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

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

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

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

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

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

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

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

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

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

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

Two articles of interest in today’s Wall Street Journal with indirect impact on the debate over the future of Internet policy. First, there’s a front-page story (“Facing Budget Gaps, Cities Sell Parking, Airports, Zoo“) documenting how many cities are privatizing various services — including some considered “public utilities” — in order to help balance budgets.  The article worries about “fire-sale” prices and the loss of long-term revenue because of the privatizations.  But the author correctly notes that the more important rationale for privatization is that, “In many cases, the private takeover of government-controlled industry or services can result in more efficient and profitable operations.”  Moreover, any concern about “fire-sale” prices and long-term revenue losses have to be stacked again the massive inefficiencies / costs associated with ongoing government management of resources /networks.

Of course, what’s so ironic about this latest privatization wave is that it comes at a time when some regulatory activists are clamoring for more regulation of the Internet and calling for broadband to be converted into a plain-vanilla public utility. For example, Free Press founder Robert McChesney has argued that “What we want to have in the U.S. and in every society is an Internet that is not private property, but a public utility.”  That certainly doesn’t seem wise in light of the track record of past experiments with government-owned or regulated utilities.  And the fact that we are talking about something as complex and fast-moving as the Internet and digital networks makes the task even more daunting.

Government mismanagement of complex technology projects was on display in a second article in today’s Journal (“U.S. Reviews Tech Spending.”)  Amy Schatz notes that “Obama administration officials are considering overhauling 26 troubled federal technology projects valued at as much as $30 billion as part of a broader effort by White House budget officials to cut spending. Projects on the list are either over budget, haven’t worked as expected or both, say Office of Management and Budget officials.”  I’m pleased to hear that the Administration is taking steps to rectify such waste and mismanagement, but let’s not lose sight of the fact that this is the same government that the Free Press folks want to run the Internet.  Not smart.

[cross-posted from BigGovernment.com]

In the battle over media and communications freedom, no group poses a more serious threat to a free and independent press than the insultingly misnamed regulatory activist group Free Press. Along with their founders, the prolific neo-Marxist media theorist Robert W. McChesney and Nation correspondent John Nichols, Free Press has engaged in relentless agitation for a truly radical media and communications policy agenda, and their influence is now spreading throughout the Obama Administration.

The Free Press-McChesney blueprint for media “reform” reads more like a script for State servitude. On the regulatory side, they call for media ownership restrictions, “localism” mandates, “Net neutrality” regulations, price controls on broadband, advertising and copyright restrictions, and layers of additional regulatory edicts.  Once all that red tape smothers the life out the independent press and private communications providers, they plan to have the State step in become the primary benefactor of the Fourth Estate and high-tech infrastructure. For starters, McChesney and Nichols advocate a $35 billion annual “public works” program for the press modeled after the Works Progress Administration of the New Deal era. Their media WPA would include a “News AmeriCorps” for out-of-work journalists, a “Citizenship News Voucher” to funnel taxpayer support to struggling media entities, a significant expansion of postal subsidies, a massive new subsidy for journalism schools, corporate welfare for newspapers sufficient to pay 50 percent of the salaries of all “journalistic employees,” municipal government ownership of press and infrastructure, and many more bureaucratic programs.

Using its growing lobbying muscle in Washington, Free Press seeks to enshrine the McChesney-Nichols blueprint into law at the Federal Communications Commission (FCC) and the Federal Trade Commission (FTC) under the guise of a “National Journalism Strategy,” a veritable industrial policy for the press that resembles a Soviet-style five-year plan. They also want a “Public Media Trust Fund,” to make sure all the money they confiscate from private providers goes to public-subsidized competitors.  Average citizens would be in for some sticker shock, too, since Free Press and McChesney propose funding much of this new media welfare state with steep taxes on our mobile phones, Internet connections, and digital gadgets. So, get ready for the iPhone tax and new fees on your broadband bills!

Surprisingly, Free Press and McChesney don’t try to sugarcoat their radical intentions. Their self-described “radical” goal is a world of “post-corporate” newsrooms. McChesney and Nichols often speak broadly of “the problem” for the press being the capitalist system itself.  In their 2002 book, Our Media, Not Theirs: The Democratic Struggle Against Corporate Media, they argued that media-reform efforts begin with “the need to promote an understanding of the urgency to assert public control over the media… Our claim is simply that the media system produces vastly less of quality than it would if corporate and commercial pressures were lessened.”  More recently, in an interview with the Canada-based “Socialist Project,” McChesney went so far as to say that “the ultimate goal is to get rid of the media capitalists” and that “Instead of waiting for the revolution to happen, we learned that unless you make significant changes in the media, it will be vastly more difficult to have a revolution. While the media is not the single most important issue in the world, it is one of the core issues that any successful Left project needs to integrate into its strategic program,” he argues. Thus, nothing short of “massive public intervention” into the news business is required. Free Press adopts a similar tone and dials up the heat inside the Beltway with apocalyptic talk about the need to have government “save the news.”  In true Rahm Emanuel-like fashion, Free Press insists, “We have a crisis. We have an historic opportunity. We can’t let either go to waste.”

Hugo-Vision for the U.S.?

If you’re beginning to think that the Free Press-McChesney plan sounds a bit like something right out of Hugo Chavez’s tyrannical press-police state, you’re not mistaken. In fact, McChesney imagines the Venezuelan strongman to be something of a misunderstood genius when it comes to how to run a “free press.”  “Aggressive unqualified political dissent is alive and well in the Venezuelan mainstream media, in a manner few other democratic nations have ever known, including our own,” McChesney has written.  That will certain come to a shock to those journalists and news outlets currently being subjected to Chavez’s reign of media terror.  Luckily — at least till McChesney and Free Press get their hands on them — there are still a few independent media outfits here in the U.S. that can report the truth about Chavez’s “democratic” press, which McChesney glorifies as the ideal for other nations.

In fact, just yesterday, editorials by The Wall Street Journal’s Mary Anastasia O’Grady (“Chávez’s Assault on the Press”) and Jackson Diehl of The Washington Post (“Chavez’s Iron Fist”) painted a frightening picture of the press nightmare that now exists in Chavez’s thugocracy. O’Grady and Diehl both document the plight of Guillermo Zuloaga, who fled the country with his family to avoid being arrested by Chavez.  Zuloaga’s crime?  He has the audacity to speak the truth about the Chavez regime, and as the owner of Globovision, one of only three remaining privately held Venezuelan television stations, that makes him a threat to the thug-in-chief.  “How is it possible that he can accuse me of such things and walk free?” Chavez has asked publicly about Zuloaga.

And Zuloaga and other independent media operators clearly have legitimate cause for concern. Chavez has already yanked the license of opposition broadcaster RCTV, who he said had been working to overthrown him. The U.S. government’s Open Source Center, which provides information on foreign political, military, economic, and technical issues, has documented how “President Chavez’s government is moving forcefully to silence critics by introducing a Media Crimes bill that would give it sweeping authority to jail journalists, media executives, and bloggers who report on anything that the government considers to be harmful to state interests.”  According to Freedom House, which ranks press freedom internationally, Venezuela is the only country besides Cuba listed as “Not Free” in the entire Western Hemisphere. The organization notes that Chavez expelled Human Rights Watch officials from the country after it released a critical report entitled A Decade Under Chavez, which found that “The Venezuelan government under President Chavez has undermined freedom of expression through a variety of measures aimed at reshaping media content and control.” The National Journalists’ Guild has also accused Chavez of violating the rights of the press. The latest Freedom House report on the state of press freedom in the country also notes that:

“Free-to-air broadcast media are largely owned by the government, which operates seven channels with nationwide coverage. However, Venezuela’s leading newspapers are privately owned, and most identify with the opposition. As a result, they are subject to threats and violence by the government and its supporters, sometimes leading to self-censorship. Local and regional media are particularly dependent on government advertising revenue, leaving them vulnerable to economic retaliation for criticism.”

So, what’s Robert McChesney’s response to Chavez’s crackdown on dissent and opposition journalism?  They had it comin’!  “If RCTV were broadcasting in the United States, its license would have been revoked years ago,” McChesney has argued. “In fact its owners would likely have been tried for criminal offenses, including treason.”

Perhaps I’ve missed something but I study the history of journalism for a living and I can’t remember the last time any media outlet had their license yanked or that any journalist was tried for treason in the U.S. for opposing a president’s policies!  But such are the tactics of shameless media Marxist.

Media Reformistas Gaining a Voice in Government

While such sympathy for the devil may seem shocking to most of us, McChesney has no choice but to defend a socialist strongman like Chavez. After all, this is basically the McChesney-Free Press blueprint for media reform!  But one would hope and think that McChesney and his merry band of media reformistas at Free Press wouldn’t be gaining much traction here in the U.S. with their self-described “radical” agenda for media takeover.  Unfortunately, you’d be wrong.

For starters, some Free Press reformistas are now having real, direct influence on the Obama Administration’s media and communications agenda.  Jen Howard, former press director for Free Press, now serves as press secretary for FCC Chairman Julius Genachowski.  And Ben Scott, former Policy Director for Free Press, was recently appointed as a “policy advisor for innovation” to the State Department. Lord help us if it’s the Free Press’s brand of “innovation” that our government will now be promoting worldwide!  Meanwhile, as Seton Motley has noted here before, Free Press has a regular audience in FCC, FTC, and congressional hearing and meeting rooms.  McChesney was even recently invited to deliver a major address at an FTC workshop on “saving journalism.”  Meanwhile, Susan DeSanti, the FTC’s Director of Policy Planning, who spearheads the agency’s “media reinvention” effort, has publicly praised McChesney and Nichols’ “excellent book,” referring to their latest manifesto for media statism, The Death and Life of American Journalism: The Media Revolution that Will Begin the World Again.

