Media have traditionally relied on a mix of advertising and subscription revenue to keep the lights on – and to produce a mix of high-quality, thoughtful, well researched, compelling news, information, educational, and other content that is necessary in a modern democracy. The internet has disrupted those revenue streams. And while some media outlets have shored themselves up on other sources of support – grants, government transfers and licensing fees, wealthy patrons, or the like – such funding is both the exception and de minimis in the overall operation of our media ecosystem.

The chapters that follow consider these institutions’ struggle to survive technological disruption. Can traditional media enterprises survive internet-era market forces? And if not, can they survive the governmental interventions (and governmental controls) that may be necessary to ride the market out?

In the first contribution to this section, Professor Laurie Lee looks to the relative success of local television news compared to newspapers over the recent past, to explore whether there are lessons that can be learned from the local television business model that can help print news to continue as a going concern. Her chapter surveys a significant amount of material, both historical and regulatory, to understand the enduring success of local television news – as well as to ponder how likely it is to continue to survive, if at all. And in an observation that bears on the other contributions to this cluster, Professor Lee notes that broadcast’s most significant advantage may lie in the “regulatory protectionist policies” it enjoys under federal telecommunications law. It is doubtful under the First Amendment that these same policies could be carried over to newspapers.

Paul Matzko carries the discussion forward from here in a chapter that considers a recent mechanism advanced to support traditional media institutions in Australia. This mechanism, commonly referred to as a “link tax,” requires social media platforms to pay some amount to Australian media outlets for links on the social media platform to content hosted by the Australian firms. As innovative as it may seem, Matzko argues that the link tax has an early twentieth-century forbear in the “hot news” doctrine. “Hot news” meant that news organizations could claim fresh scoops as their own exclusive quasi-property for short periods of time – and sue competitors who picked up the story too soon. This judicially created doctrine secured some established news organizations’ revenue against the technological disruption of the day (competitive entry in the telegraph market). But critics including Matzko have argued that hot news created entrenchment effects that negated whatever benefit to journalism courts claimed it would provide. The “link tax,” Matzko argues, will do the same: “If redistribution of online revenue is a priority for policymakers, then almost any other mechanism for accomplishing that goal would be preferable.”

Lee’s and Matzko’s chapters both focus on what could be considered business models that distribute revenues from one set of (profitable) stakeholders to another set of (unprofitable, or at least less-profitable) stakeholders though a regulatory mechanism. The final two papers go a step further, considering permutations of direct public support for uneconomic media platforms. It bears note that all four authors contributing to this discussion consider at least a minimal level of regulatory intervention in markets – even if Lee ponders whether it is necessary and Matzko urges caution against the dangers of the Australian link tax that he examines.

In his contribution, Professor Kyle Langvardt minces no words, starting with the clear statement that “The commercial market for local news in the United States has collapsed.” Two-thirds of the United States, he tells us, have no local newspaper; those papers that still serve their communities are struggling. What is the remedy? Considering the unviability of private markets to provide a solution, at least outside of edge cases such as Substack and other idiosyncratic markets, Langvardt looks to the clear alternative: public subsidies for traditional media institutions. Public funding of the press is traditionally disfavored in the United States – but, Langvardt notes, “A[a]lmost all wealthy democracies [other than the United States] give substantial financial support to the news media.” Why should not we? Indeed, he notes that even in the United States there are various subsidies for media – such as discounted postage.

Professor Langvardt argues that American concerns about First Amendment rights and state control (or capture) of critical media institutions explain much of America’s public stinginess toward the news. He considers a range of options that a public option for media may take, focusing on designs that may pass First Amendment muster. His discussion touches on several points, from the unresolved standing of government speech under the First Amendment (it may not be constitutionally problematic for the government itself to establish a media platform) to voucher-based programs directed through plebiscite.

Rounding out this section, and this volume, Professor Ramsi Woodcock also considers a model for traditional media businesses that involves more intervention in the market. Unlike Langvardt’s argument for direct public subsidies to support traditional media, Woodcock proposes two indirect interventions, one aimed at newspapers’ market for readers and the other at newspapers’ market for advertisers.

On the reader side, Woodcock would use the postal service’s letter-box monopoly to tax high-visibility social media posts. This would force lower-quality content out of the market, creating space for newspapers to shift resources back from the opinion-reporting that has proliferated in recent years to the more fact-oriented reporting that characterized mid- and late-twentieth century journalism. He believes this would restore the moderating influence that newspapers once exerted over American politics.

On the advertiser side, Woodcock would raise advertising revenues for newspapers by restricting advertising on social-media platforms, with the goal of pushing advertisers to spend more on advertising in traditional media. Unlike the link tax considered by Matzko, advertising restrictions would be more likely to restore newspapers’ revenues because they would not depend on social-media companies’ demand for news, which Woodcock believes to be small. Both of Woodcock’s proposals are grounded in a frank, unsparing recognition that social media is simply built for attention and advertising in a way that traditional journalism is not and never can be – and that public policymakers will have to rebuild the playing field if they want journalism to survive competition in the digital economy.

17.1 Introduction

Despite the sharp decline in the number of local newspapers, it’s important to understand that other legacy news-delivery platforms – particularly local TV news – have not been suffering the same degree of loss. Pew Research Center found that local TV news actually saw its audience increase across the evening and late-night timeslots in 2020, and that local TV companies earned more revenue than the previous year.Footnote ¹ In fact, local TV was deemed to be on par with or outpacing cable and network TV. Pew survey data show more Americans still prefer to get their local news from television than from any other medium, including online. Even with an increasing preference for digital delivery, “local television stations have retained a strong hold in the local news ecosystem.”Footnote ²

Why and how has local TV news managed to stay afloat while local newspapers close their doors? Even as we mourn the loss of local news from print media, we should not overlook its surviving sibling that continues to churn out news to small and medium markets. Why do some media survive in the face of competition from new, disruptive media technologies? What lessons might be learned? Is there a role that government might play? Yet with the loss of local newspapers, are broadcast stations and online platforms adequate substitutes for providing local news? Or is local broadcast news actually just on a slower decline compared to newspapers?

17.2 Surviving Disruption

Much of the blame for the fall of the newspaper industry rests with the rise of the internet and online competition. For example, digital offerings have cannibalized the editorial side of the business as online aggregators. Social-media sites have become the alternate entry point for daily news as readers rapidly migrate to social media.

Newspapers have also been hit with a loss of advertising revenue to online companies like Facebook and Google.Footnote ³ The most devasting blow is from the online siphoning of roughly $5 billion in classified ad revenues – a critically important revenue source for newspapers.Footnote ⁴ Dedicated online businesses, such as Craigslist, and social-media companies, like Facebook, are able to easily provide less-expensive access to their online “Marketplace” for individuals and merchants to buy and sell goods and services.

As a result, cost-cutting ownership practicesFootnote ⁵ – particularly by hedge-fund ownersFootnote ⁶ – have led to a death spiral for newspapers. Granted, trends have shown that revenue growth from advertising expenditures had been weakening and not keeping up with inflation enough to be sustainable.Footnote ⁷ But newspapers’ shrinking page counts, staff layoffs, and general financial crises are largely due to the advent of the internet and the online business competitors it spawned.

17.3 Understanding Local Television News Success

To understand how local television news has fared compared to local newspapers, we should examine distinguishing factors such as regulation and technology, as well as other market forces, including consumer behavior.

17.4 Discussion

It’s clear that, while newspapers are struggling economically, local television news enjoys a number of comparative advantages that have kept it afloat. Of course, it is unclear how long these advantages will continue and whether they will be enough to counter the disruptive forces of the internet. And if local TV news does continue to thrive, it is additionally unclear whether it and competing online news platforms would be sufficient substitutes for the loss of a strong newspaper presence in their respective communities. There have been various approaches suggested to help the newspaper industry readjust, recover, and possibly regain market share and its important role of watchdog journalism. Looking to local TV news as a model is one approach to consider.

17.5 Conclusion

Even if local TV news remains resilient to internet disruption and is the last local news medium standing, there is concern that it is not a perfect substitute for the kind of journalism that daily print newspapers have traditionally provided. Since TV-station coverage areas largely encompass towns and cities, smaller communities and even neighborhoods will likely not receive the same level of journalistic attention as would their weekly print newspaper. TV stations may employ fewer and less experienced reporters. Many fear that deeper forms of reporting and investigative explorations that make civic journalism valuable to communities will be lost.Footnote ¹⁴⁴

Still, if local TV news proves to be the model of success for legacy media, local journalism will remain available for most communities nationwide. TV news stations can ensure that large “news deserts” do not develop, where citizens become even more politically polarized, less engaged civically, and lose their ability to hold government officials accountable.Footnote ¹⁴⁵ But this situation is made much better if local newspapers – even co-owned with broadcasters – are enabled to prosper.

18.1 Introduction

In February 2021, the Australian federal government enacted the “News Media and Digital Platforms Mandatory Bargaining Code,” which requires Facebook and Google to pay domestic news outlets for linking to their websites. It was a first-of-its-kind mechanism for redistributing revenue from Big Tech platforms to legacy journalism, and it has attracted global attention from policymakers looking to halt the internet-fueled decline of the traditional news industry. Thus, the success or failure of what critics call Australia’s “link tax” has significant implications for the future of both the World Wide Web and the news industry writ large.

