavailable or prohibitively expensive.”

The reason for the indispensability of advertising is simple: Information (including news and other forms of “content”) has “public good” characteristics that make it is very difficult (and occasionally impossible) for information-publishers to recoup their investments.  Simply put, they quite literally lack pricing power: Whatever they charge, someone else will charge less for a close substitute, inevitably leading to “free” distribution of the content, even though the content is anything but free to produce.  Advertising is the one business model that has traditionally saved the day by rewarding publishers for attracting the attention of an audience.

Which raises another under-appreciated point: Private advertising promotes press independence.  “Newspapers, magazines, radio, television, and many websites all receive their primary income from advertising,” notes William F. Arens, author of  Contemporary Advertising, another leading textbook in the field. “This facilitates freedom of the press and promotes more complete information” he concludes.[5] Why?  Because, contrary to what some critics claim, advertising and marketing help keep private media providers independent of the need for taxpayer subsidies or private patrons.  This begs an even more profound question: If not advertising, then what else?

A “Public Option” for the Press?

What’s most troubling about Chairman Leibowitz’s comments to the Times is that he has apparently found his alternative to advertising: a “public option” for the press! He mentions special tax treatment for newspapers or a new CPB-like fund (don’t we already have one?) as two possibilities.  That certainly will be music to the ears of radical, pro-regulatory activist groups like the ironically-named “Free Press,” which wants to see a massive “public works” program for the media sector.

Free Press recently filed comments with the FTC in the agency’s recent workshop, “Can Journalism Survive the Internet Age?” and proposed a far-reaching industrial policy for “saving the news.”  They call for over $50 billion in subsidies for the Corporation for Public Broadcasting and other bureaucracies, a “journalism jobs program” for that would be part of AmeriCorps, a variety of new tax incentives for struggling media operations or individuals who support favored institutions, and an assortment of government incentives to encourage local ownership and media divestiture (by handing over control to smaller operators or minority-owned groups).  Ironically, “Free Press” has also floated the concept of “a small tax on advertising” as one way to pay for a press bailout.

The organization’s founder Robert W. McChesney, the prolific neo-Marxist media scholar, penned an essay with John Nichols of The Nation last year, claiming that saving journalism essentially requires that media become an appendage of the State.  Although advertising has supported journalism as a “public good” for centuries, the only way they can conceive to provide a public good is to socialize its means of production.  Thus, journalism, like education and national defense, requires constant government oversight and support: “A moment has arrived at which we must recognize the need to invest tax dollars to create and maintain news gathering, reporting and writing with the purpose of informing all our citizens.”  They ask us to consider the $60 billion in government spending they propose as a “free press ‘infrastructure project,’” which would “keep the press system alive.”

Some in Congress seem willing to listen.  The Senate has already held hearings about the future of journalism.  And Senator Benjamin L. Cardin (D-MD) recently introduced what he has called the “Newspaper Revitalization Act,” which would allow newspapers to become nonprofit organizations in an effort to help them stay afloat.  Importantly, however, the bill would also disallow political endorsements on newspaper editorial pages—which, like campaign finance restrictions, would be a boon for incumbent politicians.  That bill should serve as fair warning to journalists about the sort of strings lawmakers will attach to press-welfare efforts going forward.  What other “golden shackles” might come with media subsidies?

To be clear, Chairman Leibowitz hasn’t called for a complete press takeover along the lines of the Free Press plan.  Yet, he hasn’t answered a key question in this debate: Who pays for news?  He appears ready to endorse a bold new regulatory scheme for the Internet and online media that, in the name of “protecting privacy” would put at risk the one traditionally successful method of supporting private media operations—advertising.  As the Pew Research Center’s Project for Excellence in Journalism noted in its latest State of the News Media report, “The problem facing American journalism is not fundamentally an audience problem or a credibility problem.  It is a revenue problem—the decoupling… of advertising from news.”  There’s probably no way policymakers can stop this process, nor should they try.  But they shouldn’t be creating new obstacles to the survival of traditional media creators, either.

Unfortunately, that’s exactly what Chairman Leibowitz’s new regulatory scheme would do.  The revenue “delta” between “smart” advertising (tailored to consumers’ likely interests and measured for effectiveness in producing clicks, purchases, etc.) and “dumb advertising” (based purely on surrounding keywords or demographics of users presumed to visit the site) is difficult to measure but potentially enormous—even 10 times as great for some sites.[6] The difference between opt-in and opt-out could be nearly as dramatic, because it’s difficult to get consumers to opt-in for anything, especially for small players—which means that opt-in regulation could, perversely, force consolidation in the online advertising and content markets.  If the FTC cares about its statutory responsibility to safeguard competition, they should take this dynamic seriously and be hyper-cautious about heavy-handed mandates that could derail smarter advertising.

Finally, to be fair, in his interview, the Chairman also suggests the newspaper industry might want to find new way “to charge fees for the re-use of its content.”  We’re certainly not opposed to the notion and think that, if it could somehow be made to work (especially by removing antitrust obstacles), it could part of a diverse revenue mix for digital journalism.  But, there’s the rub.  Micropayments inevitably face the problem of “mental transaction costs”  that likely swamp the perceived value of most content and, like pay-walls, have generally worked only in media environments characterized by a scarcity of providers and a uniqueness of a sufficiently valuable product.  These cold, hard economic realities are why advertising remains indispensable.

The Principled Alternative to Regulation

Convinced that privacy policies simply don’t work, Leibowitz and Vladeck are asking what a “post-disclosure era” would look like.  We appreciate the continued sensitivities expressed by certain groups and individuals about online privacy and data use more generally.  But there is another way forward.  We have proposed the following “5-E” layered approach to concerns about online privacy, focusing on restraining government access to data as a clear harm, rather than crippling the private sector uses of data that directly benefit consumers:

1. Erect a higher “Wall of Separation between Web and State” by increasing Americans’ protection from government access to their personal data—thus bringing the Fourth Amendment into the Digital Age.
2. Educate users about privacy risks and data management in general as well as specific practices and policies for safer computing.
3. Empower users to implement their privacy preferences in specific contexts as easily as possible.
4. Enhance self-regulation by industry sectors and companies to integrate with user education and empowerment.
5. Enforce existing laws against unfair and deceptive trade practices as well as state privacy tort laws.

Such a layered approach would not only be a “less restrictive” alternative to top-down, one-size-fits-all government regulation, but also potentially more effective in key respects than government data use/collection mandates.  In an ideal world, adults would be fully empowered to tailor privacy decisions, like speech decisions, to their own values and preferences (“household standards”).  Consumers would have (1) the information necessary to make informed decisions and (2) the tools and methods necessary to act upon that information. Importantly, those tools and methods would give them the ability to block the things they don’t like—annoying ads or the collection of data about them, as well as objectionable content—while also helping them find the information and content they desire.

But of course, the devil’s in the details.  Leibowitz and Vladeck would set the bar so high as to what constitutes “effective” consumer choice that current privacy policies necessarily fail their test—if only because most users don’t care enough to make the “right” privacy choices.  Privacy policies, even if read by relatively few consumers, nonetheless allow privacy advocates, journalists and watchdog-bloggers to scrutinize what companies say they’re doing—promises to which the FTC should hold companies stringently.  That’s clearly not good enough for Leibowitz and Vladeck, who want to give up on “notice and choice” and move on to “opt-in” mandates.  But why not first try to make “notice” more effective?  The advertising industry is currently developing standardized interfaces that could communicate key information about privacy practices in a single icon, label or other easily-digested “consumer touch point.”

More radically, why focus on tinkering with consumer interfaces, when standardized data disclosure formats like the Protocol for Privacy Preferences (P3P) could distill legalistic privacy policies into “machine-readable” code?  Such disclosures could provide a powerful form of “notice” that the ordinary consumer could “use”: simply setting their own privacy preferences in a browser tool that automatically implements those preferences by blocking tracking that users object to.  Such a privacy disclosure format could also allow the FTC to automate enforcement of its existing authority to punish unfair or deceptive trade practices.

Conclusion

And so we return to the question the FTC asked in its recent workshop, “Can Journalism Survive the Internet Age?”  Answer: Not if the FTC kills the golden goose that lays the golden eggs through onerous advertising regulations and data controls in the name of “privacy.”  Chairman Leibowitz and Bureau Chief Vladeck shouldn’t foreclose the possibility that advertising can play a central role in the future of a free press in the Digital Age—just as it has done historically in the United States.  Indeed, they would be wise to remember that advertising has always been with us.  As the Supreme Court noted in its 1996 decision, 44 Liquormart, Inc. v. Rhode Island.

Advertising has been a part of our culture throughout our history. Even in colonial days, the public relied on “commercial speech” for vital information about the market. Early newspapers displayed advertisements for goods and services on their front pages, and town criers called out prices in public squares. Indeed, commercial messages played such a central role in public life prior to the founding that Benjamin Franklin authored his early defense of a free press in support of his decision to print, of all things, an advertisement for voyages to Barbados.[7]

Of course, for advertising to continue to play the role as sustainer of the press, it must be allowed to evolve.  Media operators—large and small alike—must be allowed to craft new strategies, some of which may require data collection and marketing practices that will make some privacy-sensitive users uncomfortable, but will also ensure that the goose keeps on laying golden eggs for them and everyone else.

While Chairman Leibowitz may decry the creative destruction at work in the news sector and information industries today, that shakeup will continue and, no doubt, be painful for incumbent players.  Advertising alone may not “save the day” for media as it has in the past, but it will likely remain essential to sustaining private media platforms and providers going forward— if federal policymakers allow it.  The alternative—massive government intervention into the news and media sectors—is too horrifying to think about.

[1] Washington Post, March 1, 1978.

[2] Congress terminated the FTC’s efforts to prohibit advertising to children, and barred the agency from issuing any advertising regulation predicated solely on unfairness for three years.  FTC Improvements Act, Pub. L. No. 96-252, § 11 (May 1980).  See generally J. Howard Beales, Director of the Bureau of Consumer Protection, Federal Trade Commission, The FTC’s Use of Unfairness Authority: Its Rise, Fall, and Resurrection, www.ftc.gov/speeches/beales/unfair0603.shtm.

[3] Thomas Rosch, Some Reflections on the Future of the Internet: Net Neutrality, Online Behavioral Advertising, and Health Information Technology, Remarks at U.S. Chamber of Commerce Telecommunications & E-Commerce Committee Fall Meeting, October 26, 2009, 13, www.ftc.gov/speeches/rosch/091026chamber.pdf.

[4] Harold L. Vogel, Entertainment Industry Economics (Cambridge, MA: Cambridge University Press, 7th Edition, 2007), at 46.

[5] William F. Arens, Contemporary Advertising (McGraw-Hill Irwin, 10^th Ed., 2006) at 50.

[6] See Berin Szoka & Mark Adams, The Benefits of Online Advertising & Costs of Privacy Regulation, PFF Working Paper, Nov. 8, 2009, www.scribd.com/doc/22445754/Benefits-of-Online-Advertising-Paper.

[7] 517 U.S. 484, 495 (1996), http://www.law.cornell.edu/supct/html/94-1140.ZO.html

______________________________

Related PFF Publications

• Privacy Trade-Offs: How Further Regulation Could Diminish Consumer Choice, Raise Prices, Quash Digital Innovation & Curtail Free Speech, Berin Szoka, Comments to the Federal Trade Commission “Exploring Privacy” Roundtable, November 10, 2009.
• Online Advertising & User Privacy: Principles to Guide the Debate, Berin Szoka & Adam Thierer, Progress Snapshot 4.19, Sept. 2008.
• Targeted Online Advertising: What’s the Harm & Where Are We Heading?, Berin Szoka & Adam Thierer, Progress on Point 16.2, April 2009.
• Privacy Polls v. Real-World Trade-Offs, Berin Szoka, Progress Snapshot 5.10, Oct. 2009.
• The Benefits of Online Advertising & Costs of Privacy Regulation, Berin Szoka & Mark Adams, PFF Working Paper, Nov. 8, 2009.
• Benefits of Online Advertising, Berin Szoka, Mark Adams, Howard Beales, Thomas Lenard & Jules Polonetsky, PFF Capitol Briefing, July 2009.
• Public Option for Press Should Get the Red Pen, Adam Thierer, The Daily Caller, Jan. 12, 2010.

. . . says Libby Jacobson of CEI, writing in the Washington Examiner.

Free Press, the radical pro-regulatory media activist group, recently filed comments with the Federal Trade Commission (FTC) for the agency’s upcoming workshop on “How Will Journalism Survive the Internet Age?”  The Free Press comments provide an enlightening glimpse into the mind of how many on the Left now think about media policy in America.  Their approach can be summarized as follows:

1. Nothing the private sector can do will save journalism (unless it is entirely non-profit / non-commercial in nature);
2. Even if there was something that private players could do to save journalism, Free Press would likely have federal authorities forbid it anyway (especially if it involved new business ownership patterns or combinations); and,
3. The only thing that can really save journalism is a “public option” for the press in the form of massive state subsidization of media in this country.

To elaborate on the last point, here’s how Free Press summarizes what they are looking for:

For U.S. public media to become a truly world-class system will require a substantial increase in funding. This could be accomplished by an increase in direct congressional appropriations to the Corporation for Public Broadcasting. With increased funding — to as little as $5 per person, increasing annual appropriations to some $1.5 billion — the American public media system could dramatically increase its capacity, reach, diversity and relevance.

But they stress that a simple expansion of the PBS/NPR/CPB non-commercial model will not be enough since that system is “vulnerable to repeated threats of funding cuts” and too “reliant on corporate backing, via the underwriting process.” They want to go well beyond non-commercial media, therefore, and have the state start building a massive public media infrastructure.  Here’s where their pitch for a public option for the press comes in:

A better and more durable solution would be to create and fund a public trust, seeded with a large endowment and operated by the Corporation for Public Broadcasting or other NGO. The money for such a trust could be provided directly through an act of Congress or perhaps by placing a small tax on advertising. We estimate that a trust fund would require $50 billion to create sufficient revenue. If that figure seems high, consider that since last year, more than $173 billion in tax money has been sunk into just one corporation, AIG. Given that Congress just passed a nearly trillion-dollar economic recovery package, $50 billion for public media seems like a smart investment.

Basically, because everybody else is on the public dole these days–including undeserving Wall Street idiots–that justifies putting media operators and journalist on the dole, too.  Some pretty twisted logic there.  But the Free Press plan doesn’t end with public bailouts for media. A welfare system for journalists is next on the list:

Another form of government investment that could help spark new competition in the news ecosystem is the creation of research and development fund for journalistic innovation and experimentation. We need to think about the new media marketplace as an incubator for innovation. Just as government invests in medical research to heal the ails of the body, we need government to invest in experimentation with news models to heal the democratic ails of the body politic. We should explore the creation of a government-seeded innovation fund for journalism — a taxpayer-supported venture capital firm that invests in new business models. As a starting point, we are proposing a $50 million per year budget. This new venture capital firm could be set up as a public-private partnership, with federal matching funds for foundation-supported projects, or designed to provide guaranteed loans at low or no interest to start-up initiatives.

But wait, there’s more!  Free Press also wants:

• “a journalism jobs program to support veteran, qualified reporters and simultaneously to engage young people in journalism” that would be part of AmeriCorps.
• special tax status for journalism institutions along the lines of Sen. Ben Cardin‘s “Newspaper Revitalization Act,” which “would offer tax benefits to philanthropic groups and individuals that donate to newspapers, while providing the newspapers themselves with the tax benefits enjoyed by all tax-exempt organizations.” [Somehow Free Press fails to mention how that bill would also forbid political editorializing by those organizations as a condition of the deal!  So much for a “free press.”]
• a collection of government incentives to encourage local ownership and media divestiture: They explain… “The idea is to create, via changes to the federal tax and bankruptcy laws, a number of targeted ‘sweeteners’ that could be invoked — alone or in combination — when media properties are being put up for sale that would make new owners or ownership structures… more attractive than traditional corporate ownership models.” … “Newspaper owners might be more inclined to sell to socially motivated parties if the government offered certain subsidies or other incentives to facilitate the transactions. Perhaps the IRS could guarantee nonprofits a reduced buyout rate. In addition, government-guaranteed loans and bidding credits could be offered to nonprofits to help them purchase failing news organizations.”  A “minority media tax credit” is also proposed.

No word on how much more those programs and proposals add to the $50 billion price tag. Nor do they ever get around to explaining exactly how we’ll pay for it all, but I suppose bumping Rupert Murdoch’s marginal tax rate up to 99% would probably be where they’ll start.  The rest of us will be expected to pay our “fair share” eventually. There is, however, that one brief mention of “a small tax on advertising” as a way to pay for some of their plans.  Isn’t that just lovely.  I guess it shouldn’t be surprising that the one traditionally successful method of supporting private media operations would be the first thing Free Press would look to tax! After all, if you’re really out to destroy private media, it’s not enough to subsidize a public press option… no, you have to force the private players to pay into the scheme, too, thereby subsidizing their own competition!   You gotta hand it to these Free Press people; when they set out on a seek-and-destroy mission, they know how to get the job done.

Taken in the aggregate, the Free Press proposal reads like a Soviet-style 5-year plan for the media sector. [Hey, why not appoint another White House “czar” to oversee it all!]  In practice, such a public option for media raises many troubling questions.  The prospect of a large swath of the American media sector being treated as a publicly funded ward of the State isn’t just a small leak in the important wall between Press and State, it is the end of that wall.  It would dynamite that wall to the ground. It could potentially open the door to a fundamental corruption of the journalistic profession by public officials who would not likely be able to resist the urge to pressure those who are subservient to the State.  As such, the plan is an affront to our traditional First Amendment values and the importance of press independence in particular. And it is an affront to the taxpayers who would be stuck paying for a lot of journalism that they may not even want, like, or see.  As I noted in a previous essay, you can file all of this under the general theme: “Socializing Media in Order to Save It.”

But hey, it’s a new era, baby!  So get ready to pay your fair share to “save journalism” because Free Press and their founder Robert McChesney appear ready to make good on their promise to socialize all media and make it everybody’s collective responsibility via their public option for the press.

It won’t be easy, you’ll think it strange, when Libby Jacobsen tries to explain how traditional journalism still wants your money after all that it hasn’t done.

On the OpenMarket blog, she critiques a report released Monday calling for the traditional journalism industry to be propped up various ways. And she does so with gusto:

Outrageously, [former Washington Post editor Leonard Downie, Jr.] also wants to put telecoms on the hook for bailing out reporting, suggesting that the FCC collect fees from internet service providers to be used for a national “Fund for Local News.” He’s blind to the fact that telecoms and ISPs have done nothing but help disseminate news and information. There is more reporting, more information, more news available to us today than there ever has been in the history of civilization. It’s true that there’s a lot of garbage out there, but there’s a lot of very good online journalism as well. Nearly everything published online is subject to peer-review from a massive amount of people, and the success of sites like Wikipedia are proof that accountability, credibility, and accuracy matter just as much online as they do offline.

Have I said too much? There’s nothing more I can think of to say to you. But all you have to do is look at Libby’s post to know that every word is true.

(Just one thing, Libby. What happens when a bad pun ruins a perfectly good blog post?)

Deposuit potentes de sede, et exaltavit humiles; [The Lord] hath put down the mighty from their seats [of power] and raised up the lowly. – “Magnificat” The Internet continues to humble the mighty in journalism. We hear a lot about the humbling of news outlets like the New York Times, but little about the humbling of news-makers. While the media reformistas would have us believe that dark, shadowy forces control what we hear, see and read, the reality is that it’s becoming increasingly impossible for even the world’s largest companies to “manage” stories because we live in an age of true media abundance. There’s no better sign of this than the fact that Michael Arrington has declared, with good reason, the “news embargo” dead. In the days of media scarcity (which the reformistas like Andrew Keen want to re-create), press releases often declared a story to be “embargoed” until a specific day and time, allowing companies to shape the story by planting releases with the “right” journalists ahead of time. Such embargoes have been breaking down for some time, but now, with the explosion of media abundance, even Google no longer has “the clout to force press to stick to embargoes.” It’s not my favorite recording but this clip of Bach’s “Magnificat” (BWV 243) should sear into your brain the irrepressibility of the Internet as the greatest leveling force since the invention of the printing press. The two are not unrelated: Bach’s Lutheranism was made possible only by the ready availability of the printed word.