The fingerprints of McChesney and Free Press can also be seen on many of the documents and projects the Obama Administration is currently producing on media policy issues.  As part of the FTC’s workshop series asking “How Will Journalism Survive the Internet Age?” the agency released a 47-page discussion draft entitled “Potential Policy Recommendations to Support the Reinvention of Journalism.” The document reads like the Cliff’s Notes for the latest McChesney-Nichols book and Free Press’s “National Journalism Strategy.” The FTC draft cites the authors over a dozen times and reproduces their proposals almost verbatim.  Meanwhile, the Federal Communications Commission is simultaneously conducting a proceeding of its own on the “Future of Media.” So far, its workshops have featured plenty of talk of expanded public media and “public-interest” programs — as well as multiple Free Press witnesses and submissions.

Amazingly, Obama Administration agency officials and congressional lawmakers on the Left often seem to turn a blind eye to some of Free Press’s more infantile attacks and tactics. For example, this week the group is wall-papering Chicago with “wanted” posters featuring Chairman Genachowski’s picture. The Chairman’s crime? He’s not attending a show trial hearing set up to demonize the pending merger of Comcast and NBC-Universal.  And Free Press has repeatedly eaten their own young during Net Neutrality debates by viciously blasting any Democrat who has had the temerity to suggest that maybe, just maybe, an FCC takeover of the Internet isn’t such a grand idea.

The Stakes in the Debate

Let’s be clear about the stakes in this battle. As media historian Ben Compaine has argued, “What the hard core reformistas really want, it seems, is not diversity or an open debate but a media that promotes their own vision of society and the world.”  That’s exactly right and, more specifically, the media reformistas want to impose this control by borrowing the old fantasy that “the public owns the [broadcast] airwaves” and extending that misguided notion to all media platforms and outlets. In other words, McChesney and Free Press want an UnFree Press. To cast things in neo-Marxists terms that they could appreciate, they want to take control of the information means of production.

The fight for real media freedom and a truly “free press” begins with a better understanding and documentation of the radical intentions of the opposition as the struggle over the future course of America’s media marketplace continues. True freedom doesn’t begin by fettering media and communications systems with more chains, as McChesney and Free Press advocate; it begins by removing the chains that already exist and then erecting a firm wall between State and Press.

For more on this subject, see my ongoing series of essays: Should Government Bailout Media, Subsidize the Press & Seek to “Save Journalism”?

I’ve been so busy trying to cover breaking developments related to Washington’s new efforts to “save journalism” (FTC) and steer the “future of media” (FCC) — see all my recent essays & papers here — that I forgot to do a formal book review of the book that is partially responsible for whipping policymakers into a lather about this issue: The Death and Life of American Journalism, the media-takeover manifesto 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.”] Anyway, I put together a formal review of the book for City Journal.  It’s online here and I’ve also pasted it down below.

A Media Welfare State?

by Adam Thierer

Imagine a world of “post-corporate” newsrooms, where the state serves as the primary benefactor of the Fourth Estate. Billions flow from bureaucracies to media entities and individual journalists in the name of sustaining a “free press.” And this new media welfare state is funded by steep taxes on our mobile phones, broadband connections, and digital gadgets.

Sound Orwellian? Well, it’s the blueprint for a press takeover drawn up by Robert W. McChesney and John Nichols in their new book, The Death and Life of American Journalism. McChesney, the prolific neo-Marxist media scholar who teaches at the University of Illinois at Urbana-Champaign, and Nichols, a journalist with The Nation, aren’t shy about their intentions. Along with Free Press, the absurdly misnamed regulatory activist group they co-founded, McChesney and Nichols outline a self-described “radical” agenda for what they hope will become a media “revolution.” And, shockingly, some folks in the Obama administration are listening.

McChesney and Nichols model their $35 billion annual “public works” program for the press after the Works Progress Administration of the New Deal era. Their media WPA would include a “News AmeriCorps” for out-of-work journalists, a “Citizenship News Voucher” to funnel taxpayer support to struggling media entities, a significant expansion of postal subsidies, a massive new subsidy for journalism schools, corporate welfare for newspapers sufficient to pay 50 percent of the salaries of all “journalistic employees,” and more. Using its growing lobbying muscle in Washington, Free Press promotes the McChesney-Nichols plan under the framework of a “National Journalism Strategy,” a veritable industrial policy for the press that resembles a Soviet-style five-year plan.

McChesney, Nichols, and the media reformistas at Free Press rest their case for “massive public intervention” into the news business on several dubious assertions: commercial journalism is dying, and nothing can save it; news has always been a “public good” and would be better provided through noncommercial means; and America has a long history of public subsidies for the press—even the Founders would endorse an expansive role for the state to “save the news.”

That last claim is perhaps the most audacious. McChesney and Nichols spin a rich revisionist history and ask us to believe that the Founders—especially Jefferson and Madison—were practically media Marxists, enthralled with public subsidization of the press. They base that claim entirely on the existence of postal subsidies. Apparently, because we’ve had reduced rates for media mail since the Republic’s early days, we should believe that the Founders would welcome a wholesale government takeover of the press. But a modest postal subsidy for press materials doesn’t suggest that the Founders believed government should be micromanaging or massively subsidizing media. The language of the First Amendment—“Congress shall make no law . . . abridging the freedom of speech, or of the press,” confirms that. Having rebelled, in part, against British restrictions on free speech, the Founders’ prime directive toward the press was not subsidization, but freedom from state meddling.

Even if it is true that news has some public-good qualities, it does not necessarily follow that the state must or should fund it. Indeed, the entire history of American media belies this argument: entertainment, journalistic, and informational media of all varieties have primarily relied on private, commercial funding for over 200 years—particularly through advertising, which rewards publishers for attracting and holding on to audiences. Once one embraces the fallacy that only the state can produce high-quality public goods, sweeping calls for government intervention inevitably follow.

It’s certainly true that we’re in the midst of a major media revolution, and that many operators are struggling to cope with intensifying competition, digitization, declining advertising budgets, and fragmenting audiences. Pundits and policymakers wonder what the future holds for many traditional news providers or whether they’ll even have one. But McChesney and Nichols seize on such anxieties to suggest that nothing short of a government press takeover is required. In true Rahm Emanuel-like fashion, Free Press insists, “We have a crisis. We have an historic opportunity. We can’t let either go to waste.”

Who pays the bill and how much will the takeover cost? McChesney and Nichols take a remarkably cavalier attitude about it: “The money must be spent and we will worry about where it comes from later.” Such “we’re-all-dead-in-the-long-run” reasoning seems to be the dominant philosophy in Washington policy circles these days. But the estimated $35 billion annual price tag for a “public works” program for the press should give us pause. Moreover, like every other corporate-welfare program (think agriculture subsidies), a journalistic welfare state would no doubt grow in scope and cost over time.

McChesney and Nichols suggest several potential funding sources for the program, many of which would end up burdening commercial media providers in order to subsidize their noncommercial/public media competitors. They advocate a four-part tax plan that would include: a 5 percent tax on new purchases of consumer electronics, which they estimate would bring in $4 billion a year; a 3 percent tax on monthly ISP & mobile-service bills (estimated at $6 billion a year); a 2 percent sales tax on advertising (estimated at $5 to $6 billion a year); and a 7 percent tax on broadcasters’ spectrum licenses (estimated to sap another $3-6 billion a year from an already reeling industry). Free Press has enthusiastically endorsed these proposals. In recent FCC testimony, managing director Craig Aaron offered specific revenue projections for the creation of a “Public Media Trust Fund.”

What McChesney, Nichols, and Free Press essentially advocate is a radical form of media redistributionism—with struggling private entities and others forced to fund public or non-commercial media outlets. What these regulatory advocates seek is not so much a bailout for the familiar private media that has served America so well for two centuries, but rather a massive wealth transfer from one class of media to another, with the stipulation—which they repeat numerous times—that state-subsidized entities are to forgo private advertising revenues, copyright protection, and any affiliation with corporate parents. These restrictions are an essential part of their push for a “post-corporate,” government-controlled press. Indeed, it would virtually make such a press a self-fulfilling prophecy, since copyright laws and advertising have been core ingredients of a successful private media system in the U.S. They’re also why we haven’t had to resort to massive public subsidies for media, as many other nations have.

McChesney and Nichols want us to believe that they (or the state) wouldn’t play favorites with public funds. But it’s hard to take such claims at face value when they dedicate their book to liberal darling Bill Moyers (who has keynoted Free Press “media reform” conferences), and when every page of their book drips with derision toward commercial media. In reality, McChesney, Nichols, and Free Press are out to destroy the private provision of media in America, but they’ve softened up their recent rhetoric to cloak their true aims. In their 2002 book, Our Media, Not Theirs: The Democratic Struggle Against Corporate Media, they were more direct, arguing for “the need to promote an understanding of the urgency to assert public control over the media.” And during a 2009 interview with the Canadian-based “Socialist Project,” McChesney confessed that “the ultimate goal is to get rid of the media capitalists,” and noted that, “unless you make significant changes in the media, it will be vastly more difficult to have a revolution.”

Similarly, The Death and Life of American Journalism concludes by noting that “We have responded in a time of crisis not with tinkering reforms but with revolution.” Indeed they have, but what’s more shocking is the warm reception their calls for “public control” and “revolution” are receiving within the Obama administration.

The Federal Trade Commission is holding a workshop series called “How Will Journalism Survive the Internet Age?” The agency released a 47-page discussion draft entitled “Potential Policy Recommendations to Support the Reinvention of Journalism,” which reads like the Cliff’s Notes for the McChesney-Nichols book and Free Press’s National Journalism Strategy. The draft cites the authors over a dozen times and reproduces their proposals almost verbatim. McChesney was recently invited to deliver a major address at an FTC event on these issues. Meanwhile, Susan DeSanti, the FTC’s Director of Policy Planning, who spearheads the agency’s “media reinvention” effort, has publicly praised McChesney and Nichols’ “excellent book” despite its call for radical steps that would hobble private media and impose crushing taxes to subsidize public, state-blessed media. Isn’t the FTC supposed to safeguard marketplace competition and innovation? Finally, the Federal Communications Commission is conducting an open proceeding of its own on the “Future of Media.” So far, it has featured plenty of talk of expanded public media and “public-interest” programs.