But while the full consequences of Australia’s regulatory innovation will not be apparent for several years, there is a precedent from the United States that could shine light on the possible outcomes. In the early twentieth century, U.S. courts created a “hot news” doctrine to bolster the Associated Press newswire service when it faced new competitors and navigated the technological disruption caused by the spread of the telegraph. The intended and unintended consequences of the American hot news doctrine offer a cautionary tale to contemporary policymakers interested in an Australian-style link tax. Both hot news and the link tax are forms of enclosure that turn a category of information into a novel form of property. Doing so has radical implications: rewarding politically connected incumbent firms, punishing insurgent competitors, and producing ideological consensus.

It is not breaking news that newspapers in the twenty-first century have experienced a general decline that has dramatically affected circulation, advertising, and revenue. The rise of the consumer internet eroded classified advertising, once the single most significant source of newspaper revenue. In Australia, classified revenue fell from $1.5 billion in 2002 to just $0.2 billion by 2018. At the same time, overall Australian newspaper revenue fell by nearly the same margin – from $4.4 billion to $3 billion – suggesting that the migration of classified ads to online clearinghouses like Craigslist was a principal factor in the collapse of the old newspaper financial model.Footnote ¹

18.2 Who Should Pay and How?

Australian newspapers had a revenue problem and looked to their national government for redress. A straightforward solution would have been to tax the online classified-ad platforms and redistribute the money to bereft newspapers, whose market share had fallen from 96 percent to 12 percent. However, such an approach would have been straightforwardly anti-competitive, would have generated costs that fell directly on consumers, and would have targeted domestic classified-ad platforms. Instead, Australian newspapers sought to take a slice from a much-larger financial pie: online search-and-display advertising, which enjoys quadruple the revenue of online classifieds.Footnote ² Since two companies that are headquartered abroad – Facebook and Google – dominate search-and-display in Australia, the costs of a link tax would not fall as directly on Australian consumers (so long as neither company pulled out of the market entirely).

Online classified platforms derive nothing from newspapers, so taxing them to subsidize newspapers would not have seemed equitable (nor would it have been particularly lucrative). By contrast, Facebook and Google operate as news aggregators, linking to newspaper articles in order to sell ads and garner user data. Since aggregators have a proximate relationship to the news, it is easy to claim that they are free-riding off of journalists’ hard work and should pay a fair share.Footnote ³ As Australia’s Federal Treasurer Josh Frydenberg put it, “This is really a question of fairness. If you prepare the content and the digital platforms are using it to bring traffic to their websites, then they should pay for it.”Footnote ⁴

Note that the justification offered is moral, rooted in a particular concept of what is fair. It is not a proposition that translates well in the offline world. For instance, it would be strange to suggest that brick-and-mortar retailers have a moral obligation to pay manufacturers not only for their product but also for the mere right to resell and display the product on their shelves. (Typically, the relationship is reversed, with manufacturers paying major retailers for prime shelf space. Efficient distribution is a value-added proposition.)Footnote ⁵ Fundamentally, the problem that the link tax is meant to address is not moral but structural, as policymakers attempt to buttress traditional media organizations that are coping with technological disruption, albeit with varying degrees of success.

Yet news aggregators had little to do with the financial decline of the newspaper industry. They were not major players in the rise of online classified advertising. Additionally, online advertising has shifted display-ad revenue away from its traditional proximity to the news. Advertisers have more non-news digital options for placing their ads – social media, streaming, etc. – than they did back when print newspapers were one of the few mediums for reaching large audiences. For example, a clothing store would have once placed an ad in the local newspaper by necessity (and not because it was a newspaper per se); how else could they affordably reach a large group of potential customers? Today, however, that clothing company would be more likely to place an ad with a TikTok influencer or to buy a display ad on Pinterest, neither of which has anything to do with news reporting. Only a miniscule fraction of the revenue lost from display ads in print newspapers was transferred over into advertising on online news aggregators.Footnote ⁶ In other words, even if one were to somehow abolish online news aggregation, it would not return significant display-advertising revenue to newspapers.

Nevertheless, after several years of studying a variety of financial redistribution mechanisms – including a per-click hyperlink tax, the source of the now somewhat-misleading “link tax” moniker – the Australian Competition and Consumer Commission opted for a mandatory-bargaining scheme. News aggregators are expected to negotiate revenue sharing deals with news producers in exchange for linking to their articles and videos. If they fail to do so within three months, the treasurer is given sole authority to appoint an arbitrator, require the parties to submit competing offers, and then choose whichever offer they find fairest.Footnote ⁷ Thus far, the mandatory-bargaining component has remained notional, given that the treasurer has yet to exercise his authority. But the mere possibility of enforcement was enough to convince Google and Facebook – after some brief initial resistance – to quickly strike a number of deals with Australia’s largest news producers.Footnote ⁸

The early returns from the law have heartened proponents. Australia’s largest newspaper and magazine conglomerate, News Corp Australia, negotiated a $50 million deal with Google, while broadcasters Seven and Nine got $30 million apiece. The total reported transfer to all news outlets from both Google and Facebook as of March 2022 was $200 million, with 90 percent going to News Corp, Seven, and Nine. Flush with cash – for instance, Nine Entertainment reported a 39 percent increase in earnings because of the payments – the outlets have embarked on a journalist-hiring spree.Footnote ⁹

However, the newly fattened bottom lines of Australia’s largest media enterprises are unlikely to assuage critics of the link tax. Indeed, given that News Corp is owned by Rupert Murdoch, opponents have dubbed it the “Fox News tax,” raising concerns that the link tax will merely entrench the global news magnate’s disproportionate share of the Australian news industry and bolster his ability to influence politics in a particular ideological direction.Footnote ¹⁰ Others have argued that the link tax is an example of ham-fisted government intervention, an “extraction of money at the point of the proverbial gun” rather than an “honest attempt at collective bargaining.”Footnote ¹¹ The boldest claim, however, comes from Sir Tim Berners-Lee, the inventor of the World Wide Web, who was “concerned that the Code risks breaching a fundamental principle of the web by requiring payment for linking between certain content online” and “could make the web unworkable around the world.”Footnote ¹²

18.3 Made in America

This is not the first time a national news industry has successfully pushed for government intervention to subsidize operations via a novel legal mechanism in response to technological disruption and financial competition. In the early twentieth century in the United States, the Associated Press (AP) newswire service found itself facing a similar crisis. Half a century earlier, a group of New York City newspapers had banded together to share the costs of producing original journalism. For example, a journalist on assignment in Charleston, South Carolina, or London, England, could send back dispatches about the latest events, from which each AP member could then construct a news story with their own stylistic spin. This system allowed newspapers to focus their efforts on the local news beat while defraying the high cost of national and international coverage. In addition, as historian Richard Schwarzlose puts it, the AP “was partner in a common-law marriage with Western Union,” which enjoyed a functional trans-continental telegraph monopoly.Footnote ¹³ As a result, the AP could not only share costs across a national pool of member newspapers, but it could transmit dispatches more quickly than could its various regional competitors.

The AP’s competitive advantages made membership a desirable privilege. By the turn of the twentieth century and by design, only about 30 percent of American newspapers had been allowed to join the AP fold. First-class AP members were given the right to exclude from membership all other newspapers in a 120-mile radius. It was a trade-off. On the one hand, more members meant that shared costs could be spread more widely; however, adding too many members would dilute the value of existing memberships by introducing local competition between member newspapers. And since AP membership rights were transferable, when a member newspaper folded, its membership could sell for the modern equivalent of hundreds of thousands or millions of dollars at auction. As one newspaper owner put it, “The exclusive character of the news [was] an essential element of its value, and incentive to its collection.”Footnote ¹⁴

But that value proposition was under serious pressure by the turn of the century. Antitrust action against Western Union and the rise of competing telegraph lines had eroded AP’s technological advantage. Newspaper owners clamoring for AP membership lobbied state governments and appealed to the courts, asking for a mandate that the AP sell its wire service to all comers as a “quasi-public utility affected with a public interest.”Footnote ¹⁵ But when the Illinois Supreme Court ruled against the AP in Inter-Ocean Publishing Co. v. Associated Press in 1900, the AP dodged this requirement by moving to New York and re-organizing under a designation intended for fish and game clubs.Footnote ¹⁶

Hunting club or not, by the 1900s, dissatisfied newspaper owners like magnate William Randolph Hearst – better known today as the inspiration for the movie Citizen Kane – took aim at the AP cartel and founded competing newswires, including United Press and the International News Service. Hearst was a sensationalist and innovator, the first newspaperman to print letters to the editor and color cartoons (including the popular Yellow Kid strip, which originated the phrase “yellow journalism” as a description of Hearst’s often-lurid article topics).Footnote ¹⁷ Instead of the AP’s dry, boring dispatches full of legislative votes and business mergers, the new wire services provided colorful accounts that had human-interest angles. Furthermore, they were early adopters of the faster, cheaper teletype technology.

The Associated Press, then under the leadership of Melville Stone, needed to find a mechanism that would stymie external competitors, quiet restive AP affiliates, and preserve the value of possessing an AP membership. Stone believed that the AP would find its salvation in “hot news” (a name derived from the saying that news was “hot off the press,” pages still warm from the printing process). Stone believed that newswires deserved an exclusive, time-limited, legal right to disseminate information collected by one of its correspondents or affiliated newspapers. This was a significant departure from the standard newsgathering practices of the time; it had been routine to extract facts from competing newspaper stories and rewrite them into stories for one’s own paper. An entire ecosystem of evening-edition and West Coast newspapers had sprung up around the practice, repurposing information gathered from morning editions and East Coast papers.

This system had been tolerated because it helped morning newspapers by making it “notorious” – as early AP member Horace Greeley put it – that “certain journals have the earliest news” while evening papers were forced to regurgitate from the leavings of the morning papers. And the practice was so beneficial to the morning papers that Greeley said he “would rather that those [evening newspapers] who do not take it should copy than not.”Footnote ¹⁸ Indeed, the Associated Press itself engaged in so-called “news piracy.” As Stone reported to the AP Board of Directors after the U.S. Supreme Court ruling in INS v. AP, the “proprietary news case had not only great advantage for us, but it had some disadvantage” by “necessarily put[ting] an end to our pirating news from the London papers.”Footnote ¹⁹ But the loss of that benefit was outweighed by the way in which the hot news doctrine would reinforce the competitive advantages of the Associated Press. Since the AP had the largest news-gathering network, decreasing the amount of free-riding performed by non-member newspapers and insurgent newswires would simultaneously raise costs for competitors, increase the value of an AP franchise, and convince current AP members to remain in-network and continue paying the substantial membership fees required.

Stone found a test case involving an employee of an AP affiliate in Cleveland, Ohio, who had been bribed by the International News Service to relay information gathered from the newsroom’s bulletin board. The AP sued, the federal district court ruled in its favor, INS appealed, and the case then went to the U.S. Supreme Court, which upheld the district court’s decision in International News Service v. Associated Press (1918). Melville Stone got his wish for a hot news standard when the Supreme Court granted newswires and newspapers a “quasi-property” right over freshly collected news as rightful recompense for “one who gathers news, at pains and expense, for the purpose of lucrative publication” and to prevent unfair competition.Footnote ²⁰ The Supreme Court did not set a cooling-off period for hot news, though the district court had suggested a minimum of “three or four hours,” as long as “sufficient time has elapsed to afford opportunity for general publication.”Footnote ²¹ Regardless, the Supreme Court had created something wholly new, a category of property separate from copyright, trademarks, trade secrets, stock tips, and other established categories of proprietary information.

18.4 Enclosure of an Informational Commons

Both the hot news doctrine and the link tax have created a novel, quasi-property right in information. The proper term for describing that process is “enclosure,” an echo of how rentiers in early modern Europe turned previously common pasture, open to the use of all village residents, into private property by erecting fences and legal boundaries. Similarly, as legal scholar Yochai Benkler wrote in 1999, “We are in the midst of an enclosure movement in our information environment,” as “our society is making a series of decisions that will subject more of the ways in which each of us uses information to someone else’s exclusive control.”Footnote ²² The invention of the internet undermined the value that could be extracted by a class of quasi-monopolistic newsgatherers who had been able to charge consumers inflated prices for access to news information and the classifieds marketplace.

With those geographically defined news-distribution monopolies under threat from digital disruption, it is understandable why the formerly landed newspapers would seek a legal mechanism to enclose their corner of the World Wide Web – to erect a high regulatory fence that could keep out all those who would graze on their news without permission. The metaphor breaks down, however, given that in the case of internet news aggregation, the grazing does not crop the grass, thus starving the animals and leaving the owner bereft; rather, the aggregator funnels users to the news originator, expanding their audience at no marginal cost to them. It is hardly the fault of the aggregator that the news producer lost an entirely different form of income (from classified ads) and has suffered as a result.

Proponents of hot news and a link tax often justify a quasi-property right on the basis that reporting the news takes hard work and great expense. As the Associated Press had argued in its brief, “News is a business commodity, because it costs money and labor to produce and because it has value for which those who have it not are ready to pay.”Footnote ²³ In other words, it is property because we have it, it was hard to produce, and you want it so much that you will pay for it. The U.S. Supreme Court in INS v. AP had agreed, adopting what would later become known as the “sweat of the brow” standard for property in information.Footnote ²⁴ Factual news itself, not merely copyrightable stories about that news, was considered a form of time-limited property under the hot news doctrine.

By contrast, the traditional standard for those “noblest of human productions – knowledge, truths ascertained, conceptions, and ideas” – was that they should be, in the words of Justice Louis Brandeis (from his dissent to INS v. AP), “free as the air to common use.” Exceptions could be made to this rule, especially “productions which, in some degree, involve creation, invention, or discovery” – a standard which certainly applies to newsgathering – but it was an exception that proved the rule.Footnote ²⁵ For instance, copyright was a form of property invented to be, as Lord Thomas Macaulay put it, “a tax on readers for the purpose of giving a bounty to writers.”Footnote ²⁶ According to dissenters like Justice Brandeis, the question of whether or not an abstraction should be proprietized was a function of the social utility derived and not the labor that went into making it. The goal was not payment for authors per se but rather the creation of a necessary incentive that would lead to greater literary production and thus net social benefit.

This is an old debate, which legal scholar Richard Epstein has summarized as the difference between “those who see the source of property rights in the positive law” and “as a command of the sovereign” versus those who ground “property rights on the traditions and common practices within a given community” and see property arising “from the bottom up, and not from the top down.” In the latter conception, the state ought to play merely a discovery role, figuring out “what the community has customarily regarded as binding social rules” and then enforcing those organically generated rules. Indeed, this debate underlines the current contest over the link tax. Should the government of Australia use positive law – given “its administrative ease of application,” to quote Epstein again – to subsidize news outlets via the creation of a novel, quasi-property right over links to news articles? Or should it instead constrain itself to conforming the law to the spontaneously evolving technical and community standards of the World Wide Web?Footnote ²⁷

18.5 Wreck-It Rupert Breaks the Internet

It is important to recognize just how radical a departure such a link tax enclosure is from the norms of the World Wide Web. This was the source of Sir Timothy Berners-Lee’s concerns about the link tax’s effect on the future of the internet. Berners-Lee invented the concept of hypertext in 1980 – which links text on one site to text in another location – and then connected it to emerging protocols for transmission and identification, thus creating the first modern website in December 1990. As he later described, his intention was always that “normal links should simply be references,” meaning that a hyperlink did not imply endorsement or claim ownership of the linked site. The link was no more the property of the reference site than the bare footnote to this paragraph is the property of the cited author.Footnote ²⁸ The resulting spiderweb of interconnections spread quickly and globally, thus earning the name “World Wide Web.”

The Australian link tax, however, turns the hyperlink itself into a form of quasi-property by granting an exclusive right of control and compensation to the reference site.Footnote ²⁹ As internet-theorist Konstantinos Komaitis notes, this “changes fundamentally the meaning and scope of hyperlinks” and “ascribes to them a meaning they are not meant to have.”Footnote ³⁰ Links to news sites are no longer “normal links” under Berners-Lee’s taxonomy. Google and Facebook can no longer legally share a mere link to one of Rupert Murdoch’s papers without paying for his permission to do so (or, at least, without risking the wrath of the treasurer of Australia for their failure to bargain). Yet, according to Berners-Lee, it is “the ability to link freely … without limitations regarding the content of the linked site and without monetary fees” that “is fundamental to how the web operates, how it has flourished till present, and how it will continue to grow in decades to come.”Footnote ³¹ The link tax, by proprietizing the hyperlink and legally enclosing online news, threatens to snip a set of threads tying together the World Wide Web.Footnote ³² Australia has been a relatively minor player in global internet development, so the Web can likely survive even so fundamental a challenge. But the success of the link tax Down Under could propel the rise of an imitative, rentier class across the globe, each nation snipping away at the threads that bind together the Web. The days of a truly “world-wide” web may be numbered.

To understand just how radical the legal enclosure of hyperlinks could be, consider other similar forms of information and how social benefit is derived from their remaining publicly accessible. Compare a news website to the house you occupy; both required significant expense and effort to construct and furnish. However, owning a house at a particular location does not give the title holder ownership of the street address. That is because there is immense social and civil benefit derived from that address remaining public information – remaining “free as the air.” Its nonownership is a traditional, well-established communal norm. It is useful for taxing authorities, commercial entities, and social connectedness; in the internet age, it is a vital part of services such as Google Maps that greatly benefit travelers.

Turning street addresses into private property could have potential upsides, like helping shield celebrities from stalkers or domestic-abuse survivors from former partners. Perhaps it could even generate rents for those holding these novel rights in street addresses by forcing phone-book companies and registries to pay for listing rights. But more likely, enclosure would simply destroy these networks that provide socially beneficial uses without returning any monetary benefit to the owner.

Indeed, this is the reason why, when looking at the global map of Google Street View locations, you will find large blank spots in Germany. Based on an understandable, historical fear of government surveillance and an emphasis on personal privacy rights, German courts have upheld “informational self-determination” and prohibited corporations from using images of people’s homes or even listing their street addresses without obtaining express permission. Enclosing this category of information – which is freely available in other parts of the world – destroyed much of the social utility derived from Google Street View and did so without returning any kind of monetary benefit to German residents. Given the value Germans place on privacy, it appears to be a price they were willing to pay.Footnote ³³ But it serves as a reminder that the decision to enclose a commons can generate distributed social costs and informational deadweight losses.Footnote ³⁴

Or imagine a world in which authors – jealous of the revenue extracted from their hard work by used bookstores or the loss of revenue from library borrowing – convinced the government to proprietize factual information about books.Footnote ³⁵ In this imaginary world, in order to display a book cover on its shelves or list a book title or description in its catalog, a bookstore or library would need to obtain and pay for the express permission of the newly endowed rights holder. This might create some financial benefit for authors, but it would certainly devastate the used-bookstore and library industries. Given the costs of regulatory compliance and decreased competition, that would leave consumers literarily impoverished with fewer titles carried in fewer locations and at higher prices.Footnote ³⁶ Likewise, the future of a World Wide Web in which an increasing number of hyperlinks are considered property is an internet composed of fewer links, offering fewer services, and providing less information, even as it returns only a fraction of that lost consumer value to a handful of websites.

18.6 Pass Go and Collect $200

The desirability of a new property right should be determined by weighing its social benefits and detriments. To do so, it is first necessary to study the contexts from which hot news and the link tax originated. Both were rooted in efforts – by the Associated Press in the U.S. in the 1910s and Australian news outlets in the 2010s – to protect natural advantages that were crumbling under technological disruption. In the mid-nineteenth century, a natural monopoly in telegraphy developed in response to its high capital costs and the need for government-granted easements, a situation from which the Associated Press, via its relationship with Western Union, derived a massive competitive advantage. As discussed previously, the late-nineteenth-century erosion of the AP’s derived telegraph monopoly launched both a wave of new competition and Melville Stone’s reactionary hot news crusade.

Australian newspapers at the turn of the twenty-first century did not have a comparable technological advantage, but newspapers in the pre-internet era typically enjoyed a different kind of natural advantage: a geography-based regional monopoly in news provision. As Berkshire Hathaway CEO Warren Buffett once put it, “If you have a monopoly newspaper … your idiot nephew could run it.”Footnote ³⁷ Buffett backed his words with his wallet, going on a U.S.-newspaper buying spree in the 1970s. By that point, Australian newspaper magnate Rupert Murdoch had already inherited the family newspaper in Adelaide and embarked on his own buying spree of distressed newspapers as the industry consolidated. Classified-ad revenue – which Murdoch once described as “rivers of gold” – was the financial bedrock on which Murdoch ultimately built a network of domestic broadcast stations, international newspapers, and, in 1996, a new American cable news network, the Fox News Channel.Footnote ³⁸

But by the 2000s, it was apparent that technological disruption of the newspaper industry was on the horizon. Online classified-ad platforms provided a better, faster, and cheaper service to consumers than print newspapers could, and newspaper owners were generally slow to pivot and create their own online platforms lest they cannibalize their existing business model. In addition, some of the earliest online news aggregators did not merely share links to articles hosted on the newspaper’s own websites – driving display-ad revenue – but simply copied the content wholesale and posted it on their own sites. By the end of the decade, the newspaper industry’s income had fallen precipitously; at The New York Times, for example, revenue had halved from $3.27 billion in 2006 to $1.59 billion in 2012.Footnote ³⁹ But the paper’s executive editor Bill Keller blamed not the direct copiers – which could be, and often were, sued for copyright violations – but aggregators like The Huffington Post, which merely linked to The Times’ articles, and which Keller dramatically compared to Somali pirates.Footnote ⁴⁰

The frustrations of newspaper owners percolated up to the Associated Press, which announced its intent to spend more on its legal efforts to win “appropriate compensation” for its newsgathering. Like in Australia, the primary cause of newspaper revenue decline was the loss of classified ads, but there was nothing the NYT or AP could do about the likes of Craigslist and other classified ad platforms. They could, however, target early news aggregators like The Huffington Post and Drudge Report, which were dependent on linking to newspapers. The Associated Press had waged a war against news piracy in the early twentieth century; and in the early twenty-first century, the Associated Press and member newspapers charged once more into the breach, albeit one opened by the advent of the internet instead of the decline of a telegraphic monopoly.

Little about the rhetoric involved had changed in a century. Back in 1917, district court judges had accused the International News Service of being a “parasite,” which by “taking the news” would kill off the Associated Press and then “meet the same fate that every parasite meets,” dying “with the stock upon which it feeds.”Footnote ⁴¹ Likewise, a 2009 article in the Los Angeles Times was titled “Internet Parasites” and opened with an elaborate analogy in which newspapers were compared to the hardworking, bread-baking Little Red Hen of the eponymous folk tale, while online aggregators played the role of the lazy dog, cow, and pig who “undercut her price and each other’s” until all were driven out of the bread business.Footnote ⁴²

The moment also demonstrated the continuing relevance of Melville Stone’s crusade for hot news. From 2008 to 2012, a wave of scholarship and activism called for a revival of a federal hot news doctrine (which had lapsed in the 1930s) with INS v. AP as a precedent.Footnote ⁴³ If news itself – and not just copyrightable stories about the news – were considered a form of quasi-property, then free-riding online papers and bloggers would have to either wait to publish their own derivative articles or pay the newspapers for the right to do so promptly. Yet while a closely watched Federal Trade Commission panel in 2009 discussed “potential revenue sources from changes in law” to bail out the newspaper industry – including federal hot news legislation – the proposals went nowhere in either Congress or the courts.Footnote ⁴⁴ In part, that was because early aggregators were small fry; the oft-maligned Huffington Post, for example, had only $30 million in revenue in 2010, at which point the NYT was seeking to recoup nearly fifty times that amount.Footnote ⁴⁵

18.7 “Advertising Only Is Dead”

In any case, by the middle of the decade, the larger American news outlets had discovered a new, even more successful financial model. The newspapers might have lost classified ads and their regional monopolies, but they now enjoyed a potentially global audience in which the marginal cost of every additional subscriber was zero. They slapped up subscription paywalls, dribbled out a handful of free news articles each month to inveigle new subscribers, and watched their subscription bases swell. For example, The New York Times had flipped its $88 million operating loss in 2012 into a $109 million profit by 2021, in large part by multiplying its online subscriber count from less than one million readers to more than ten million.Footnote ⁴⁶ With growth and profits this torrid, demand for a revived hot news doctrine went cold.

However, the idea of a quasi-property right in news persisted Down Under. While the NYT and Associated Press complained and dithered, Rupert Murdoch acted. In an insightful speech at a Federal Trade Commission Workshop in 2009, Murdoch acknowledged that “the old [newspaper] business model based on advertising-only is dead” and any replacement “that relies primarily on online advertising cannot sustain newspapers over the long term.Footnote ⁴⁷ The reason is simple arithmetic…. The old model was founded on quasi-monopolies such as classified advertising – which has been decimated by new and cheaper competitors.” Instead, “good journalism will depend on the ability of a news organization to attract customers by providing news and information they are willing to pay for.” By 2009, Murdoch had already begun to pivot to a subscription model, well before his peers.Footnote ⁴⁸

Murdoch’s acute business analysis did not, however, alleviate his sense that news aggregators were unfairly appropriating his content. He decried those who “take our news content and use it for their own purposes without contributing a penny to its production,” and some who “rewrite, at times without attribution, the news stories of expensive and distinguished journalists … all under the tattered veil of ‘fair use’” but which is truly “theft.” Bear in mind that his speech was titled, “From Town Crier to Bloggers: How Will Journalism Survive the Internet Age,” suggesting a capacious definition of unfair online competition. Murdoch might have made the smart move and pivoted his newspapers to a subscription model, but he was still determined to crack down on bloggers, aggregators, and copiers by restricting their right to profit from his news articles without his express permission. “There’s no such thing as a free news story,” Murdoch enjoined, “and we are going to ensure that we get a fair but modest price for the value we provide.”Footnote ⁴⁹ Of course, what Murdoch saw as collecting a “fair but modest price,” critics saw as him extracting a pound of flesh – vengefully taking that which was not his by right.

While the push for an enhanced property right in news in the United States stalled, Murdoch was able to take advantage of his even greater influence over Australian media and politics. As Rod Sims – the head of the Australian Competition and Consumer Commission, which drafted the mandatory-bargaining rules – acknowledged, it was Rupert Murdoch who first proposed a link tax.Footnote ⁵⁰ Sims recently stepped down, but Murdoch’s personal influence within the link tax regime is likely to continue given that the new head of the competition committee, Gina Cass-Gottlieb, is a former director of the Murdoch family trust.Footnote ⁵¹

18.8 Concentrate, Consolidate

Rupert Murdoch is both the driving force behind the Australian link tax and its greatest beneficiary. That is because the Australian newspaper industry is one of the most highly concentrated in the world. One study of media concentration ranked it third out of thirty countries, behind only China and Egypt, which have nationalized news outlets and authoritarian governments. It is so concentrated that more than half – 51.9 percent – of all newspaper readership in Australia goes to newspapers affiliated with Murdoch’s News Corp. Throw in the next three networks by size, and only 7.4 percent of the market is left for independently owned papers.Footnote ⁵² It should not be a surprise that Murdoch’s News Corp and the Nine Network together received over 90 percent of the total money brokered between Google, Facebook, and Australian newspapers. The largest conglomerates in a highly concentrated industry are naturally best able to extract the greatest financial returns from the new regulations they helped design.Footnote ⁵³

This is an expected outcome from informational enclosure. As legal scholar Yochai Benkler notes, enclosure increases input costs for everyone “because some information previously available at no charge from the public domain is now available only for a price.”Footnote ⁵⁴ Previously, another website or aggregator could freely link to a news article; doing so now, however, comes at a cost. News producers and distributors can compensate for those higher costs by either sharing fewer links or by adjusting their organizational strategy to reduce costs – merging, in this case.Footnote ⁵⁵

Benkler’s taxonomy of organizational structures can be adapted to the Australian media landscape. News Corp is a blend of two organizational forms. It is, like most traditional newspapers, a “quasi-rent seeker,” an entity that sells exclusive access to a time-sensitive product.Footnote ⁵⁶ But News Corp is also something that Benkler calls a “Mickey” (after Disney’s famous Mouse), meaning a highly integrated firm with a large catalog of valuable content. News Corp is horizontally integrated across a national network of newspapers and radio and television stations. A quasi-rent-seeking “Mickey” has the most to gain from enclosure because the value of its large informational holdings increases; and it has the least to lose since horizontal integration mitigates increased transaction costs by allowing resource-sharing from across the firm. In short, member newspapers do not have to pay to link to each other, while non members do.

This incentivizes smaller newspapers to merge or to join with larger existing firms. Enclosure thus propels consolidation “of a greater portion of the information production function in the hands of large commercial organizations.” In 1999, Benkler presciently predicted that “a world dominated by Disney, News Corp., and Time Warner appears to be the expected and rational response to excessive enclosure of the public domain.”Footnote ⁵⁷ Given that Australia already has one of the most concentrated news industries in the world, the anti-competitive effects of enclosure should be a particular concern.Footnote ⁵⁸

There has already been a severe imbalance that is evident when looking at which companies have benefited from Australia’s mandatory-bargaining regime. Big newspaper conglomerates like News Corp, Seven, and Nine have each won tens of millions of dollars from Google and Facebook. But smaller, nonprofit, and public outlets have struggled to receive the same consideration. Ostensibly, the mandatory-bargaining rules allow these outlets to appeal to the Australian federal treasurer, who can impose arbitration (although the treasurer has yet to do so in any instance). However, even if the rules functioned as designed, smaller outlets would still simply have “less clout than a bigger player, than a News Corp,” in the words of media critic Jeff Jarvis.Footnote ⁵⁹ That includes Croakey Health Media, which reaches indigenous communities with health information. Croakey’s editor-in-chief, Melissa Sweet, has asked the federal treasurer to compel Google and Facebook to begin mandatory bargaining, but she worries that they “do not have that political power.” A system that requires companies to “bend the ear of the Treasurer” if they are unable to strike a deal with Google or Facebook on their own is a system that will be more responsive to the likes of Rupert Murdoch than to those like Melissa Sweet.Footnote ⁶⁰

Furthermore, an anti-small bias is designed into the mandatory-bargaining code. It expressly limits mandatory-bargaining rights to news organizations with a minimum of $150,000 in revenue. That excludes most bloggers, newsletters, nonprofits, and even small startup newspapers. The $150,000 limit would be an unusual criterion if the goal of the link tax, as originally stated, was truly to enforce “fairness” in the distribution of the news by ensuring that aggregators pay all newsgatherers. But if the goal is merely financial redistribution from Big Tech to Big Ink – from Google and Facebook to News Corp and other news conglomerates – then it makes perfect sense.Footnote ⁶¹

The problem is that enclosure, in general, creates incentives for consolidation, just as Yochai Benkler predicted a quarter of a century ago; creating this kind of size threshold only heightens the consolidation pressure for companies that would benefit by meeting it. For example, Broadsheet Media – a small Australian city guide specializing in restaurant reviews – falls below the mandatory-bargaining threshold and thus cannot compel Google to offer them compensation for linking users to their restaurant recommendations. But if a larger conglomerate newspaper were to start a competing culture guide in Broadsheet’s market, it would be qualified for mandatory bargaining, thus driving Broadsheet out of business or into a merger.Footnote ⁶²

18.9 “Property Rights Talk”

The early returns from Australia’s link tax suggest that there will be anti-competitive outcomes. The history of the hot news doctrine is instructive in this regard. After the victory in INS v. AP, the Associated Press grew enormously, with membership swelling from 35 percent of all daily newspapers in 1912 to 67.8 percent by 1948, while total revenues nearly tripled. The ratio was even more skewed for morning newspapers, of which a remarkable 96 percent were affiliated with the AP by the 1940s.Footnote ⁶³ Indeed, AP head Melville Stone had worried that the U.S. Supreme Court’s decision was so useful to the AP’s enterprise that it might “destroy our competition or hamper it in such measure that it will make us seem a monopoly,” thus attracting “very dangerous” antitrust attention. The longstanding goal of Associated Press leadership in the early twentieth century was not monopoly power but “moderated competition.”Footnote ⁶⁴

From Stone’s perspective, the hot news doctrine would cement the AP’s control over existing members, who were restive over high telegraphy fees, worried about the promise and peril of radio news, and tempted to leave because of the AP’s reluctant decision in 1915 – under antitrust pressure from the U.S. attorney general – to allow members to receive news from competing wire services.Footnote ⁶⁵ By reducing free-riding by non-members, the hot news standard would theoretically raise the costs of leaving the AP fold. However, Stone stepped down from his active duties shortly after the legal victory, and his successor, Kent Cooper, did not share Stone’s interest in pursuing a hot news-based, anti-competitive strategy. Instead, Cooper reduced fees while increasing the number of member newspapers.

Cooper’s approach worked to the benefit of William Randolph Hearst, who was not only the head of the INS but also the single largest owner of newspapers with AP memberships. Hearst had lost INS v. AP in his capacity as INS head, but his AP holdings hedged that loss significantly. Indeed, the post-case boom in the size of the AP meant that even more of Hearst’s papers were quickly added to the AP fold. For Hearst, creating the INS was at least in part a way to increase his bargaining power within the AP – a way to pressure it to loosen its cap on the number of newspapers allowed into membership.

It is also a reminder that the point of asserting an informational property right can be something other than the direct financial benefit that it entails. Even if a property right is never formalized nor defended in court, its mere existence – and the implied threat of assertion – can boost negotiating power or constrain unwanted behavior. Publisher and AP member Horace Greeley once described the inveterate complaints about news piracy as something “talked of for effect’s sake.”Footnote ⁶⁶ Complaining has its own utility, a function that the AP’s Stone sought to boost by inventing a novel property right in hot news.

This “property-rights talk,” to use legal scholar Douglas Baird’s phrase, may bear on the Australian link tax situation.Footnote ⁶⁷ If the goal of inventing a novel quasi-property right over hyperlinks was the creation of an equitable and transparent redistribution process, then the chosen mechanism has already proven itself to be a failure. But if the link tax’s goal was instead to bolster the bargaining power of well-connected, incumbent newspaper conglomerates, then the link tax has been a major success. That distinction also makes sense of the fact that the mandatory-bargaining system has yet to be formally invoked by Australia’s federal treasurer. The system’s nominal purpose and actual function are quite different. By persuading Google and Facebook to sit down with large outlets like News Corp, the link tax may have already fulfilled its true purpose.

18.10 Censorship and Consensus

There are other negative consequences that stem from informational enclosure beyond industry consolidation and diminished competition. When the consolidated power of an industry is dependent on governmental support, it exacerbates the risk of either overt censorship or the creation of an artificial consensus. It is too early to predict any particular outcomes from Australia’s link tax in this regard, but there are warning signs. The tax vests a great deal of discretionary power in a single, appointed position: the federal treasurer. And the mandatory-bargaining process is a black box. Initial negotiations between news outlets and aggregators are private. If those negotiations fail and an appeal is filed, the federal treasurer is under no obligation to explain why they mandated arbitration or chose not to. When concerns about the opacity of the bargaining process were raised, the head of the Australian Competition and Consumer Commission retorted that “the objective was never transparency…. The simple thing was evening out the bargaining power. If deals are done that the media companies are happy with, then it’s a success.”Footnote ⁶⁸ It is hard to imagine a design more likely to result in regulatory capture and untoward political influence on behalf of favored media groups.

There is a subtler danger than overt censorship. News media consolidation tends to favor centrist politics and the creation of ideological consensus. Smaller, more radical newspapers will naturally have greater difficulty than larger firms in building the political capital needed to “bend the ear” of a partisan treasurer or their appointed arbitrators. Without intending to, the link tax could set the stage for decreased ideological diversity in the output of the Australian newspaper industry.

Something similar happened in the aftermath of the hot news doctrine. Although the test case in INS v. AP involved news piracy in Cleveland, Ohio, the subject of the pirated wires was the world war being waged in Europe. Hearst had developed a pro-German reputation prior to U.S. entry into the conflict, becoming the “most hated man in the country” (though he averred that his anti-war views made him “the only powerful sane man on the mad planet”). Hearst changed his tune after the U.S. declaration of war in 1917, but by that point, each of the major Allied governments had already barred INS reporters from using their cables or postal services, angry about INS newspapers running unapproved (but mostly true) stories about various military setbacks and political machinations. Hearst sounded a defiant note – “I will not supplicate England for news”! – but his newspapers still needed coverage from the front.Footnote ⁶⁹ Hearst was forced to rely heavily on information obtained from the AP’s wire reports and did so until he was caught in Cleveland. By contrast, Stone and the AP had deferred to French and British censors and had earned special, expedited privileges for AP reports.Footnote ⁷⁰ Back in the United States, the AP encouraged President Wilson to create a censorship board and pledged its “hearty support” for the war effort.Footnote ⁷¹

In this context, granting a property right over hot news reinforced wartime censorship by guaranteeing that the most enthusiastically pro-government wire service carried the freshest news. In his dissent from INS v. AP, Justice Brandeis recognized this problem, noting the “danger involved in recognizing such a property right in news” when it aligned with “prohibitions imposed by foreign governments.”Footnote ⁷² There were even concerns within the AP about the situation. Stone’s successor, Kent Cooper, later said that he “disliked the idea of the Associated Press having exclusive access to and being an outlet for the propaganda tainted announcements of foreign governments, which in effect set The Associated Press up as the exclusive mouthpiece in America for these governments.”Footnote ⁷³ That kind of knock-on government censorship is relatively easy to spot. There is, as of yet, no evidence of a similar problem in Australia today involving the link tax.

However, what is less visible but no less pernicious are the ways in which enclosure and consolidation can stifle peripheral voices, creating an artificial ideological consensus even without formal censorship. By the early twentieth century, the Associated Press had earned a reputation for conservatism, opposition to organized labor, and disinterest in racial issues. Garrison Villard, owner of The Nation, accused the AP of siding “in ninety-nine cases out of a hundred” with “the views of the employing class.”Footnote ⁷⁴ INS, on the other hand, reflected Hearst’s more progressive politics, his desire to “see the press fulfill its noble calling, and as the mouthpiece of the people, rule, regulate, and reform the world.”Footnote ⁷⁵ Other, smaller newswires cropped up in the 1900s and 1910s to address the oversights of the AP, including the Federated Press, which served a group of socialist newspapers, and the Associated Negro Press, which reached a growing national network of black-owned newspapers. The hot news standard was never strictly enforced, but a rigorous hot news regime would have been damaging for these second-tier newswires, which often relied upon basic information gleaned from the AP. Through its cozy relationship with the federal government and a relative disinterest in serving radical or marginalized communities, the AP’s rise to predominance by the 1940s may have played an important role in the formation of the post–World War II liberal consensus.Footnote ⁷⁶

18.11 Friend or Foe?

Censorship concerns aside, it is possible that the link tax’s bark will be worse than its bite, as was the case with the hot news doctrine. The mandatory-bargaining rule has yet to be formally invoked or challenged in court. And the major news conglomerates do have a substantial interest in keeping news aggregators in the Australian market. Perhaps the strangest aspect of the rhetoric revolving around the link tax is that it often assumes an unnecessarily adversarial relationship between news producers and news aggregators. Remember, aggregators did not cause the decline of local newspapers. Aggregators actually provide crucial assistance to papers that have been able to transition away from peddling classified ads and instead pivoted towards a subscription-based financial model. Aggregators function as global discovery and distribution networks for newspapers, which is why newspapers almost invariably keep their websites open to search-engine indexing. If news-aggregator “piracy” were truly a problem, stopping Google would be as easy as inserting a simple text file (robots.txt) into a website’s code. It is so easy that U.S. courts have recognized that the failure to implement such code grants an “implied license” to aggregators to index and link to a website.Footnote ⁷⁷

That discovery-and-distribution function has significant monetary value. Google claims to direct consumer referrals worth $218 million to Australian media companies yearly. Facebook claims $407 million.Footnote ⁷⁸ Both companies have an incentive to exaggerate their contribution, but their willingness to pay hundreds of millions to stay in the Australian news market suggests that it is not too far from the truth. And the value of news aggregation is backed by research from overseas. When Spain passed a tax on snippets (the brief description of a website that appears below the hyperlink), Google News pulled out of the country entirely, giving researchers a natural experiment about the effects of (dis)aggregation of online news. All eighty-four major Spanish online newspapers lost a huge amount of traffic and revenue, with the losses concentrated among the smallest newspapers.Footnote ⁷⁹ By severing the mutually beneficial relationship between news producers and news aggregators, Spain’s snippet tax left everyone poorer and consumers less informed.

Australian newspapers will naturally wish to maximize their share of the revenue from mutually beneficial deals struck with aggregators. But they also have an incentive not to completely drive aggregators away, as happened in Spain. The best-case scenario would be that the link tax is an extreme example of “property-rights talk” or jawboning, not an effort to create a quasi-property right over hyperlinks. If it is jawboning, the link tax is a signal that Australian newspapers want to be taken seriously, not literally. It would then merely reset the bargaining equilibrium at a different value proposition than if the link tax did not exist. Such a scenario may be true, but it is a dangerous game to play, given the high stakes involved.

Policymakers in Canada, the United Kingdom, and the European Union are looking to Australia’s experience for guidance while considering implementing their own versions of a link tax.Footnote ⁸⁰ But a link tax can undermine mutually beneficial exchange, that is, news producers receiving free distribution and distributors accessing free content, and generate significant downside risks, for example, inequitable enclosure, corporate consolidation, ideological consensus, and a snipped World Wide Web. Thus, a link tax is a questionable option for addressing the decline of the legacy news industry. If redistribution of online revenue is a priority for policymakers, then almost any other mechanism for accomplishing that goal would be preferable.

19.1 Introduction

The commercial market for local news in the United States has collapsed. Many communities lack a local paper. These “news deserts,” comprising about two-thirds of the country, have lost a range of benefits that local newspapers once provided. Foremost among these benefits was investigative reporting – local newspapers at one time played a primary role in investigating local government and commerce and then reporting the facts to the public. It is rare for someone else to pick up the slack when the newspaper disappears.

The local newspapers that do remain in operation are badly diminished. Most have cut their print circulation either by narrowing geographical reach,Footnote ¹ distributing the paper only a few days a week,Footnote ² or moving to an online-only model. Almost all surviving newspapers have made severe cuts to reporting staff. These cuts have diminished the quantity and depth of local coverage. Investigations that dig beneath the surface of police reports and press releases are costly and beyond most surviving newspapers’ means. It is much more convenient, and much more common, to run low-cost pro forma stories that merely repeat the official line.

Local newspapers of the twentieth century had their own problems, but overall these problems were much less dire. When newspapers made cuts and their quality suffered, it was usually because management wanted to report high profit margins to investors.Footnote ³ But revenues themselves remained quite high.Footnote ⁴

Revenues were high because twentieth-century papers inhabited a technological “Goldilocks zone.”Footnote ⁵ The high cost of printing created economies of scale – big papers with big printers incurred less cost per page, so markets naturally encouraged papers to grow their operations. Distribution costs went up over long distances, though, so it was not generally in a publication’s interest to grow the audience by acquiring long-distance subscribers. Instead, the most successful operations achieved scale by saturating the local market.

Under these conditions, most local markets could only support one or two such printer/distributors – and this monopoly or duopoly on printing and distribution served as an anchor for a newspaper’s entire operation. The lack of competing publisher-distributors, in turn, created opportunities to package and sell a “bundle” of sports, lifestyle, home and garden, and local and national news. The inclusion of classified ads and advertiser-friendly “soft” content in the bundle allowed newspapers to cross-subsidize the costly work of investigative reporting.

The internet has destroyed the Goldilocks zone that made this business model possible. Today the marginal cost of distribution is zero, and geographical distance is irrelevant. Economies of scale remain, but local journalism institutions are in no position to capture them. Many readers access content on an à la carte basis, typically mediated by some type of online recommendations platform, and the old bundle of “hard” and “soft” content, “local” and “national” content, is no longer marketable.

These market changes have not wiped local news out completely. Some high-quality paywalled products have enjoyed significant success. Mega-papers such as The New York Times or The Guardian can still thrive by marketing a multimedia super-bundle to far-flung subscribers. But this model only seems possible in very large urban markets, and even when it works, the need to reach out-of-town readers can create pressures for a newspaper like The New York Times to divert reporting resources away from New York City concerns.Footnote ⁶

Other publications have found success by publishing some kind of a smaller product, such as a newsletter, behind a paywall. The Charlotte Ledger, for example, offers a daily Substack letter to about 2,000 subscribers for $99 per year. Downtown Albuquerque News offers a weekday online-only paper to 450 subscribers for $100 per year. This appears to be a sustainable business model, but one that is probably incapable of producing a volume of content that is comparable to that of a traditional paper.Footnote ⁷

Some philanthropy-funded, donor-funded, and/or VC-funded outlets have emerged as well, and these often produce high-quality content. But even in large markets, these outlets are unlikely to have the bandwidth to produce the volume and variety of content found in a traditional newspaper, or to achieve the market saturation necessary to play the central role in community life that local newspapers did during most of the twentieth century.Footnote ⁸

At one time, many hoped that the internet would create new opportunities for volunteers to produce free community journalism – and at some level it has. Quite a bit of social-media activity involves communications that some might consider reporting – even on the low-profile app NextDoor, users “report” (and misreport) suspicious activity on their block. But volunteer reporting, typically uncoordinated, has obvious limits as a substitute for an industry that employs full-time professional reporters.Footnote ⁹ Indeed, the low-quality information that amateurs and saboteurs circulate on social media and in similar settings only intensifies the public need for professional journalists to play a corrective role.

This is all to say that there is little reason to expect the private sector to produce any reliable, widely reproduceable model to recover what has been lost – or that it is unlikely, at least, that any such model will emerge on an acceptable timescale.Footnote ¹⁰ If commerce, philanthropy, and volunteerism will not sustain high-quality, wide-circulation local journalism, then the only viable models for journalism will have to depend for financial support on the government.

19.2 Public Media and Subsidized Private Media

Almost all wealthy democracies give substantial financial support to news media. But in the United States, there is a widespread and deep-seated fear among American policymakers and journalists themselves that government actors will inevitably capture and exploit media organizations that depend on public support. This fear explains – or at least provides a rationalization for – America’s uniquely stingy approach to its news media. According to research conducted by Timothy Neff and Victor Pickard, the United States spends just $3.16 per person on its public media, while Germany spends $142.42 on public media per person, Norway $110.73, and the UK $81.30.Footnote ¹¹

America’s concern about state capture is probably somewhat excessive – the sky has not fallen in Iceland, where per-capita state expenditures on media outstrip those in the United States by a factor of about 13 to 1. Yet state capture is not an entirely unrealistic concern either – state institutions in flawed democracies around the world have used subsidies to influence news coverage, and America’s increasingly troubled political system is nothing if not “flawed.” The question, then, is how to structure a subsidy for local journalism that mitigates the state-capture concern as well as is reasonably achievable.

There are, broadly, two ways for the public sector to support journalism financially. The United States practices both methods in modest ways, but at nowhere near the levels that most wealthy democracies do.

19.3 Concerns about Constitutionality and State Capture

Even assuming that a broad-based subsidy is politically achievable, however, it is also likely to draw a constitutional challenge. Such a challenge would almost certainly center on the program’s eligibility criteria and the compatibility of these criteria with the First Amendment.

A completely neutral subsidy available to any media organization that wants it is not desirable. However broadly the subsidy might be drawn, it will have to exclude at least some media institutions to achieve its goals. A subsidy for local news, for example, would probably exclude media institutions that do not report news at all, or that consist entirely or primarily of commentary on national developments. Beyond this basic criterion, one can also expect that the subsidy would require beneficiaries to meet some minimum threshold of quality and human decency.

All these requirements would favor some kinds of speech over others. This favoritism could pose a serious problem if courts apply the “public-forum” doctrine – an uneven but often severe set of First Amendment rules for public programs that underwrite private speech. But it is also conceivable that courts would view a local-news subsidy as the government’s own speech rather than as a form of regulation and, on that basis, exempt the program from any kind of First Amendment scrutiny at all. The stark difference between these two doctrinal worlds – government speech versus public forum – makes it very important to determine which one of them we are in. And if it is impossible to answer this question conclusively up front, then we should determine how likely it is that a court would apply public-forum principles to the kind of broad-based subsidy we have in mind. If it seems likely that courts would apply the public-forum doctrine to the subsidy, then the subsidy’s designers would have to tread lightly to avoid invalidation.

19.4 Limited Options

In sum, the First Amendment as currently interpreted seems to allow three broad strategies to support local media:

1. 1. Congress may create its own media institutions and then provide them the financial resources to run local affiliates around the country. These institutions may be in the mold of the Agency for Global Media, which is housed within the State Department, or it may be a publicly funded nonprofit corporation like the Corporation for Public Broadcasting. The Supreme Court has held that government may do this without inadvertently opening a public forum. That means that Congress should have the ability to require the new media institution to observe norms of professionalism, objectivity, and balance, and to create institutional firewalls to protect for editorial independence.

2. 2. Congress may give subsidies to existing private media institutions and guarantee these institutions’ editorial independence in much the same way that it guarantees editorial independence at the Corporation for Public Broadcasting and the Agency for Global Media. But in guaranteeing that it will not withdraw the subsidy based on editorial decisions, Congress is very likely to become committed to a full “viewpoint-neutrality” requirement under the public-forum doctrine. This viewpoint-neutrality requirement will make it very difficult for Congress to set minimum standards for journalistic quality.

3. 3. Congress might give subsidies to existing private media institutions as in strategy 2 while also clarifying somehow that these media institutions now speak on behalf of the government and that the government has control over the message. This strategy would allow the government to avail itself of the “government speech” doctrine, which means that the government could safely deny the subsidy to low-quality outlets. The problem, obviously, is that this kind of incursion onto the independence of the press would largely defeat the purpose of having a press at all.

Among these options, the first one – a massive expansion of public media – is in most respects the best. There is American precedent for this model in a dramatically smaller form. PBS and NPR enjoy broad public support despite their perennial funding battles, and their journalistic operations are widely respected.

This model is relatively uncomplicated from a legal perspective as well. Insofar as the courts have applied the First Amendment to public broadcasting, they have generally done so in a way that supports editorial independence at these institutions. Courts have not, so far, given any reason to fear that First Amendment litigation will undermine or interfere with these programs’ operations. For all these reasons, a public media expansion would be an attractive and straightforward way to provide economic support for local journalism.

The one real shortcoming of this approach – other than the longstanding political opposition to public media – is that on its own, it would not support private news institutions that may already be established in a community. If struggling private news institutions are forced to compete with better-funded public options, then a public media expansion seems certain to accelerate their decline. Even with strong public media, the loss of these private institutions would badly diminish the plurality and resiliency of the overall media landscape in ways that may be hard to foresee.Footnote ⁴⁹ Therefore, some kind of subsidy for nonpublic media institutions is probably desirable in any event, either as a standalone program or as a supplement to a public media expansion.

19.5 Designing a Subsidy

The question, then, is how to design this kind of program in a manner that is least likely to fall under constitutional challenge. As I have discussed, it is likely that courts would construe a broad media-subsidy program as a public forum for First Amendment purposes. In principle, this would allow the government to set some viewpoint-neutral rules for the kind of content the program will support, and at what level. But in practice, it can be hard to predict where the line lies between content classifications and viewpoint classifications. This uncertainty introduces a degree of litigation risk into any element of a subsidy that turns on content. Program designers will be well-advised to avoid content classifications to the greatest extent practicable.

Some degree of content classification is probably unavoidable and relatively safe. A program designed to promote local journalism can probably get away with requiring local coverage.Footnote ⁵⁰ But it is less certain whether content classifications designed to ensure that funds go to legitimate institutions would survive review.

Bob McChesney has proposed to hold referenda in which voters would name a short list of news outlets in their community to receive federal funds. The few top-ranking outlets then would become eligible to take “journalism vouchers” that individual community residents allocate to the participating institution of their choice.

Vouchers are promising. The Supreme Court has upheld school tuition-voucher programs over objections that these vouchers gave an unconstitutional benefit to religious schools. Direct, preferential grants by government to parochial schools might have violated the First Amendment’s Establishment Clause. But if the government left the final choice with individuals who overwhelmingly awarded their vouchers to parochial institutions, then the government’s hands were clean.Footnote ⁵¹ A similar line of reasoning could inoculate a journalism voucher from First Amendment-based challenges: It is not viewpoint discrimination or even content discrimination for the government to give funds to individuals who then spend them according to personal preference.

The primary difficulty with a voucher-oriented program, however, is that one still must set some conditions to determine which organizations may collect vouchers and seek public reimbursement. Otherwise, program funds could be diverted to uses that are not related to the purpose of the fund. Churches, for example, might encourage members to use their voucher to buy the church bulletin; or retailers might give incentives for customers to “subscribe” to “news” about products on sale. And for the program to have the most impact, it will probably make sense to concentrate vouchers on a small menu of publications within a community.

McChesney’s proposal of a ranked referendum is likely to address these concerns without requiring government officials to set content criteria. But the Supreme Court has indicated fairly clearly that it would view even a popular referendum as yet another form of viewpoint discrimination. In Board of Regents v. Southworth, the Court warned that a campus referendum to decide funding for student groups would violate the First Amendment. “To the extent the referendum substitutes majority determinations for viewpoint neutrality it would undermine the constitutional protection the program requires…. Access to a public forum … does not depend upon majoritarian consent.”Footnote ⁵²

An irony here is that in the glory days of local news, the business model of a robust community newspaper really did depend on something like popular consent in the form of large market share, which enabled high economies of scale. It is only when majorities express themselves through a political process – here a direct referendum, but legislative action would count as well – that the First Amendment kicks in and concerns about majoritarian tyranny flare up.

Whether or not this dichotomy between political majoritarianism and market majoritarianism makes any sense, it is bedrock in American constitutional culture. And it may provide an opening for a public subsidy program to concentrate its funds on widely read and widely trusted community papers. Rather than asking community members to choose which local news outlets are worthy to receive public subsidies, the government might implement a system of content-neutral subsidies to simulate the monopolistic incentive structure that made the old local newspapers viable. The government might, for example, provide matching funds for each subscription a local publication picks up – and then sharply escalate the degree of match as the publication achieves a higher degree of saturation within a defined geographical radius.

Such a system would involve some degree of technical challenge, as well as several difficult design choices. But it would also seem to avoid the concerns about state influence and content neutrality that have traditionally underlain the American suspicion toward public news subsidies. In many ways, the incentive structure I propose would offer a spiritual successor to the postal subsidies that Congress has at various points extended to the press.

Those subsidies, too, came with content-neutral conditions that Congress adjusted over the years to achieve different structural goals. In some years, the subsidies were drawn to reward long-distance readership. In other years, the subsidies were drawn to reward local readership. A twenty-first-century subsidy for local newspapers might be drawn to reward popular outlets that are capable of reaching a large segment of the community and offering a common reference point on local events.

Hopefully, many recipients of a program like this one would use their new revenues to pick up the hard, investigative reporting work that so many legacy papers have been forced to forego. But even “soft” news on culture, sports, and community events could provide real value by helping to consolidate a sense of place and local community. If nothing else, a consistent source of local news might help to displace the excess of ideologically polarizing national news that dominates most contemporary news consumers’ media diets.

20.1 Introduction

It is usually a mistake to suppose that a company is the best judge of how its business works.Footnote ¹ Or that an industry is the best judge of how the industry works. AT&T is a good example. When the Justice Department sat down with management in 1981 to negotiate a breakup of what was then a monopoly provider of telephone service, government lawyers asked which part of the company management wanted to keep after the breakup – the long-distance operations or the regional networks.Footnote ² The long-distance operations had long been the company’s most profitable, so management asked for those.Footnote ³

It was a mistake. The long-distance operations had been profitable only because AT&T had owned the regional networks and could use them to deny access to competing long-distance companies seeking to complete calls.Footnote ⁴ Once AT&T had spun off the regional networks, the company could no longer do that.Footnote ⁵ Competitors flooded the long-distance market, driving down AT&T’s profits. But the regional networks remained protected from competition thanks to the prohibitive cost of running new wires to individual homes. They flourished. Management had failed to grasp that the real source of AT&T’s power was its regional-network monopolies, not its long-distance operations. Two decades later, AT&T was forced to sell itself – to one of the regional networks.Footnote ⁶

If management sometimes has trouble understanding the value proposition of the single company that it runs, we can forgive newspapers for not understanding the value proposition of the entire industry that they constitute.

Over the past decade, the newspaper industry has been trying to stave off collapse brought on by the very low cost of internet communication.Footnote ⁷ That low cost has all but eliminated barriers to entry into both the news industry and the broader market for reader attention. That has forced newspapers to engage in ruinous competition for a shrinking share of overall public engagement.Footnote ⁸ In local news markets, the result has been bankruptcy as newspapers’ declining share of reader attention has reduced the value of newspapers’ main product – advertising distribution – to advertisers.Footnote ⁹ In national newspaper markets, which still attract enough attention to sustain the market, the result has been fragmentation and quality destruction. Newspapers have replaced fact-reporting with opinion-reporting to differentiate themselves in a more viewpoint saturated national conversation and cut costs.Footnote ¹⁰

The newspaper industry’s response has betrayed a lack of comprehension regarding the source of its misfortune. The industry has responded to the overall decline in its share of reader attention by calling for antitrust action against the Tech Giants – particularly Google and Facebook – which are principally responsible for the decline.Footnote ¹¹ But Google and Facebook have prospered because social media is more engaging than newspapers, not because the Tech Giants are monopolies. Whether there is one social media company or hundreds, readers are not going to start substituting more newspaper time for the time they spend on social media. In a fit of blind egomania, the industry has also responded by trying to negotiate payments from the Tech Giants as compensation for their use of links to newspaper articles – part of a broader project of obtaining intellectual-property protection for news articles.Footnote ¹² But social media has captured the public’s attention for reasons other than the opportunity it provides to share news. Accordingly, the Tech Giants are not willing to pay much for the privilege of linking, whether newspaper articles are protected by intellectual-property rights or not. They would do just fine without linking to news. Finally, the industry has experimented with a microjournalism model of subscriptions for independent journalists and niche reporting. But while microjournalism may prevent the total demise of journalism at the local level and stem losses at the national level, high-quality fact production requires scale in newsgathering that is fundamentally incompatible with such decentralization.Footnote ¹³

To save newspapers, other approaches are needed. Ruinous competition may be addressed by attacking the root of the problem: the low cost of communication. Policymakers could raise the cost of communication by taxing internet post views at levels just high enough to discourage excessive entry into national news markets and thereby to enable national newspapers to maintain the scale and profitability they need to invest in the production of high-quality investigative journalism.Footnote ¹⁴ Organizations that cannot pay the tax required to reach a broad audience will be driven from the market. The resulting reduction in competition will alleviate the pressure on newspapers to differentiate themselves through opinion-reporting. It will also drive up revenues, creating both the means and the incentive for newspapers to invest more in fact-reporting. The federal government, in the form of the U.S. Postal Service, already has the tools to impose such a tax by reinterpreting its “letter-box monopoly” to include electronic letter boxes, allowing the postal service to charge postage for the receipt of electronic communications of any kind.Footnote ¹⁵

Internet postage would solve the problem of excessive competition within the newspaper industry but not the problem of competition for reader attention from the Tech Giants that has hit local newspapers particularly hard. Internet postage should not be set so high as to discourage social media use as a general matter, but only high enough to limit the number of users having large numbers of post views.Footnote ¹⁶ Social media is, overall, a good thing. Taxing it out of existence would therefore destroy value.Footnote ¹⁷

To solve the problem of Tech Giant competition, government could adopt a second policy, complementary to the policy of charging internet postage, that would channel advertising revenues back to the newspaper industry. That policy would be to cap the number of ad impressions that social media companies are permitted to sell per year.Footnote ¹⁸ Because advertising is ultimately a race to the bottom – firms are compelled to do it to counteract the advertising of competitors – advertisers would respond by shifting their advertising dollars back to newspapers, despite the inferiority of newspaper advertising, in order to keep up with each other. For the same reason, modern militaries would purchase bows and arrows if prevented from purchasing more sophisticated equipment.Footnote ¹⁹ This race-to-the-bottom characteristic of advertising would, incidentally, allow the government to place a cap on all advertising without reducing the amount of revenue generated by advertising distributors.Footnote ²⁰ Because advertising distorts preferences and therefore leads to misallocation of resources, such a cap would improve economic efficiency – and could be piggybacked on policies targeting Tech Giant advertising.

Neither internet postage nor advertising caps would violate the First Amendment.Footnote ²¹ The Supreme Court long ago ruled that the U.S. Postal Service’s letter-box monopoly does not violate the First Amendment because people are free to use alternative means of communication such as placing phone calls, slipping paper under front doors, or making in-person appointments.Footnote ²² And advertising caps must pass constitutional muster because, in the information age, advertising’s information function is obsolete.Footnote ²³ Consumers can get all the product information they want from a quick Google search, which they can also use to educate themselves about products that they do not yet know to seek out.Footnote ²⁴ Advertising’s only remaining function is to manipulate consumers into buying products that they do not prefer. But the Supreme Court has extended First Amendment protection only to advertising that enhances consumers’ ability to make independent choices about which products they wish to buy.Footnote ²⁵

20.2 Newspapers’ Challenges

Newspapers were perhaps the most successful monopolies of the twentieth century, the sort of asset with a “moat” around it that the likes of savvy investor Warren Buffet coveted.Footnote ²⁶ Newspapers enjoyed protection from competition both because distribution costs were high – paper is costly, and heavy – and because advertisers prefer newspapers that have more readers.Footnote ²⁷ As a result, a single newspaper serving all advertisers was able to charge lower prices than a smaller newspaper serving a fraction of the market; the larger newspaper could spread distribution costs over more customers. This newspaper could also offer broader distribution to advertisers than a newspaper serving a fraction of the market, making it more appealing to advertisers, as well.Footnote ²⁸ Nearly, every city therefore came to have a single major newspaper and a handful of papers served the national news market.Footnote ²⁹

The monopoly position of newspapers created a number of positive externalities. One was independence for the press from interference by either government or corporate advertisers. Monopoly profits meant that newspapers did not require government subsidies and a monopoly position meant that advertisers strove to please newspapers, not the other way around. Another positive externality of monopoly was that newspapers enjoyed both the means and incentive to invest in expensive fact-reporting.Footnote ³⁰ In a competitive news market, each newspaper caters to a relatively small, ideologically homogenous readership.Footnote ³¹ Any attempt to attract ideologically distant readers fails because those readers have access to alternative options that are better aligned with their political views.Footnote ³² In a monopoly news market, the monopolist caters to a large, ideologically diverse group of readers because readers who are ideologically distant from the monopolist have no alternative newspaper to which they can turn.Footnote ³³ To induce such readers to subscribe rather than forgo news entirely, a newspaper monopolist must deemphasize ideology to the greatest extent possible and invest in fact-reporting. Facts have broad appeal across ideological lines, even if each reader prefers a different spin on the facts.Footnote ³⁴ The scoop rather than the hot take was therefore king. And, as monopolies, newspapers could afford to invest in scoops. It is no accident that the ethic of objectivity in reporting came to dominate journalism over the course of the twentieth century as newspaper monopolies arose and became more entrenched.Footnote ³⁵ The result was a willingness to invest in high-cost investigative journalism that incidentally served democracy.Footnote ³⁶ Finally, the monopoly position of newspapers paid a dividend in terms of social stability. There is, of course, no such thing as a neutral or objective report of the facts. Each newspaper must choose a location along the ideological spectrum. As median-voter theory has taught in the context of elections, however, the point that has the broadest appeal is the center. Newspapers therefore tended to promote viewpoints that interpolated between political extremes, exerting a moderating influence on national debates.Footnote ³⁷ All this was true even in markets, such as national news markets, that had a small number of newspapers as opposed to a single monopolist. In those markets, the small number of competitors meant that most readers still lacked ideologically aligned news sources, creating an incentive for papers to use fact-reporting and centrism to reach them. And the small number of competitors meant that papers still earned handsome profits.

The low cost of communication created by the internet dealt a death blow to newspaper monopoly on the reader-facing side of the business and created new competitors on the advertiser-facing side, eliminating the positive externalities that had come with newspapers’ privileged market position. Printing and distribution of paper editions on a daily basis requires large, up-front investments in printing presses, trucks, paper, and of course labor, making entry into paper news markets difficult.Footnote ³⁸ With the maturation of the internet, anyone who could post news online – and that was almost everyone – could compete with The New York Times.Footnote ³⁹ Low-cost communication also introduced new competition into advertising markets. It created an entire new category of media – social media – that gave advertisers a desirable alternative to advertising in newspapers, putting pressure on news industry revenues.Footnote ⁴⁰

Low-cost communication tore down barriers to entry into news markets, increasing competition for the attention that consumers devote to news. Social media made new categories of consumer attention available to advertisers by causing interactions that might once have been carried out around the dinner table or by email to be conducted on internet platforms through which they could be subjected to advertising.Footnote ