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).

I’ve spent a lot of time here through the years trying to identify the factors that fuel moral panics and “technopanics.” (Here’s a compendium of the dozens of essays I’ve written here on this topic.) I brought all this thinking together in a big law review article (“Technopanics, Threat Inflation, and the Danger of an Information Technology Precautionary Principle”) and then also in my new booklet, “Permissionless Innovation: The Continuing Case for Comprehensive Technological Freedom.”

One factor I identify as contributing to panics is the fact that “bad news sells.” As I noted in the book, “Many media outlets and sensationalist authors sometimes use fear-based tactics to gain influence or sell books. Fear mongering and prophecies of doom are always effective media tactics; alarmism helps break through all the noise and get heard.”

In line with that, I want to highly recommend you check out this excellent new oped by John Stossel of Fox Business Network on “Good News vs. ‘Pessimism Porn‘.”  Stossel correctly notes that “the media win by selling pessimism porn.” He says:

Are you worried about the future? It’s hard not to be. If you watch the news, you mostly see violence, disasters, danger. Some in my business call it “fear porn” or “pessimism porn.” People like the stuff; it makes them feel alive and informed. Of course, it’s our job to tell you about problems. If a plane crashes — or disappears — that’s news. The fact that millions of planes arrive safely is a miracle, but it’s not news. So we soak in disasters — and warnings about the next one: bird flu, global warming, potential terrorism. I won Emmys hyping risks but stopped winning them when I wised up and started reporting on the overhyping of risks. My colleagues didn’t like that as much.

He continues on to note how, even though all the data clearly proves that humanity’s lot is improving, the press relentlessly push the “pessimism porn.” He argues that “time and again, humanity survived doomsday. Not just survived, we flourish.” But that doesn’t stop the doomsayers from predicting that the sky is always set to fall. In particular, the press knows they can easily gin up more readers and viewers by amping up the fear-mongering and featuring loonies who will be all too happy to play the roles of pessimism porn stars. Of course, plenty of academics, activists, non-profit organizations and even companies are all too eager to contribute to this gloom-and-doom game since they benefit from the exposure or money it generates.

The problem with all this, of course, is that it perpetuates societal fears and distrust. It also sometimes leads to misguided policies based on hypothetical worst-case thinking. As I argue in my new book, which Stossel was kind enough to cite in his essay, if we spend all our time living in constant fear of worst-case scenarios—and premising public policy upon them—it means that best-case scenarios will never come about.

Facts, not fear, should guide our thinking about the future.

______________________

Related Reading:

• Journalists, Technopanics & the Risk Response Continuum (July 15, 2012)
• How & Why the Press Sometimes “Sells Digital Fear” (April 8, 2012)
• danah boyd’s “Culture of Fear” Talk (March 26, 2012)
• Prophecies of Doom & the Politics of Fear in Cybersecurity Debates (Aug. 8., 2011)
• Cybersecurity Threat Inflation Watch: Blood-Sucking Weapons! (March 22, 2012)

My most recent Forbes column is entitled, “We All Hate Advertising, But We Can’t Live Without It.” It’s my attempt to briefly (a) defend the role advertising has traditionally played in sustaining news, entertainment, and online service, and (b) discuss some possible alternatives to advertising that could be tapped if advertising starts failing us a media cross-subsidy.

What got me thinking about this issue again was the controversy over satellite video operator DISH Network offering its customers a new “Auto Hop” capability for its Hopper whole-home HD DVR system. Auto Hop will give viewers the ability to automatically skip over commercials for most recorded prime time programs shown on ABC, CBS, FOX and NBC when viewed the day after airing. It makes the viewing experience feel like the ultimate free lunch. Alas, something still must pay the bills. As innovative as that technology is, we can be certain that it will not make content consumption cost-free. We’ll just pay the price in some other way. The same is true for online services since it’s never been easier to use technology to block ads.

So, what is going to pay the bills for content as ad-skipping becomes increasingly automated and effortless? Stated differently, what are the other possible methods of picking up the tab for content creation? Here’s a rough taxonomy:

I.     CHARGES

A.     Direct Fees (Periodic billing / Pay-per-view)

B.    Indirect Charges (Tiers / Bundles / Package pricing)

II.     ADVERTISING

A.    General / Mass market ads (Billboards / Banner ads / Pop-up online ads)

B.     Targeted ads (Directed pitch)

C.     Integrated (Product placement / Payola)

D.     Sponsorship / Underwriting

III.     PHILANTHROPIC

A.     Individual  (ex: Arts & opera funding)

B.     Foundational (ex: Knight Foundation)

C.     Governmental  (ex: CPB / BBC model)

IV.     INTERNAL CROSS-SUBSIDY  (Profitable division subsidizes unprofitable / “loss leader” strategies)

There are probably other ways of subsidizing content creation, but those are the primary methods. I have no idea what combination of strategies will sustain content going forward, but I think advertising is likely to play a diminished role in the mix as it becomes increasingly easy for us to filter it out of the mix. But the content creators will just shift costs elsewhere and raise the prices for programming through direct and indirect pricing techniques. Do you like HBO’s pricing model? Pay-per-view? Paywalls? Well, it doesn’t make a difference whether you do or not because you’ll likely be seeing a lot more of those models in your life in coming years if advertising fades as a subsidization method.

Alternatively, as I also note in my Forbes piece, “we could see a lot more Texaco Star Theaters in our future, with major companies essentially owning specific shows or networks.” Such program sponsorship and content underwriting has always been with it, but it could really explode as a cross-subsidy method if traditional advertising starts failing. “But it will be challenging for every show or website to find its own corporate benefactor, and it will also raise issues about undue influence and bias,” I note in my essay.

I hope no one seriously believes that philanthropic models can fill the gaps. Even if we saw a significant uptick in voluntary charitable giving or even taxpayer support for the arts and media, there’s no way in hell it will possibly begin to cover the the bill for what advertising support covers today.

In the end, I can’t help but think how great we’ve had it when it comes to advertising. As I also noted in my essay, advertising has been “the great subsidizer of the press, entertainment, and online services” historically and benefited us tremendously even if we haven’t appreciated that fact. “It’s possible that no single industry — not newspapers nor search engines nor anything else — has done as much to advance the storehouse of accessible human knowledge in the 20th century as advertisers,” argues Washington Post columnist Ezra Klein. Klein is exactly right, yet it doesn’t really make a difference how important advertising has been to us if we fail to appreciate that fact and increasingly take steps to exclude it from our lives.

As that becomes easier and easier to accomplish, we shouldn’t bitch and whine when the bills (literally) come due for the content we all desire. As always, there is no free lunch. We’ll pay the price one way or another.

Additional Reading:

• my recent Charleston Law Review article on “Advertising, Commercial Speech & First Amendment Parity”
• Ezra Klein on the Importance of Advertising to Media
• The Hidden Benefactor: How Advertising Informs, Educates & Benefits Consumers
• There is No Free Lunch! No Advertising, No Media
• PFF’s Mega-Filing in the FCC’s “Future of Media” Proceeding

Yesterday on TechCrunch, Josh Constine posted an interesting essay about how some in the press were “Selling Digital Fear” on the privacy front. His specific target was The Wall Street Journal, which has been running an ongoing investigation of online privacy issues with a particular focus on online apps. Much of the reporting in their “What They Know” series has been valuable in that it has helped shine light on some data collection practices and privacy concerns that deserve more scrutiny. But as Constine notes, sometimes the articles in the WSJ series lack sufficient context, fail to discuss trade-offs, or do not identify any concrete harm or risk to users. In other words, some of it is just simple fear-mongering. Constine argues:

Reality has yet to stop media outlets from yelling about privacy, and because the WSJ writers were on assignment, they wrote the “Selling You On Facebook” hit piece despite thin findings. These kind of articles can make mainstream users so worried about the worst-case scenario of what could happen to their data, they don’t see the value they get in exchange for it. “Selling You On Facebook” does bring up the important topic of how apps can utilize personal data granted to them by their users, but it overstates the risks. Yes, the business models of Facebook and the apps on its platform depend on your personal information, but so do the services they provide. That means each user needs to decide what information to grant to who, and Facebook has spent years making the terms of this value exchange as clear as possible.