Perhaps most insultingly, McChesney, Nichols, Free Press, the FTC, and the FCC all ignore the burdens on private media operators that they themselves have had a hand in creating or preserving. For years, the media marketplace has been smothered with layers of red tape that has hindered operators’ ability to respond promptly to new developments. In particular, a crazy-quilt of media ownership regulations has artificially restricted business models from developing that might have saved many news organizations from the fate that McChesney and Nichols now decry. Stunningly, the FCC and FTC show no sign of willingness to loosen those chains, especially with Free Press and other media reform groups aggressively hounding them and congressional lawmakers to impose even more regulation.

It remains to be seen whether the Obama administration implements the McChesney/Nichols blueprint for a media welfare state. But their book clearly draws the battle lines for the future of media—and provides a fresh reminder, for those of us who still care about our fundamental First Amendment freedoms and a truly free and independent press, what it is we’re fighting for.

_________________

Adam Thierer is president of the Progress & Freedom Foundation in Washington, D.C. (www.pff.org) and the coauthor, with Brian Anderson, of A Manifesto for Media Freedom (Encounter Books, 2008).

Faithful readers know of my geeky love of tech policy books [here are my “best of” lists for 2008 & 2009], and the intriguing battle taking place today between Internet optimists and pessimists in particular.  One of the things that I noticed when I was putting together my compendium, “The Digital Decade’s Definitive Reading List: Internet & Info-Tech Policy Books of the 2000s,” is that there are up years and down years. For example, there weren’t a lot of big tech policy titles in 2000 or 2005. By contrast, 2001, 2006 and 2008 were monster years.  I suppose that’s the case with any genre, of course.

Anyway, I was beginning to think that 2010 was shaping up to be one of those slow years, with Jaron Lanier’s You Are Not a Gadget being the only major release so far this year. [See my review of it here.] But there are some very important titles on the way that are worth picking up. I’ve already pre-ordered most of these and am looking forward to reviewing them all soon:

• Ronald J. Deibert, John G. Palfrey, Rafal Rohozinski and Jonathan Zittrain (eds.) – Access Controlled: The Shaping of Power, Rights, and Rule in Cyberspace (now out)
• Nick Carr – The Shallows: What the Internet Is Doing to Our Brains (June)
• Clay Shirky – Cognitive Surplus: Creativity and Generosity in a Connected Age (June)
• Tim Wu – The Master Switch: The Rise and Fall of Information Empires (November)
• Siva Vaidhyanathan, The Googlization of Everything
• Evgeny Morozov — How Dictators Learned to Stop Worrying and Love the Web

Please let me know others that I may be missing. [Note: Most of the books I’ve been reading this year have more to do with the future of media, the press, journalism, etc. It’s been a big year for books like that. For example, McChesney & Nichols’ The Death and Life of American Journalism; Lee Bollinger’s Uninhibited, Robust, and Wide-Open: A Free Press for a New Century; and Bob Garfield’s The Chaos Scenario. But it’s not clear any of these books belong in the “info-tech policy” genre, although they all have something to say about the impact of the Internet and digital technology on the media and journalism. So, who knows, maybe I will add them to my end of year list.]

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!

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.

Free Press, the radical regulatory activist group founded by Marxist media scholar Robert W. McChesney, has never seen a media or technology regulation they don’t like, but their latest effort to have the feds halt innovation is shocking even by their standards. According to The Washington Post:

Free Press and other public advocacy groups are sending letters Monday to the Justice Department and the Federal Trade Commission calling for a probe of the “TV Everywhere” plan by cable, satellite and phone companies that brings television shows and movies to computers and devices, but only for those that subscribe to both television and high-speed Internet services.

Think about this. “TV Everywhere” is still in its cradle, having only just been launched recently. It will give multichannel video distributors a chance to find their footing as millions of consumers continue to “cut the video cord.”  And it would provide consumers with ubiquitous access to content over the Internet while also ensuring that content creators are compensated for their programming.

OK, so what’s wrong with all this again? Why would we want federal antitrust officials throw a wrecking ball into this innovative new business model?

What’s so galling about this is that Free Press and these other “media reformista” groups are constantly harping about how struggling media operators need to “change their business models,” and yet those groups would tie the hands of media creators and distributors at every juncture. No liberalization of old rules would be allowed if Free Press had their way, and new regulations would be layered on prophylactically to disallow any future marketplace evolution or innovation.

So, what is the Free Press alternative if no private restructuring or innovation is to be allowed?  Can you say “public option for the press“? Free Press has proposed an industrial policy for journalism and for “saving the news” that includes 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). And in an essay Robert McChesney penned with John Nichols of The Nation last year, the price tag for their proposed “press infrastructure project” was over $60 billion.

Hmmm, let’s see… we could spend $50-$60 billion for a state-subsidized press, or we could allow private marketplace experimentation with innovative new media business models.  I would hope the choice would be an easy one.

I’ve just released a new PFF white paper looking at the hysteria that has often accompanied major media mergers and then taking a look at the marketplace reality years after the fact.  Here‘s the PDF, but I have also pasted the entire thing down below.

_____________________________

A Brief History of Media Merger Hysteria: From AOL-Time Warner to Comcast-NBC

by Adam Thierer

Although the pending union of Comcast and NBC Universal has not yet made it to the altar, Chicken Little-esque wails about the marriage have already begun in earnest. For example, the pro-regulatory media organization Free Press has already set up a website to complain about the deal.[1] And Jeff Chester, executive director of the Center for Digital Democracy, has called it “an unholy marriage.”[2] The fever only promises to spread once the deal is formally announced, and a lengthy fight over the deal is expected at the Federal Communications Commission (FCC) and whichever antitrust agency reviews the deal.[3]

But reality tends to play out somewhat less dramatically than the script penned by the media worrywarts. It’s worth looking back at some of the more prominent examples of media merger hysteria in recent years to understand why such panic is unwarranted, and why a deal between Comcast and NBC Universal is unlikely to lead to the sort of problems that the pessimists suggest.[4]

AOL-Time Warner: From the “New Totalitarianism” to Digital Divorce Court in Less Than a Decade

When the mega-merger between media giant Time Warner and Internet superstar AOL was announced in early 2000, the marriage was greeted with a cacophony of righteous indignation and apocalyptic predictions.  When referring to the dangers of the deal, syndicated columnist Norman Solomon, a longtime associate of the media watch group Fairness & Accuracy In Reporting, summoned the ghost of Aldous Huxley when he and referred to the transaction in terms of “servitude,” “ministries of propaganda,” and “new totalitarianisms.”[5] Similarly, USC Professor of Communications Robert Scheer wondered if the merger represented “Big Brother” and claimed, “Diversity is out, niches are gone, it’s Skippy peanut butter time. AOL is the Levitown of the Internet, mom and apple pie, ‘50s boredom, conformity and dullness as a virtue: A Net nanny reigning in potentially restless souls.”[6]

Such pessimistic predictions proved wildly overblown. To say that the merger failed to create the sort of synergies (and profits) that were originally hoped for would be an epic understatement.[7] The titles of two popular books about the deal summed up the firm’s troubles: One was entitled Fools Rush In (by Nina Munk) and the other, There Must Be a Pony in Here Somewhere (by Kara Swisher and Lisa Dickey).[8]

The numbers were mind-boggling. By April 2002, just two years after the deal was struck, AOL-Time Warner had already reported a staggering $54 billion loss.^[9] By January 2003, losses had grown to $99 billion.^[10] By September 2003, Time Warner decided to drop AOL from its name altogether and the deal continued to slowly unravel from there.^[11] In a 2006 interview with the Wall Street Journal, Time Warner President Jeffrey Bewkes famously declared the death of “synergy” and went so far as to call synergy “bullsh*t”!^[12] In early 2008, Time Warner decided to shed AOL’s dial-up service^[13] and now is set to spin off AOL entirely.[14] Looking back at the deal, Fortune magazine senior editor at large Allan Sloan called it the “turkey of the decade”:

The day the deal was announced, Jan. 10, 2000, Time Warner closed at the equivalent of $184.50 a share. After almost 10 years of travail, the $184.50 has shrunk to about $42.25, consisting of one Time Warner share and a quarter of a Time Warner Cable share. The 77 percent decline is triple the decline in the Standard & Poor’s 500-stock index over the same period.[15]

And the Time Warner-AOL split wasn’t the end of this messy divorce process. In 2008, Time Warner Cable and Time Warner Entertainment decided to split.^[16] Time Warner has even spun off some of its oldest properties. In 2006, it announced that it was putting 18 of the 50 magazines in its Time magazine division up for sale.^[17]

As is always the case, these divestitures and down-sizing efforts garnered little attention compared with the hullaballoo and hysteria that accompanied the announcement of the deal back in 2000.^[18]

News Corp/DirecTV: Murdoch’s “Digital Death Star” Blows Up

No media industry personality attracts more attention (or angst) than News Corp. Chairman and CEO Rupert Murdoch. The popular leftist blog The Daily Kos has likened him to “a fascist Hitler antichrist.”[19] And CNN founder Ted Turner once compared the popularity of the News Corp.’s Fox News Channel to the rise of Adolf Hitler prior to World War II.^[20] Alternatively, Murdoch has been accused of being a Marxist.[21] Meanwhile, Karl Frisch, a Senior Fellow at Media Matters for America, speaks of Murdoch’s “evil empire”^[22] and a recent MSNBC poll has asked people to vote on the question: “Is Rupert Murdoch evil?”[23] In 2003, when asked by talk show host Chris Matthews, “Would you break up [News Corp.-owned] Fox?” then Democratic presidential candidate Howard Dean answered, “On ideological grounds, absolutely yes.”^[24] And in their book Our Media, Not Theirs, John Nichols and Robert McChesney took the Murdoch-as-evil-overlord storyline to its logical extreme when they suggested Hollywood was on to something by scripting a media tycoon like Murdoch as the bad guy in a James Bond movie: “No wonder conspiracy theories are so popular in America; no wonder, when the makers of James Bond movies look for believable villains these days, they eschew Eurotrash bad guys for more credibly threatening villains such as the Rupert Murdoch-like media baron of 1997’s Tomorrow Never Dies.”^[25]

These Murdochian fears came to a head in 2003 when News Corp. announced it was pursuing a takeover of satellite television operator DirecTV.  Paranoid predictions of a pending media apocalypse followed.  A group of regulatory activists filed joint comments to the FCC claiming that if News Corp. and DirecTV were allowed to merge, “the result will be unprecedented concentration within all aspects of the television marketplace, as well as increased prices for consumers of cable and satellite television.”[26] Similarly, then-FCC Commissioner Jonathan Adelstein worried that the deal would “result in unprecedented control over local and national media properties in one global media empire. Its shockwaves will undoubtedly recast our entire media landscape.” He continued; “With this unprecedented combination, News Corp. could be in a position to raise programming prices for consumers, harm competition in video programming and distribution markets nationwide, and decrease the diversity of media voices.”[27]

Not to be outdone, full-time media fussbudget Jeff Chester predicted that Murdoch would use this “Digital Death Star” as the base of a nefarious scheme to conquer the media universe:

Murdoch will use DirecTV as a ‘death star’ to force his programming on cable companies by threatening a price war unless they give Fox favorable access. Since News Corp will control cable TV’s principal multichannel competitor, it will easily create new channels—unlike anyone else in the TV business.  Rather than engage in open combat and competition, cable powerbrokers such as Comcast and AOL-Time Warner will likely accommodate Murdoch and add his new channels to their own services. Imagine Fox News on steroids. Worse, with DirecTV’s capacity to ‘spotbeam’ channels to serve distinct communities, localized versions of Fox programs could be available in major cities across the nation.[28]

Imagine the horror of new, “spotbeamed” local media competition!  However, unlike the destruction of the planet Alderaan by the Death Star in Star Wars,[29] no one was harmed in the making of the News Corp-DirecTV marriage.  Indeed, the rebels would get the best of Darth Murdoch since his “Digital Death Star” was abandoned just three years after construction.  In December 2006, News Corp. decided to divest the company to Liberty Media Corporation in an effort to win back more controlling News Corp. stock.^[30]

Ironically, many of the same groups that had vociferously protested the original News Corp-DirecTV deal again found reason to complain when the deal was being undone! The FCC’s failure to implement various restrictions as part of the license transfer, they claimed, would “result in continuing control by News Corp. over content distribution, harming competition in both the programming and distribution markets, reducing consumer choice and raising cable prices.”^[31] Unsurprisingly, little mention was made of the previous round of pessimistic predictions or whether there had ever been any merit to the lugubrious lamentations of the media critics.

Sirius-XM: “Merger to Monopoly” or Prelude to Bankruptcy?

Some of the most entertaining and wrong-headed predictions about the future of the media marketplace often come from media moguls themselves. For example, back in 2003, when he was still President and Chief Operating Officer of Viacom, Mel Karmazin said in reference to Microsoft, AOL Time Warner, and Comcast: “I can’t imagine being a competitor with any of these guys.”[32] Just six years later, however, plenty of others are competing with those companies. Microsoft finds itself in a heated war with Google on all fronts, AOL-Time Warner has fallen apart, and Comcast is squaring off against telco (e.g., Verizon’s FiOS and AT&T U-Verse) and online video competitors (e.g., YouTube, Hulu) that were unfathomable in 2003—not to mention the traditional satellite TV competitors they still face. Meanwhile, Karmazin abandoned Viacom and is now struggling to find a way to make subscription-based satellite radio survive the ongoing digital music bloodbath caused by the rise of online music services and a little thing called the iPod.

Of course, hysteria ran rampant when Sirius and XM were merging, too.  Critics called it a “merger to monopoly” and predicted a variety of coming calamities.[33] National Association of Broadcasters Vice President Dennis Wharton described the merger as a “monopoly platform for offensive programming” that would be “anti-consumer.”^[34] Mr. Wharton later remarked that the merged firms “will raise prices, won’t improve their technology and will limit their offerings.”^[35] A coalition of six non-profits claimed that the merger was “perhaps the worst offense against the basic principle that competition is the consumer’s best friend” and, if approved, “a tsunami of mergers could ripple through the digital space at the worst possible moment.”^[36] They predicted that “once the competition is eliminated, prices will rise over time,” “innovation will slow to the pace preferred by the monopolist and consumers will be much worse off in the long run.”^[37] Another coalition argued that the new company would “abuse consumers, artists and other input suppliers in the satellite radio market.”[38]

In the end, the merger took an astonishing 500-plus days for the FCC to finally approve[39] and was conditioned with a lengthy set of “voluntary concessions” to supposedly rectify these potential harms—including pricing constraints that could limit the firm’s ability to cover costs and pay down debt over time.

Unsurprisingly, things haven’t turned out so well for Sirius XM. When the merger was finally approved by the FCC in August 2008, Commissioner Copps dissented vigorously on various grounds but specifically insisted that, “We must assume that the marketplace can support two financially viable competitors.”[40] Unfortunately for Commissioner Copps—as well as Sirius XM—it’s not even clear that the market can sustain one satellite radio provider. The company’s stock went into freefall following completion of the deal and, at one point, its stock fell below 10 cents per share. The company flirted with bankruptcy in February of this year as “satellite radio failed to win over many younger listeners, and competition from other sources slowed subscriber growth.”[41] In March 2009, Karmazin orchestrated a cash-for-stock swap with Liberty Media to get a $530 million lifeline and avoid bankruptcy.[42] But even with the cash infusion Sirius XM faces an uncertain future with stiff competition.[43] “Sirius is girding for slower growth than in the past,” notes Olga Kharif of Business Week, “and analysts remain concerned about the company’s ability to control costs.”[44] Former stockbroker and RealMoney.com contributor Tim Melvin predicts the overleveraged company “will disappear from the landscape. The subscribers will go to another tech or entertainment company in bankruptcy proceedings. Subscription radio just does not have that much appeal to most people.”[45]

Whether Melvin’s dour forecast for satellite radio proves accurate remains to be seen. What’s clear, however, is that the fears bandied about by critics when the Sirius-XM deal was pending have not come to pass.

Murdoch’s Wall Street Journal Quest

In 2007, Rupert Murdoch announced his desire to purchase The Wall Street Journal.  Once again, a great deal of hand-wringing ensued. “This takeover is bad news for anyone who cares about quality journalism and a healthy democracy,” argued Robert McChesney. “Giving any single company—let alone one controlled by Rupert Murdoch—this much media power is unconscionable.”[46] And FCC Commissioner Copps warned that “It will create a single company with enormous influence over politics, art and culture across the nation and especially in the New York metropolitan area.”[47]

Today, however, the Journal keeps humming along and continues to produce some of the finest journalism on the planet. Meanwhile, “politics, art and culture” seem largely unaffected by the deal—either in New York or the nation.

And the deal certainly hasn’t made Murdoch or News Corp. any richer. “His purchase of The Wall Street Journal is widely seen as one of the worst moves of his career,” notes Michael Wolff of Vanity Fair.[48] News Corp. has already taken a whopping $3 billion write-down on the deal.  Considering the $5 billion price tag Murdoch paid two years ago, one wonders if he’ll hold on to this property any longer than he did DirecTV.

Comcast-NBC Universal: Debunking the Fears Preemptively

No doubt we’ll soon be hearing many of these same apocalyptic predictions about the Comcast-NBC deal. Free Press has said the new entity “will have an incentive to prioritize NBC shows over other local and independent voices and programs, making it even harder to find alternatives on the cable dial.”[49] And Free Press Executive Director Josh Silver has called for the Obama Administration to block the deal saying “it would further starve Americans of [media] diversity.”[50] Even competitors are complaining. Liberty Media Corp. Chairman John Malone, which owns DirecTV, has suggested that they might push the government to reject the deal.[51] Many other rivals will likely join that bandwagon.

These critics will likely raise vertical integration fears and claim that Comcast will act as a “gatekeeper” by limiting the ability of independent voices to get a slot on cable distribution systems, or by withholding NBC-Universal content from other platforms and providers. But there’s little historical evidence that suggests this will be a problem. As the adjoining exhibit illustrates, the overall number of video programming channels available in America has skyrocketed, from just 70 channels in 1990 to 565 channels in 2006, the last year for which the FCC has made data available.

More importantly—and despite claims to the contrary—vertical integration in the video marketplace has plummeted over the past two decades. While many more cable and satellite networks are available today than ever before, the greatest share of the growth in the multichannel video marketplace has come from independently owned video networks. Since 1990, the number of cable-owned or affiliated channels has increased slightly, but it pales in comparison with the growth of independently owned and operated video networks. In real terms, therefore, the percentage of the overall video marketplace controlled (i.e., owned and operated) by cable companies has plummeted—from 50% in 1990 to just 14.9% in 2006. Moreover, in the wake of the Time Warner Cable and Time Warner Entertainment divorce, vertical integration in the cable sector has probably fallen into the single digits. Even if the merger of Comcast and NBC-Universal results in slight increase in industry vertical integration, it almost certainly will not surpass 20 percent.  Consequently, as far as vertically integrated industries go, it is impossible to conclude that this market could be characterized as being controlled by “gatekeepers.”

It is difficult to imagine that Comcast would buck these trends and begin restricting independent options on its systems or withhold its content from others.  Video distributors don’t make money by restricting choice. Consumers would flock to alternative video providers and media services if Comcast played such games. The great thing about the modern media marketplace is that there is always another place for consumers to turn to find something they want.[52] Sports programming could be an exception to the rule, and is the one issue that Comcast may need to bargain over with FCC regulators or antitrust officials since they own regional sports networks that other video distributors want access to.^[53] But traditional concerns about access to over-the-air broadcast signals (namely, the NBC local broadcast television properties) shouldn’t be as much of an issue today as it was the past.  Frankly, local broadcasters need all the eyeballs they can get these days. Thus, it’s unlikely that Comcast would try to withhold those stations from other video distributors, especially since a great deal of NBC programming is already available through other means. And intense competition exists for some of the most important news and informational services that NBC offers, such as local news, weather, and traffic.

Overall, therefore, it’s hard to see the case for the FCC rejecting the deal. Regulators need to be forward-looking about what is driving this deal.  This deal isn’t about protecting old markets but instead about building new ones. “The real motivation behind this deal,” argues Mike Berkley, former CEO of SplashCast Media, “is survival.”

Comcast understands that the price point for distributing TV into homes is going to fall dramatically in the coming years. Comcast’s 3 distribution products, Voice – TV – Internet, are collapsing into just one, single product: Internet. This poses a huge threat to Comcast’s top line. As such, Comcast is hedging through diversification into content, moving up the media value chain. Comcast will be looking to replace lost revenue in distribution with revenue from content (advertising, subscriptions, etc).[54]

Similarly, Wall Street Journal business columnist Holman Jenkins points out that Comcast is scrambling to find a way to rework their business model as the era of set-top box-delivered video slowly gives way to a world of ubiquitously available online video:

This would be a merger, after all, of two businesses that seem headed toward some combination of the fates of newspapers, music CDs and the old wireline telephone business. Customers want the product for free. Comcast’s lifeblood, the $100-a-month cable bill and the $50-a-month broadband bill, increasingly look like duplicative expenses. And so on. True, the number of households that have actually dropped their cable subscriptions in favor of subsisting on TV streamed or downloaded from the Internet is not yet large. But for the Roberts family and its Comcast property, their worst fears lurk just around the corner—being reduced to a “dumb pipe,” subject to commodity pricing while somebody else (Google) makes all the money. Yet an escape route is vexingly hard to envision. Time Warner and Comcast have been talking up plans to make their respective cable lineups available by computer—as long as you keep paying your cable bill. This is a stopgap, especially appealing to anyone who owns two homes but wants to pay only one cable bill. Never mind, too, that hundreds of shows are already available online for free, via Web sites operated by none other than Comcast and the TV networks themselves.[55]

In light of such technological upheaval and marketplace uncertainty, it’s important that regulators proceed cautiously when reviewing this deal or future deals.

Conclusion: Let Markets Evolve

The point here is not that media mergers are inherently good or always make sense. Indeed, as the examples discussed above illustrate, mergers sometimes prove to be huge blunders.[56] But the hysteria sometimes heard before media mergers are consummated rarely bears any relationship to reality once the deals move forward. Media markets are extremely dynamic and prone to disruptive change and technological leap-frogging. Mergers are often one response to that turbulence.

But mergers are no panacea, and they often fail to produce the “synergies” hoped for. A 2004 survey by McKinsey & Co. found that “Nearly 70 percent of the mergers in our database failed to achieve the revenue synergies estimated by the acquirer’s management.”[57] Perhaps, therefore, the best argument for blocking media mergers is not their potentially pernicious effect on markets or consumers, but rather to save the merging firms (and their stockholders) from a miserable marriage!

On the other hand, experimenting with alternative business models and ownership structures is an important part of any dynamic market, because markets are not static but represent and ongoing processes of entrepreneurial “discovery.”[58] Thus, policymakers would be wise to avoid micro-managing mergers and instead let things run their course.  Sometimes collaboration makes a great deal of sense, especially when the significant costs of providing a media service becomes impossible absent a partnership. Indeed, federal officials and agencies are currently exploring how (or whether) journalism can survive an era of seeming perpetual media upheaval.[59] Healthy media companies certainly must be part of the answer and new ownership arrangements might be part of the solution.

Given how difficult it is to predict the future course of events in this chaotic sector, humility—not hubris—is the sensible disposition when it comes to media merger policy. At a minimum, policymakers should insist that ongoing debates are governed by facts instead of fanaticism, because, if the past decade is any guide, discussions about media mergers have been more often rooted in hyperbolic rhetoric and unsubstantiated hysteria.

[1] www.freepress.net/comcast

[2] Quoted in Cecilia Kang, Public Interest Groups Rail against a Comcast and NBC Merger, Washington Post, Post Tech Blog, Nov. 9, 2009, http://voices.washingtonpost.com/posttech/2009/11/for_example_were_advancing_tv.html

[3] “For regulators, a deal like this is a gift; an occasion to impose their will upon needy companies that would otherwise be outside their regulatory reach.” Craig Moffett, Bernstein Research, Comcast: Snatching Defeat from the Jaws of Victory? Oct. 23, 2009, at 14.

[4] Cecilia Kang, A New Kind of Company, A New Kind of Challenge for Feds, Washington Post, Nov. 26, 2009, at 1, www.washingtonpost.com/wp-dyn/content/article/2009/11/26/AR2009112602500.html

[5] Norman Soloman, AOL Time Warner: Calling The Faithful To Their Knees, Jan. 2000, www.fair.org/media-beat/000113.html

[6] Robert Scheer, Confessions of an E-Columnist, Jan. 14, 2000, Online Journalism Review, www.ojr.org/ojr/workplace/1017966109.php

[7] Looking back at the deal almost ten years later, AOL co-founder Steve Case said, “The synergy we hoped to have, the combination of two members of digital media, didn’t happen as we had planned.” Quoted in Thomas Heath, The Rising Titans of ’98: Where Are They Now?, Washington Post, Nov. 30, 2009, www.washingtonpost.com/wp-dyn/content/article/2009/11/29/AR2009112902385.html?sub=AR

[8] Nina Munk, Fools Rush In: Steve Case, Jerry Levin, and the Unmaking of AOL Time Warner (New York: Harper Business, 2004); Kara Swisher and Lisa Dickey, There Must Be a Pony in Here Somewhere: The AOL Time Warner Debacle and the Quest for a Digital Future (New York: Crown Business, 2003).

[9] Frank Pellegrini, What AOL Time Warner’s $54 Billion Loss Means, April 25, 2002, Time Online, www.time.com/time/business/article/0,8599,233436,00.html

[10] Jim Hu, AOL Loses Ted Turner and $99 billion, CNet News.com, Jan. 30, 2004, http://news.cnet.com/AOL-loses-Ted-Turner-and-99-billion/2100-1023_3-982648.html

[11] Jim Hu, AOL Time Warner Drops AOL from Name, CNet News.com, Sept. 18, 2003, http://news.cnet.com/AOL-Time-Warner-drops-AOL-from-name/2100-1025_3-5078688.html

[12] Matthew Karnitschnig, After Years of Pushing Synergy, Time Warner Inc. Says Enough, Wall Street Journal, June 2, 2006, http://online.wsj.com/article/SB114921801650969574.html

[13] Geraldine Fabrikant, Time Warner Plans to Split Off AOL’s Dial-Up Service, New York Times, Feb. 7, 2008, www.nytimes.com/2008/02/07/business/07warner.html?_r=1&adxnnl=1&oref=slogin&adxnnlx=1209654030-ZpEGB/n3jS5TGHX63DONHg

[14] John Letzing, AOL, On The Verge Of Independence, Weighs On Parent, Wall Street Journal, Nov. 4, 2009, http://online.wsj.com/article/BT-CO-20091104-718782.html

[15] Allan Sloan, ‘Cash for . . .’ and the Year’s Other Clunkers, Washington Post, Nov. 17, 2009, www.washingtonpost.com/wp-dyn/content/article/2009/11/16/AR2009111603775.html

[16] Tim Arango, Time Warner Spinning Off Cable Unit, New York Times, April 30, 2008, www.nytimes.com/2008/04/30/business/30warner-web.html?ref=technology

[17] Carolyn Pritchard, Time Inc. to Sell 18 Magazine Titles, MarketWatch, Sept. 12, 2006,  www.marketwatch.com/News/Story/Story.aspx?guid=%7B94967C37%2D9B4A%2D4C1A%2D8AC0%2D64904C1267A1%7D&dist=rss&siteid=mktw&rss=1

[18] “Break-ups and divestitures do not generally get front-page treatment,” notes Ben Compaine, author of Who Owns the Media?  See Ben Compaine, Domination Fantasies, Reason, Jan. 2004, p. 28, www.reason.com/news/show/29001.html

[19] www.dailykos.com/story/2009/9/7/778254/-Rupert-Murdoch-is-a-Fascist-Hitler-Antichrist

[20] Jim Finkle, Turner Compares Fox’s Popularity to Hitler, Broadcasting & Cable, Jan. 25, 2005, www.broadcastingcable.com/CA499014.html

[21] Ian Douglas, Rupert Murdoch is a Marxist, Telegraph.Co.UK, Nov. 9, 2009,  http://blogs.telegraph.co.uk/technology/iandouglas/100004169/rupert-murdoch-is-a-marxist

[22] Karl Frisch, Fox Nation: The Seedy Underbelly of Rupert Murdoch’s Evil Empire? MediaMatters.org, June 2, 2009, http://mediamatters.org/columns/200906020036

[23] www.msnbc.msn.com/id/19817142/

[24] Dean Vows to ‘Break Up Giant Media Enterprises,’ The Drudge Report, Dec. 2, 2003, www.drudgereport.com/dean1.htm; Bill McConnell, Dean Threatens to Break Up Media Giants, Broadcasting & Cable, Dec. 3, 2003, www.broadcastingcable.com/index.asp?layout=articlePrint&articleID=CA339546.

[25] John Nichols and Robert W. McChesney, Our Media, Not Theirs: The Democratic Struggle against Corporate Media (New York: Seven Stories Press, 2002) at 31.

