Digital News' Antitrust Hurdle

An opinion written by Tim Rutten of Los Angeles Times last Tuesday, brought to the fore the main hurdle preventing newspapers to charge for online contents: should one paper start, but go it alone, the web-visitor will simply go elsewhere. For a fee based web-news service to truly function, all major players have to synchronize and begin charging at the same time.

But that, as Mr. Rutten points out, smacks of antitrust issues and price-fixing.

What he suggests is that the Obama administration affords the newspaper industry the same antitrust leeway that major league baseball currently enjoys.

According to the opinion, "Executives from many of America's leading newspaper companies and the head of the Associated Press met quietly in Chicago on Thursday to discuss ways to increase revenues from their online operations--presumably by charging visitors to their websites--as well as how to recapture some share of their catastrophically declining classified ad business.

"The meeting, whose participants included an antitrust lawyer to make sure the conversation didn't stray into impermissible collusion or price-fixing, was conducted under the auspices of the Newspaper Assn. of America, and its agenda was titled 'Models to Lawfully Monetize Content.' These guys may be slow on the uptake, but their legal departments have schooled them well in risk management."

Mr. Rutten goes on to say that "Unless the English-speaking world's newspapers find a way to charge for the content they currently give away free on their websites and allow to be aggregated and sold to advertisers by Internet search-engine companies that pay no fees for the privilege, most papers won't survive very far into the next decade."

And this is not crying wolf. American newspapers are losing classified advertising to Craigslist and others by the bucket load--by the $7 billion worth bucket load. To rub salt into these wounds they have also lost 25% of their display advertising over the same eighteen month period, which translates in to an annual loss of $12 billion. Real money, that.

The Associated Press reports that over the same period newspapers online advertising revenue, although rising, only adds up to $445 million, and that's a far cry from spelling viability.

And when it comes to the cost-cutting necessary to meet the financial realities of a vastly reduced revenue stream, what will go first? You guessed it: that oh, so expensive, and most likely over-qualified journalist we currently pay for in Paris, or Rome, or Barcelona, or even in our own backyard.

Make do with less in the newspaper world means, essentially, make do with less quality unbiased reporting. That, in any concerned citizen's book is too hefty a price to pay.

But the problem, as Mr. Rutten points out, "is that newspapers can't begin charging for online content or licensing their journalism to search engines unless all the English-speaking papers do it at once. That's currently illegal under laws barring collusion and price-fixing."

I wanted to clarify that very paragraph with him, and he kindly responded to my email and had no problem with me quoting his reply.

Here's the exchange:

My question:

"When you say the problem is that that newspapers can't begin charging for online content or licensing their journalism to search engines unless all the English-speaking papers do it at once, do you mean that if all newspapers do not do so simultaneously, online readers will simply go somewhere else that's still free?

"Or is there a specific/legal reason LA Times, for example, could not begin charging for its online content tomorrow (which I, for one, would pay for)?"

Tim Rutten's reply:

"You've got the point exactly. Given the reach of the web--every Saturday, for example, I read the Guardian's excellent book section--unless all the quality English language newspapers are allowed to act in concert, readers simply will vote with their clicks and go to the free sites."

And that's the crux.

For although Speaker of the House Nancy Pelosi has endorsed the idea of allowing the newspaper industry at least a temporary exemption from the antitrust and price-fixing statues--which would allow such a concerted and coordinated start to fee-based online news--the Justice Department's antitrust division begs to differ, and sees no reason for such an exemption.

This looks to shape up as a very interesting confrontation, one with the survival of the newspaper industry in general--and good journalism in particular--at stake.