“While sensationalizing the dangers of online privacy sure drives page views and ad revenue,” Constine also noted, “it also impedes innovation and harms the business of honest software developers.” These trade-offs are important because, to the extent policymakers get more interested in pursing privacy regulations based on these fears, they could force higher prices or less innovation upon us with very little benefit in exchange.

Of course, the press generating hypothetical fears or greatly inflating dangers is nothing new. We have seen it happen many times in the past and it can be seen at work in many other fields today (online child safety is a good example). In my recent 80-page paper on “Technopanics, Threat Inflation, and the Danger of an Information Technology Precautionary Principle,” I discussed how and why the press and other players inflate threats and sell fear. Here’s a passage from my paper:

“The most obvious reason that doomsday fears get disproportionate public attention is that bad news is newsworthy, and frightening forecasts cause people to sit up and take notice,” Julian Simon astutely observed in 1996.[1] That is equally true today.[2] Many media outlets and sensationalist authors sometimes use fear-based rhetorical devices to gain influence or sell books. “Opportunists will take advantage of this fear for personal and institutional gain,” notes University of Colorado Law School professor Paul Ohm.[3] Fear mongering and prophecies of doom have always been with us, since they represent easy ways to attract attention and get heard. “Pessimism has always been big box office,” notes [Matt] Ridley.[4] This is even more true in the midst of the modern information age cacophony. Breaking through all the noise is hard when competition for our eyes and ears is so intense. It should not be surprising, therefore, that sensationalism and alarmism are used as media differentiation tactics. This is particularly true as it relates to kids and online safety.[5] “Unbalanced headlines and confusion have contributed to the climate of anxiety that surrounds public discourse on children’s use of new technology,” argues Professor Sonia Livingstone of the London School Economics. “Panic and fear often drown out evidence.”[6] Sadly, most of us are eager listeners and lap up bad news, even when it is overhyped, exaggerated, or misreported. [Michael] Shermer notes that psychologists have identified this phenomenon as “negativity bias,” or “the tendency to pay closer attention and give more weight to negative events, beliefs, and information than to positive.”[7] Negativity bias, which is closely related to the phenomenon of “pessimistic bias” …  is frequently on display in debates over online child safety, digital privacy, and cybersecurity.

[UPDATE: 2/14/2013: As noted here, this paper was published by the Minnesota Journal of Law, Science & Technology in their Winter 2013 edition. Please refer to that post for more details and cite this final version of the paper going forward.]

I’m pleased to report that the Mercatus Center at George Mason University has just released my huge new white paper, “Technopanics, Threat Inflation, and the Danger of an Information Technology Precautionary Principle.” I’ve been working on this paper for a long time and look forward to finding it a home in a law journal some time soon.  Here’s the summary of this 80-page paper:

Fear is an extremely powerful motivating force, especially in public policy debates where it is used in an attempt to sway opinion or bolster the case for action. Often, this action involves preemptive regulation based on false assumptions and evidence. Such fears are frequently on display in the Internet policy arena and take the form of full-blown “technopanic,” or real-world manifestations of this illogical fear. While it’s true that cyberspace has its fair share of troublemakers, there is no evidence that the Internet is leading to greater problems for society. This paper considers the structure of fear appeal arguments in technology policy debates and then outlines how those arguments can be deconstructed and refuted in both cultural and economic contexts. Several examples of fear appeal arguments are offered with a particular focus on online child safety, digital privacy, and cybersecurity. The  various  factors  contributing  to  “fear  cycles”  in these policy areas are documented. To the extent that these concerns are valid, they are best addressed by ongoing societal learning, experimentation, resiliency, and coping strategies rather than by regulation. If steps must be taken to address these concerns, education and empowerment-based solutions represent superior approaches to dealing with them compared to a precautionary principle approach, which would limit beneficial learning opportunities and retard technological progress.

The complete paper can be found on the Mercatus site here, on SSRN, or on Scribd.  I’ve also embedded it below in a Scribd reader.

Technopanics and Threat Inflation [Adam Thierer – Mercatus Center]

I am so gonna retweet this.

What a delight it has been to watch the rescue of the Chilean miners on a live feed, without commentary from any plasticized, blathering “news reporter.” Of course, there are editorial judgments being made by the camera crews and on-scene director, but it is refreshing to make my own judgments based on what I see happening and what I see on the faces of the miners, their wives, and standers-by.

As my friend, the curmudgeonly @derekahunter notes, “There’s really nothing worse than listening to a reporter attempting to fill time while waiting for something to happen.”

Meanwhile, I’ve been chasing down some intemperate commentary on Twitter about the recent discovery of explosives in a New York cemetery. One Fred Burton, identified on his Twitter feed as Vice President of Intelligence for STRATFOR and a former counter-terrorism agent, Tweeted at the time that these explosives seemed like “a classic dead drop intended for an operative.”

But now we know the explosives are old, they were dug up and laid aside in May or June of 2009, and someone recently found them and decided to report them. That is not consistent with a dead drop, and Burton was wrong to speculate as he did, starting an Internet rumor that needlessly propagates fear.

As a public service, I’m doing a little bit to cut into Burton’s credibility, which should cause him to think twice next time. The winning Tweet is not mine, though. It’s @badbanana’s: “Military-grade explosives found at NYC cemetery. Hundreds confirmed dead.”

In summary, it’s a do-it-yourself news and commentary night. I’m making my world and re-making yours (just a tiny bit), rather than all of us sitting around being fed what to think.

“There’s no question [cable news is] contributing to the splintering of the political system and the means by which people get information about that system,” said Robert Thompson, who runs the Bleier Center for Television and Popular Culture at Syracuse University. “If there’s no standard base line of fact and reporting, where can the conversation go?”

This, from “Cable News Chatter is Changing the Electoral Landscape,” by Howard Kurtz and Karen Tumulty in today’s Washington Post.

Cable news and, of course, the Internet are definitely splintering the media environment. But there’s a big difference between the political system and the means by which people get information about it. Why on earth should there be a standard base line on which all political conversation must rest?

Speaking of earth, people used to think that the earth was at the center of the universe. Other planets moved erratically with relation to ours, and that was difficult to explain. Now we know that it is the sun at the center of our solar system, and the movements of planets, stars, and galaxies have been rationalized.

Many of us occupy different political and ideological planets, some of which have similar orbits, some very different. Slowly, sometimes, we can align our orbits by inquiring and debating about the nature of humankind, what is good, and the social systems that produce the greatest good for the greatest number.

Finding out that we should have these debates is not a threat to the political system. It’s a threat to the geocentric model of the political system, in which the three major networks provided the “standard base line of fact and reporting.”

The media universe is still not splintered enough, in my opinion. But, increasingly, the conversation will more easily go wherever it is supposed to go, unhindered by the false authority of a small number of news executives.

Wall Street Journal columnist Holman Jenkins has a terrific, wide-ranging interview with Google CEO Eric Schmidt in today’s paper that is well worth reading. One thing worth highlighting is Schmidt’s comments on the “economic disaster that is the American newspaper.”  He argues that, “The only way the problem [of insufficient revenue for news gathering] is going to be solved is by increasing monetization, and the only way I know of to increase monetization is through targeted ads.”

Absolutely correct. It’s a point that Berin Szoka, Ken Ferree and I tried to make in PFF’s mega-filing in the FCC’s “Future of Media” proceeding in early May, and Berin and I stressed it in even more detail in our piece on”Chairman Leibowitz’s Disconnect on Privacy Regulation & the Future of News.” The key takeaway: If Washington goes to war against advertising — and targeted advertising in particular — then there will be no future for private news. As we stated there:

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.

Thus an attack on advertising is an attack on media / news itself. And yet Washington is currently engaged in an all-out assault on advertising, marketing, and data collection efforts / business models.

Incidentally, Google recently submitted comments with the Federal Trade Commission in reaction to its Staff Discussion Draft about the future of journalism and laid out their views on many of these issues. More importantly, as summarized on pg. 30 (of the pdf) of this Newspaper Association of America filing to the FTC, Google has proposed an interesting monetization model that utilizes Google Search, Google Checkout and DoubleClick ad server, “to build a premium content system for newspapers.”  Worth checking out.  Kudos to Google for taking these steps and to Schmidt for again stressing the importance of targeted advertising for the future of media.

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

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)

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

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!

Ken Ferree, former chief of the FCC’s media bureau and PFF’s recently retired president (now Board member), has penned another devastatingly witty piece slamming the FCC’s recently announced inquiry into “the future of media and information needs of communities in a digital age” as something that,

should make the stomachs of civil libertarians everywhere queasy. Of course the Public Notice of the inquiry is dressed up in all of the usual public interest language. The Commission purports to be interested in protecting good journalism, promoting a diversity of information sources, and expanding the opportunities for a vibrant debate of public issues. We have no reason to doubt the sincerity of those representations, or of the FCC’s claim that it will consider First Amendment concerns first and foremost as the inquiry proceeds. The problem is that the very act of initiating such an inquiry will chill protected speech; government inquiry into what is and is not working in the area of news, information, and media is itself an affront to the First Amendment. And it is no answer that the Commission has embarked on this journey with beneficent motives, it has no power to derogate from the protections of the First Amendment in the name of what one group of bureaucrats may think are important government interests. Can there be any doubt but that any category of speakers that are even indirectly regulated by the FCC will be mindful of this new inquiry and will curb the nature of their conduct and communications in light of it? What great potential for mischief the FCC has spawned merely by initiating this little inquiry! Regulation by “raised eyebrow” has become a well-established tool for a number of federal agencies, including the FCC, but with this inquiry the Commission has taken the concept to a level heretofore unknown – this inquiry is regulation by penetrating leer.

The rest of the piece is well worth reading. But of course, the FCC will continue on their merry way anyway presuming neither their their complete lack of jurisdiction nor the First Amendment prevents them from “merely asking questions”—as with asked open-ended questions about things like cloud computing, online privacy (a slightly different matter) and online content controls that don’t come anywhere near the agency’s jurisdiction. Adam and I will be filing comments on the “Empowering Parents” inquiry questioning this “questioning.”

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

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.

We’ve talked here before about the dangers of a government-subsidized press as a way of “saving journalism.” But I don’t think I’ve ever read anything quite as eloquent on the issue as Seth Lipsky’s editorial in today’s Wall Street Journal entitled “All the News That’s Fit to Subsidize.”  Mr. Lipsky is a member of the adjunct faculty at the Columbia Journalism School. In his essay today, he warns of the very real slippery slope associated with proposal to have government step in and somehow bailout newspapers as they find themselves in a time of crisis.Specifically, Mr. Lipsky addressees a new report (“The Reconstruction of American Journalism“) by Leonard Downie (former executive editor of the Washington Post) and co-author Michael Schudson (also of Columbia Journalism School), in which the authors call for a mixture of legal and regulatory changes as well as government subsidies to help prop up failing news operations.

Mr. Lipsky argues that they have “stepped onto an exceptionally slippery slope”:

I take no comfort from the analogy the authors of this report draw with government funding for the arts. In New York City, there came a time when the leaders the voters entrusted with their tax money concluded that what was being done with it in the arts was so abhorrent they tried to stop it. This happened in 1999, when Mayor Rudy Giuliani confronted the Brooklyn Museum over its display of a depiction of the Madonna that had been splattered with elephant dung. A federal court wouldn’t let the city stop funding the museum. […] Even if one could get around this sort of thing, I’ve come to the view that the real protection of press freedom is in the idea of private property. Press freedom in Soviet Russia was lost precisely on this issue when, as American journalist John Reed told the story in his famous book, “Ten Days that Shook the World,” a proposal was put on the table to restore the press freedom that had been suspended on the first day of the Bolshevik revolution. Lenin shouted it down with a diatribe about how that would mean restoring to capitalists privately owned printing equipment, paper supplies and ink. I don’t mean to suggest, in any way, that Mr. Downie is a Bolshevik. I do mean to suggest that the best strategy to strengthen the press would be to maximize protection of the right to private property—and the right to competition. Subsidies are the enemy of competition…

Amen brother.  Read the whole thing.

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.

Google Trends for websites reveals all kinds of fascinating insights into the way technology is reshaping the world. Among them is the fact that the HuffingtonPost.com has matured from a scruffy group blog into a new media powerhouse to rival the Wall Street Journal and Washington Post:

Note that the convergence of these three sites has happened both because HuffPo has doubled its audience and because the audience for the WashingtonPost.com has shrunk by half.  While WSJ.com’s audience has returned to roughly its pre-election level, the decline of NYTimes.com suggests that the Internet really is splintering audiences and bringing the giants of news media like the “Gray Lady” down from their once unassailable heights:

Two great articles today about the dangers of government getting too involved in the newspaper business as the industry experiences serious marketplace difficulties. Slate’s Jack Shafer (“Saving Newspapers From Their Saviors“) and Mark Hopkins of Silicon Angle (“Obama Administration ‘Open’ to State Run Newspapers“) both raise concerns about President Obama’s recent comments hinting that he is open to legislation that might grant struggling news organizations tax breaks if they were to restructure as nonprofit businesses.

In a piece for the City Journal back in March entitled “Socializing Media in Order to Save It,” I discussed the specific proposal in question, Senator Benjamin L. Cardin’s (D-MD) bill, S. 673, the “Newspaper Revitalization Act,” which would allow newspapers to become nonprofit organizations in an effort to help them stay afloat. Importantly, however, the measure would also disallow political endorsements on their editorial pages as part of the deal.  In my essay, I pointed out how “If the FCC received grant-making authority to dole out subsidies to media operators… it’s hard to imagine how journalists won’t be expected to surrender something in exchange.”  And that something would be their journalistic independence.

Shafer and Hopkins raise similar concerns in their essays.  Hopkins shares my concern about undue government influence as a result of such a potential legislative quid pro quo:

[I]sn’t journalism supposed to be the lauded and independent “Fourth Estate,” free of bias and loyalty to any governmental institution? Obviously, bias is pervasive in the old Heritage Media, but assigning journalism governmental overlords will almost ensure that journalistic independence will end. A bailout is the only hope of continued existence for the majority of newspapers, since almost without exception they’re too proud or ignorant to fundamentally change the way their organizations operate to adapt to the new media ecosystem. If one examines the extent to which the government has structured their relationships with the large banking institutions and the automakers, it isn’t a great leap of logic to see how the interference will play out with newspapers (and who would be more aware of that than the journalists that have covered those stories?).

Indeed, the fact that the Cardin bill already proposes a prohibition on political editorializing doesn’t bode well for what the future might hold should government ride in to rescue some struggling papers.  What else might newspapers have to entertain?  Free ads for politicians? A Fairness Doctrine or mandatory right of reply for printed editorials? Censorship for hard-hitting political satire or comics?  Who knows, but it is impossible for me to believe that lawmakers won’t ask for something in return for bailing out news outlets.

Meanwhile, Slate’s Shafer does a nice job itemizing concerns raised by a wide variety of folks in the newspaper industry itself and he also notes how such media marketplace meddling could distort the emerging news playing field in dangerous ways:

The government’s attempt to prop up newspapers with rewrites of the tax code or Sarkozy-esque direct subsidies of government advertising and free subscriptions for young people interferes with the already-in-progress transition from print to digital news delivery that’s been accelerating for the past 15 years—or longer. Propping up troubled papers has a cost. It weakens the enterprises that are rising from below to compete with them to deliver advertising and, yes, deliver news. I can think of no better way to hinder the rise of such Web sensations as Politico and Talking Points Memo than rewriting the rules to benefit newspapers.

Great point.  Any way you cut it, federal meddling with the news business — even in the name of saving some traditional journalistic outlets — will likely have serious unintended consequences in the long run.  President Obama should just say no to newspaper bailouts.

. . . follow @persiankiwi.

On the problems with the newspaper industry, Michael Kinsley writes in the Washington Post:

You may love the morning ritual of the paper and coffee, as I do, but do you seriously think that this deserves a subsidy? Sorry, but people who have grown up around computers find reading the news on paper just as annoying as you find reading it on a screen. (All that ink on your hands and clothes.) If your concern is grander – that if we don’t save traditional newspapers we will lose information vital to democracy – you are saying that people should get this information whether or not they want it. That’s an unattractive argument: shoving information down people’s throats in the name of democracy.

I rarely say it, but the whole thing is worth reading.

Over on the Poynter Online blog, Amy Gahran has a very smart piece on some of the confusion surrounding debates about “media localism.” In her essay asking “How Important is Local, Really?”, she challenges some of the assumptions underlying the Knight Foundation’s new Commission on the Information Needs of Communities in a Democracy.

I particularly like her line about how, “in many senses, ‘local’ is just one set of ripples on the lake of information — especially when it comes to ‘news.’ And for many people, it’s not even the biggest or most important set of ripples.” That is exactly right. Today, local choices are just a few more choices along the seemingly endless continuum of media choices. It’s foolish to assume that “media localism” in a geographic sense is as important now as it was in the past for the reasons Gahran makes clear in her essay:

I’m glad that the Knight Foundation is asking basic questions about what kinds of information people need support community and democracy. However, I question the Commission’s strong focus on geographically defined local communities. It seems to me that with the way the media landscape has been evolving, geographically defined local communities are becoming steadily less crucial from an information perspective. I suspect that defining communities by other kinds of commonalities (age, economic status/class, interests, social circles, etc.) would be far more relevant to more people — although more complex to define.

I suspect that clinging reflexively to “local” as the paramount criteria for “relevant” reflects a newspaper perspective that was never a good fit for most people, and that never really served most people’s information needs well. I’m not saying local doesn’t matter. Local is important. It’s especially important for people who are newcomers to communities. It’s especially important for identifying accessible resources and services that people might need in their daily lives. But in many senses, “local” is just one set of ripples on the lake of information — especially when it comes to “news.” And for many people, it’s not even the biggest or most important set of ripples. So my question for Knight is: Why do you assume that geographically defined local communities should be the paramount focus of people’s informational diet, or even to support democracy? Did you seriously consider any other perspectives? Today, you’re at Google — where folks are used to viewing people’s information needs as a complex mosaic, where no one filter is paramount for everyone. I hope you take advantage of their insight.

Gahran has it exactly right, but over at the Knight Foundation blog, a debate is raging about her comments. I posted some of my own thoughts on the topic, which were originally posted here in my essay on Our Continued Wishful Thinking about “Media Localism”. Read that for more details on the forgotten dimensions of this debate.