[26] Consumers Union, Consumer Federation of America, Center for Digital Democracy, and Media Access Project, Comments In the Matter of News Corporation/Fox Entertainment Group Merger with Hughes Electronics Corporation/DirecTV, MB Docket No. 03-124, July 1, 2003, www.consumersunion.org/pdf/0701-DirecTV.pdf

[27] Dissenting Statement of Commissioner Jonathan S. Adelstein, Re:  General Motors Corporation and Hughes Electronics Corporation, Transferors, and The News Corporation Limited, Transferee, MB Docket No. 03-124, Jan. 14, 2004, http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-03-330A6.doc

[28] Jeff Chester, Rupert Murdoch’s Digital Death Star, AlterNet, May 20, 2003, www.alternet.org/story/15949

[29] Destruction of Alderaan, Wookieepedia: The Star Wars Wiki, http://starwars.wikia.com/wiki/Destruction_of_Alderaan

[30] News Corporation and Liberty Media Corporation Sign Share Exchange Agreement, News Corp Press Release, Dec. 22, 2006, www.newscorp.com/news/news_322.html.  A frustrated Murdoch referred to DirecTV as a “turd bird” just before he sold it off. See Jill Goldsmith, Murdoch Looks to Release Bird, Variety, Sept. 14, 2006, www.variety.com/article/VR1117950090.html?categoryid=1236&cs=1

[31] Consumers Union, Consumer Federation of America, Free Press, and Media Access Project, Comments In the Matter of Authority to Transfer Control of DirecTV, MB Docket No. 07-18, March 23, 2007, www.mediaaccess.org/file_download/177

[32] Richard Linnett, Media Rivals Backslap at Cable Conference, AdAge.com, June 10, 2003.

[33] Dissenting Statement of Commissioner Michael J. Copps, Applications for Consent to the Transfer of Control of Licenses, XM Satellite Radio Holdings Inc., Transferor, to Sirius Satellite Radio Inc., Transferee, MB Docket No. 07-57, Aug. 5, 2008, http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-08-178A3.pdf

[34] Dennis Wharton, National Association of Broadcasters, NAB Statement in Response to Sirius/XM Proposed Merger, Feb. 19, 2007, www.nab.org/AM/Template.cfm?Section=Search&template=/CM/HTMLDisplay.cfm&ContentID=8258.

[35] Peter Whoriskey and Kim Hart, Justice Dept. Approves XM-Sirius Radio Merger, The Washington Post, Mar. 25, 2008, www.washingtonpost.com/wp-dyn/content/article/2008/03/24/AR2008032401645.html.

[36] The XM-Sirius Merger: Monopoly or Competition from New Technologies: Hearing Before the Senate Committee on the Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights, 3 & 6 (March 20, 2007) (statement of Common Cause et. al), www.hearusnow.org/fileadmin/sitecontent/2007_-_0320_Public_Interest_GroupsStatement-_Senate_Judiciary.pdf

[37] Id. at 6.

[38] Common Cause, Consumer Federation of America, Consumers Union, Free Press, Comments in the Matter of Consolidated Application for Authority To Transfer Control of XM Radio Inc. and Sirius Satellite Radio Inc., MB Docket No. 07-57July 9, 2007, at 1, www.hearusnow.org/fileadmin/sitecontent/xm-sirius_comments.pdf

[39] James Gattuso, Day 505: The XM-Sirius Circus Is Finally Over, Technology Liberation Front Blog, Aug. 7, 2008, http://techliberation.com/2008/08/07/day-505-the-xm-sirius-circus-is-finally-over

[40] Dissenting Statement of Commissioner Michael J. Copps, Applications for Consent to the Transfer of Control of Licenses, XM Satellite Radio Holdings Inc., Transferor, to Sirius Satellite Radio Inc., Transferee, MB Docket No. 07-57, Aug. 5, 2008, http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-08-178A3.pdf

[41] Andrew Ross Sorkin & Zachery Kouwe, Sirius XM Prepares for Possible Bankruptcy, New York Times, Feb. 10, 2009,  www.nytimes.com/2009/02/11/technology/companies/11radio.html

[42] Jon Birger, Mel Karmazin Fights to Rescue Sirius, Fortune.com, March 16, 2009, http://money.cnn.com/2009/03/13/technology/birger_sirius.fortune/index.htm

[43] Former stockbroker and RealMoney.com contributor Tim Melvin worries about the “significant competition for the company going forward” He notes:

Most of the younger people I know have iPod docks in their vehicles for listening to music. Smartphones are bringing music and podcasts to mobile consumers. E-reading machines have wireless connections that can eventually deliver content on a subscription or pay-per-use basis. I really do not need the sports channels from Sirius if I can watch and listen to the games I want on my phone. As time goes by, satellite radio will be viewed as a stepping-stone technology that was replaced by smartphones and other portable media devices.

Tim Melvin, Sirius’ Hopes Keep Slipping Away, The Street.com, Nov. 10, 2009, www.thestreet.com/story/10624757/1/sirius-hopes-keep-slipping-away.html?cm_ven=GOOGLEFI

[44] Olga Kharif, Sirius XM: The Good and Bad Earnings News, Business Week, Nov. 5, 2009, www.businessweek.com/technology/content/nov2009/tc2009115_002716.htm

[45] Melvin, supra 39.

[46] Robert McChesney, Murdoch’s Deal for the Journal: Yet Another Blow for Journalism, Free Press Press Release, July 30, 2007, www.freepress.net/release/260

[47] Michael Copps, Letter to FCC Chairman Kevin Martin, Oct. 25, 2007, http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-277576A1.pdf

[48] Michael Wolff, Rupert to Internet: It’s War! Vanity Fair, Nov. 2009, at 112.

[49] www.freepress.net/comcast

[50] Josh Silver, Too Big to Block? Why Obama Must Stop the Comcast-NBC Merger, Huffington Post, Nov. 13, 2009, www.huffingtonpost.com/josh-silver/too-big-to-block-why-obam_b_356826.html

[51] www.forbes.com/feeds/afx/2009/11/19/afx7143505.html

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

[53] However, experience with regulation of sports programming suggests that FCC meddling has had negative unintended consequences.  See W. Kenneth Ferree, Competition in the Sports Programming Marketplace, Testimony before the Subcommittee on Telecommunications and the Internet, House Committee on Energy and Commerce, March 5, 2008, www.pff.org/issues-pubs/testimony/2008/030508ferreetestimony.pdf; Barbara Esbin, Unable to Watch the Big Game? Testimony before the National Conference of State Legislatures Communications, Financial Services and Interstate Commerce Committee, Apr. 25, 2008, www.pff.org/issues-pubs/testimony/2008/080425esbinNCSLpresentation.pdf

[54] Mike Berkley, The Comcast-NBC Deal is a Defensive Move by Comcast. It’s about Survival, TV News Stream, Nov. 16, 2009, http://tvnewsstream.com/the-comcast-nbc-deal-is-a-defensive-move-by-c

[55] Holman Jenkins, The Economics of Jay Leno, Wall Street Journal, Nov. 18, 2009, at A17, http://online.wsj.com/article/SB10001424052748704431804574541684183772504.html

[56] Chris O’Brien, Beware the Hype Around Mergers, MercuryNews.com, Nov. 12, 2009, www.mercurynews.com/chris-obrien/ci_13756963?nclick_check=1

[57] Scott A. Christofferson, Robert S. McNish & Diane L. Sias, Where Mergers Go Wrong, McKinsey on Finance, Winter 2004, at 2, http://westportcapital.com/library/McKinsey_Where_Mergers_Go_Wrong.pdf.  The authors noted that, “acquirers face an obvious challenge in coping with an acute lack of reliable information. They typically have little actual data about the target company, limited access to its managers, suppliers, channel partners, and customers, and insufficient experience to guide synergy estimation and benchmarks.”

[58] See, e.g., Israel M. Kirzner, Competition, Regulation, and the Market Process: An “Austrian” Perspective, Cato Institute Policy Analysis No. 18, 1982, www.cato.org/pubs/pas/pa018.html

[59] For example, congressional hearings have been held on this topic and the Federal Trade Commission is holding a workshop on December 1^st and 2^nd asking, “Will Journalism Survive the Internet Age?” www.ftc.gov/opp/workshops/news/index.shtml

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

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

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

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

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

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

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

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

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

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

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

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

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

I’ve spent a lot of time here deconstructing and criticizing the proposals set forth by the Free Press, the radical media “reformista” group founded by the prolific Marxist media theorist Robert McChesney.  I have been trying to shine more light on their proposals and activities because I believe they are antithetical to freedom of speech and a free society.  That’s because, as media scholar Ben Compaine has noted, “What the hard core reformistas really want, it seems, is not diversity or an open debate but a media that promotes their own vision of society and the world.”  That’s exactly right and, more specifically, as I argued in my 2005 Media Myths book, the media reformistas want to impose this control by taking the fantasy that “the public owns the [broadcast] airwaves” and extending it to ALL media platforms and outlets.  In other words, McChesney and the Free Press want an UnFree Press.  To cast things in neo-Marxist terms that they could appreciate, they want to take control of the information means of production.  And it begins, McChesney argues, by all of us having to give up this “sort of religious attachment to the idea of a ‘free-press'” from which we all suffer.

Some people accuse me of “red-baiting” or “McCarthyite” tactics when I use the “M-word” (Marxism) or the “S-Word” (socialism) to describe McChesney, the Free Press, and the movement they have spawned.  But these are labels with real meaning and ones that McChesney himself embraces in his work. In his 1999 book Rich Media, Poor Media, he says that “Media reform cannot win without widespread support and such support needs to be organized as part of a broad anti-corporate, pro-democracy movement.” He casts everything in “social justice” terms and speaks of the need “to rip the veil off [corporate] power, and to work so that social decision making and power may be made as enlightened and as egalitarian as possible.”  What exactly would all that mean in practice for media? In his 2002 book Our Media, Not Theirs: The Democratic Struggle against Corporate Media with John Nichols of The Nation, McChesney argues that media reform efforts must begin with “the need to promote an understanding of the urgency to assert public control over the media.” They go on to state that, “Our claim is simply that the media system produces vastly less of quality than it would if corporate and commercial pressures were lessened.”

If you want additional proof of his intentions, then I encourage you to read this lengthy interview with McChesney that appears in the new edition of The Bullet, an online newsletter produced by the Canada-based “Socialist Project.”  (If you ask me, there’s something strangely appropriate about a socialist newsletter named “The Bullet” in light of the millions of people who died while living under socialist tyranny!)  Anyway, let’s ignore that and focus on what neo-Marxist media reform entails according to McChesney.  Because never before has he laid his cards on the table as clearly as he does in this interview.

The “Struggle” for “Media Democracy”

In the interview, as in all his work, McChesney speaks repeatedly about the Marxist concept of “struggles,” which  usually refers to class struggles and worker struggles. But McChesney’s work focuses on “media democracy struggles” as part of an overall struggle for “social justice.”  He says:

Instead of waiting for the revolution to happen, we learned that unless you make significant changes in the media, it will be vastly more difficult to have a revolution. While the media is not the single most important issue in the world, it is one of the core issues that any successful Left project needs to integrate into its strategic program.

In other words, media reform is part of The Big Struggle. The Big Struggle is the effort to overthrow free-market capitalism. And the struggle for “media democracy” is crucial to that, you see, because we are all just pawns whose minds are being manipulated by some far-off corporate puppet-masters in New York and L.A., who are, of course, just feeding us nothing but pro-capitalist propaganda 24/7.  Thus, we have to burn the village to save it, McChesney says:

Many say that corporate journalism, based on profit maximization, best serves a free and democratic society. The position is incorrect. The connection of capitalism to journalism, which has always been fraught with problems, has always been unstable. The relationship between capitalism, journalism, and democracy has never been a sure thing. In the U.S, the notion that capitalism is the natural steward of journalism and should be left alone to provide for a free and self-governing society refers to a period that began during the 19th century. This period ended when owners realized they could make a lot of money by turning journalism into big business. Corporations are not in a position to generate and pay for quality journalism. The news is not a commercial product. It is a public good, necessary for a self-governing society.

In other words, down with private media!  McChesney basically declares that the entire history of private media in America to be one gigantic case of market failure and must be abandoned.

Subsidies to “Save Journalism”

But what’s going to replace private media once McChesney and his media reformistas have moved the regulatory wrecking ball in?  In a nutshell, he wants massive state subsidization of the media:

Once we accept this [the supposed “public goods” nature of all media], we can talk about the kind of media policies and subsidies we want. What are the best ones? How should they be implemented? We are now trying to answer those questions and organize around them.

Herein lies one of the great ironies of McChesney’s work: He spends a great deal of time arguing that the entire history of American media has basically been one big government-created construct (monopolies, entry barriers, subsidies, etc), only to turn around and advocate massive state intervention and subsidies as a solution!  McChesney plays revisionist historian and even tries to paint Jefferson and Madison as media socialists because postal rates from the founding period on down have been reduced for print media mailings. Somehow, McChesney reads this to mean that “the U.S. state has always played a direct and indirect role in facilitating and legitimizing the corporate media system.”  Which is rubbish. The idea that postal subsidies have created “the corporate media system” is preposterous. McChesney is on stronger ground in arguing the state has occasionally helped foster and then protect monopolies, but that is a function of the very “public utility” regulatory regime that McChesney favors! [More on this point down below.]

Meanwhile, in true Rahm Emanual-ian “you-never-want-a-crisis-to-go-to-waste” fashion, the Free Press has started a new project to “Save the News” and move America “Toward a National Journalism Strategy” by endorsing a lot of the same regulations, subsidies, and tax credits that McChesney and John Nichols recently advocated in their Nation magazine essay, “The Death and Life of Great American Newspapers.” As I noted in my City Journal response to that essay back in March, you can file this all under “socializing media in order to save it,” complete with Soviet-style 5-year plans dictated by some faceless elite inside a Beltway bureaucracy. Oh, and there’s the little matter of $60 billion price tag that taxpayers will be left footing.  (But hey, what’s another $60 billion these days?)  Even Free Press favorite Dan Rather is on board with his plan to have President Obama give us “The News America Needs” by “form[ing] a commission to address the perilous state of America’s news media.”  Perhaps once the car commission folks get done driving the U.S. auto industry into the ground they can shift gears, so to speak, and see what they can do to steer journalism onto a supposedly better path.

Down with Advertising

If McChesney and Free Press don’t succeed in destroying private media with their regulatory plans, there’s always Plan B… bleed free market media operators and Internet companies dry by taking away their mother’s milk, advertising.  McChesney argues that “the Internet is increasingly hyper-commercialized” and it is “open[ing] our entire lives to 24/7 injections of advertising messages.”  Thus, wouldn’t you know it, yet another “struggle” is in order!

We need to organize against hyper-commercialism. This is an easy-sell for the Left. We understand that advertising is not something done by all people equally, but rather, done by a very small group of people working on behalf of multinational corporations. Advertising is commercial propaganda…  Advertising is the voice of capital. We need to do whatever we can to limit capitalist propaganda, regulate it, minimize it, and perhaps even eliminate it. The fight against hyper-commercialism becomes especially pronounced in the era of digital communications.  […] There is a fundamental crisis when you are in a world that is entirely commercial, in terms of the integrity of speech and thought. We are at the tipping point and we need to struggle directly against it.

Struggle, struggle, struggle!

Of course, McChesney will have plenty of allies in this particular struggle as Washington continues to wage a war against advertising of all sorts. Of course, there really is no free lunch in this world and something will have to pay for serious news-gathering (and entertainment, for that matter). Of course, McChesney and his Free Press allies will, no doubt, respond that still more subsidies are in order!  There is, apparently, always someone else in their world to whom the buck can be passed.  [But I wonder: Who would be left to pay all the taxes needed to support public media if McChesney’s “struggle” to overthrow The Man succeeds??]

Net neutrality & Infrastructure Nationalization

And don’t for one minute think that McChesney and Free Press are only out for the old media operators.  They’re out for private broadband and Internet players as well.

When speaking about the centrality of Net neutrality regulation to this “struggle” and coming “revolution,” McChesney does a nice job reminding some of us why we have been so concerned about politicizing a debate over network engineering when he says: “What we want to have in the U.S. and in every society is an Internet that is not private property, but a public utility.”  Ah yes, because public utilities have been soooo efficient and innovative in other contexts!  Please.

In advocating increased regulation or state-ownership of communications networks or broadband companies and connections, McChesney seems utterly oblivious to the fact that the very state power he advocates on one hand is the same state power that private parties can corrupt on the other.  He says, for example, that “Our struggle to make the Internet into a public utility conflicts with the interests of telephone and cable firms,” because “Their power rests upon their ability to successfully buy off politicians.”  How does he not see the contradiction?  He’s certainly right to fear that public officials can be co-opted by private interests. (Read up on your public choice theory, buddy!)  But I suppose McChesney believes that his perfect socialist state will be immune to these pressures because it will be run by enlightened, public-minded philosopher kings… you know… like himself.  But that’s nonsense.  See my old essay on the fantasy of “Building a Better Bureaucrat” or Tim Lee’s old essay on “Real Regulators” for more details on why it never works out that way in practice. Or, better yet, since I know he would never read anything I penned on the subject, I encourage McChesney to take a hard look at the definitive 2-volume Economics of Regulation by a far more experienced progressive Democrat, Professor Alfred E. Kahn. In Kahn’s masterwork, you will find the following words of wisdom (and caution) from someone who spent a lifetime studying these issues:

When a commission is responsible for the performance of an industry, it is under never completely escapable pressure to protect the health of the companies it regulates, to assure a desirable performance by relying on those monopolistic chosen instruments and its own controls rather than on the unplanned and unplannable forces of competition. […] Responsible for the continued provision and improvement of service, [the regulatory commission] comes increasingly and understandably to identify the interest of the public with that of the existing companies on whom it must rely to deliver goods.

McChesney makes one final point about Net neutrality that is worth highlighting. When asked whether he had any reservations about making short-term alliances with new media companies or Internet operators such as Google, eBay, Amazon, and Microsoft in the push for Net neutrality regulations, McChesney says: “Absolutely.. But I’ve learned, by participating in over a decade of specific media struggles, that when you are in the short-term and you are fighting to win, sometimes you make tactical alliances.” Nonetheless, he notes, ” the ultimate goal is to get rid of the media capitalists in the phone and cable companies and to divest them from control.” And, so, the ends justify the means in terms of striking short-term alliances with those evil, blood-sucking capitalists.  I hope the folks at Google, eBay, Amazon, and Microsoft are reading McChesney’s radical thinking on communications policy and realize that he and his Free Press reformistas will eventually turn their sights on them just as soon as they are finished socializing the infrastructure layer of the Internet.

Conclusion: Against Media Tyranny

In a very strange sense, I admire Robert McChesney.  He is a man of principle.  And he isn’t ashamed to advocate his principles publicly (whereas some of his Free Press disciples do a very nice job disguising their true intentions).

That being said, McChesney’s principles are dangerous ones. Very dangerous.  They are antithetical to a free society, freedom of speech, and technological progress.  At its core, as I noted in my old essay, “Your Soapbox is My Soapbox,” the repugnant morality behind this “media access” movement is that nothing is truly yours.  “Media democracy” means everything is up for grabs.  Here’s how I put it in that old “soapbox” essay:

Imagine you built a platform in your backyard for the purpose of informing or entertaining your friends of neighbors. Now further imagine that you are actually fairly good at what you do and manage to attract and retain a large audience. Then one day, a few hecklers come to hear you speak on your platform. They shout about how it’s unfair that you have attracted so many people to hear you speak on your soapbox and they demand access to your platform for a certain amount of time each day. They rationalize this by arguing that it is THEIR rights as listeners that are really important, not YOUR rights as a speaker or the owner of the soapbox. That sort of scenario could never happen in America, right? Sadly, it’s been the way media law has operated for several decades in this country. This twisted “media access” philosophy has been employed by federal lawmakers and numerous special interest groups to justify extensive and massively unjust regime of media regulation and speech redistributionism. And it’s still at work today.

Indeed, McChesney has taken this old “media access” movement that Jerome Barron, Owen Fiss, Cass Sunstein and others pioneered long ago, and advanced it to a whole new level, and to its logical conclusion.  The aim is not just to co-opt someone else’s soapbox; it is to smash their soapbox into pieces. It is to tear the very fabric of the First Amendment into shreds and rebuild “media democracy” around the principles not of true freedom, but of state servitude.  You only have as much freedom to engage in speech, reporting, or entertaining as your media overlords will allow.  And God help you if any of it proves popular because then they will really want to crush you like an ant!

I’ll close this rant the same way I concluded my earlier “soapbox” rant:

This arrogant, elitist, anti-property, anti-freedom ethic is what drives the media access movement and makes it so morally repugnant. Freedom doesn’t begin by fettering the press with more chains, it begins by removing those that already exist and then erecting a firm wall between State and Press. The media access crowd has succeeded in breaching that wall with seven decades of misguided and unjust regulation of the press. The movement back toward a truly free press begins by understanding the error in their thinking, rejecting that reasoning, and then embracing, once again, the original vision of the First Amendment as a bulwark against government control of speech and the press.

I’ve got a new essay up over at the City Journal about John Nichols and Robert McChesney’s proposal to have the government heavily subsidize failing media enterprises to “save journalism.” It follows below:

“Socializing Media in Order to Save It“ by Adam D. Thierer

City Journal March 27, 2009

With proposals to nationalize or heavily subsidize various segments of our economy more in vogue than ever, it was probably only a matter of time before someone suggested that America’s media marketplace should be brought into the government fold. John Nichols of The Nation and the prolific neo-Marxist media theorist Robert W. McChesney have now provided the road map for media’s march to serfdom. The cost to the American taxpayer would be at least $60 billion, but the cost for the First Amendment and our democracy would be incalculable.

Nichols and McChesney have coauthored several books and essays about media policy that view the world through the prism of class struggle, “manufactured consent” (á la Noam Chomsky), and the rest of the typical Marxoid tripe about history and economics. In their view, private, for-profit media cannot be trusted. As they stated in their 2003 call to arms, Our Media, Not Theirs: The Democratic Struggle Against Corporate Media, media-reform efforts must begin with “the need to promote an understanding of the urgency to assert public control over the media.” “Our claim,” they continue, “is simply that the media system produces vastly less of quality than it would if corporate and commercial pressures were lessened.”

In a new Nation essay, “The Death and Life of Great American Newspapers,” the authors bring their earlier work to its logical conclusion. Saving journalism, they argue, essentially requires that media become an appendage of the state. Journalism, they claim, is a “public good,” which—like education and 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 propose that government devote $60 billion to “subscription subsidies, postal reforms, youth media and investment in public broadcasting.” Think of it as a “free press ‘infrastructure project,’” they say. “It would keep the press system alive. And it has the added benefit of providing an economic stimulus.” (Isn’t it amazing how everything stimulates the economy these days?)

Perhaps most audaciously, they argue that policymakers must respond to the crisis in journalism “with the same urgency with which they would approach the threat of terrorism, pandemic, financial collapse or climate change.” And they proclaim that their subsidy proposals are entirely consistent with what the nation’s Founders would have wanted:

We have to open the door to enlightened public policies and subsidies. . . . We need an organized citizenry demanding the institutions that make self-government possible. Only then can we, like our founders, build a free press. The technologies and the economic challenges are, of course, more complex than in the 1790s, but the answer is the same: the democratic state, the government, must create the conditions for sustaining the journalism that can provide the people with the information they need to be their own governors.

The Founders cared about a free press, of course, but they didn’t call for massive public subsidies to achieve it. They did put in place one rather important provision—the First Amendment—suggesting what they believed constituted a truly free press: “Congress shall make no law . . . abridging the freedom of speech, or of the press.”

Nichols and McChesney seem utterly naive, however, about the dangers to the First Amendment of putting government in control of media’s purse strings. “We must have a system that prohibits state censorship and that minimizes commercial control over journalistic values and pursuits,” they maintain. Well, good luck with that. If eight decades of Federal Communications Commission meddling in media markets have taught us anything, it’s that if you give bureaucrats the power to regulate the size and the shape of a soapbox, they will inevitably use their authority to regulate the speech delivered on that soapbox—indecency regulation, educational-television mandates, public-access rules, and the Fairness Doctrine are only a few examples. If the FCC received grant-making authority to dole out subsidies to media operators as Nichols and McChesney desire, it’s hard to imagine how journalists won’t be expected to surrender something in exchange. (Consider in this light the bill that Senator Benjamin L. Cardin (D-MD) introduced this week that would allow newspapers to become nonprofit organizations in an effort to help them stay afloat, but would also disallow political endorsements on their editorial pages.)

Nichols and McChesney in fact do envision strings being attached to public financing. They call, for example, for an annual tax credit for the first $200 each American spends on daily newspapers. To be eligible for this indirect subsidy, though, the reader must purchase media that meet criteria set by . . . Nichols and McChesney: “Newspapers would have to publish at least five times per week and maintain a substantial ‘news hole,’ say at least twenty-four broad pages each day, with less than 50 percent advertising.” Missing, moreover, is any mention of who defines what constitutes “news.” It wouldn’t take long for such a process to become a politicized nightmare.

Nichols and McChesney would also require that recipients of this “stimulus subsidy” make at least 90 percent of their content immediately available, free of charge, online. That’s an underhanded way of converting journalism into a giant, government-sponsored commons. (Incidentally, I can’t help but notice how many of Nichols’s essays are locked down on the Nation website, available only to subscribers.)

Nichols’s and McChesney’s argument shouldn’t simply be dismissed as radical, pie-in-the-sky theorizing. The authors have successfully spearheaded an increasingly influential media-reform movement through Free Press, the activist group they cofounded in 2002. The organization’s boisterous band of reformistas work tirelessly to mobilize troops whenever the slightest whiff of media liberalization is in the air. Nichols’s and McChesney’s new article gives us a taste of what we might expect their reform allies in Congress to propose next.

Nichols and McChesney are right about one thing: America’s media operators are struggling in the face of unprecedented competition and unexpected technological change. But the medicine they prescribe is far worse than the disease—for both the profession of journalism and for democracy itself.

Over at Reason’s “Hit and Run” blog, Matt Welch has penned a piece pointing out how it is impossible to make the anti-media activists happy. Welch notes that radical activist groups like Free Press go around demonizing media moguls like Rupert Murdoch because he supposedly symbolizes the fact that will live in an age of media monopolists who puppeteer all our news and entertainment from on high. It’s all 100% B.S., of course, as we have shown here again and again.

But even when confronted by the rise of alternative owners and ownership models, the Free Press fanatics show their true colors by saying that won’t work for them either. Walsh notes, for example, that the skake-up of the old Tribune empire and the emergence of Sam Zell as an independent owner of the Trib — and an owner hellbent on downsizing the old empire, no less — should be exactly what Free Press wants:

So along comes a decidedly unfaceless individualist who buys a newspaper company anchored in his two hometowns ? Chicago and Los Angeles ? and promptly takes it off the stock exchange, even making employees his partners. Instead of expanding his new company’s empire, he sells various pieces off, thus diluting whatever “opoly” we’re on now. All the while mandating more local coverage. Shall we try to guess how the StopBigMedia coalition has reacted to Sam Zell? The Chicago Reader’s Michael Miner talks to various media grumpuses, including Free Press Executive Director Josh Silver, and discovers that Zell is the new, woefully inappropriate poster boy for anti-media consolidation.

Here’s what Silver has to say about Zell:

“He insults journalists and journalism at virtually every whistle stop on his tour,” Silver replied, referring to Zell’s visits to Tribune Company properties. “He says it’s not about democracy ? it’s about profits. The American public and policy makers have to decide whether journalism is produced purely for the reaping of profit or if it’s a central component to a functioning participatory democracy. “And based on the answer to that question,” Silver went on, “you make policy accordingly. There is no such thing as a deregulated media policy system. The only question is, will the media be regulated for the largest media corporations or regulated on behalf of the American public. That’s what all of our anticonsolidation efforts are about.”

Michael Miner of the Chicago Reader points out why this is so silly:

If Zell would shut up, critics like Silver and [Bill] Moyers might notice that he makes a lousy poster boy for big media. He took the Tribune Company private and made its employees nominal co-owners. He’s not acquiring properties — he’s selling them off. America has always had it both ways about that choice Silver thinks the nation needs to make: journalism for profit or journalism for democracy. Zell has loudly and rudely told his staffs that from where he sits the second is predicated on the first, and turning a profit is something he knows a little more about than they do.

So if the Free Press folks don’t want Murdoch on the one hand, or Zell on the other, what do they want? As Ben Compaine notes, “What the hard core reformistas really want, it seems, is not diversity or an open debate but a media that promotes their own vision of society and the world.” That’s exactly right and, more specifically, as I argued in my Media Myths book, the media reformistas want to impose this control by borrowing the fantasy that “the public owns the [broadcast] airwaves” and extending it to ALL media platforms and outlets. In other words, Free Press wants an UnFree Press. To cast things in neo-Marxists terms that they could appreciate, they want to take control of the information means of production.

Don’t take my word for it? Well, then, listen to Robert McChesney. He is the godfather of the media reformista movement, the founder of Free Press, and an avowed socialist. And he has made his intentions in this regard abundantly clear throughout his prolific career. In his book Rich Media, Poor Media, he says that “Media reform cannot win without widespread support and such support needs to be organized as part of a broad anti-corporate, pro-democracy movement.” He casts everything in “social justice” terms and speaks of the need “to rip the veil off [corporate] power, and to work so that social decision making and power may be made as enlightened and as egalitarian as possible.”

What exactly does all that mean in practice for media and media operators? In his book Our Media, Not Theirs: The Democratic Struggle against Corporate Media with John Nichols of The Nation, McChesney argues that media reform efforts must begin with “the need to promote an understanding of the urgency to assert public control over the media.” They go on to state that, “Our claim is simply that the media system produces vastly less of quality than it would if corporate and commercial pressures were lessened.”

Sure, whatever you say, guys. If we just put you and your UnFree Press buddies in control, the media world would be perfect. We’d have plenty of choice and abundant viewpoints represented. Oh, wait a minute, we already have that today!! It’s just that they don’t like the fact that THEIR particular socialist viewpoints are not more widely accepted throughout the media marketplace. Well, tough luck. Hey, I don’t like that fact that not everyone on the nightly news or talking head shows isn’t spreading my libertarian gospel to the world, but I would never be so arrogant as to force them to do so as the UnFree Press reformistas would like to do using the coercive power of Big Government to bend media to their will.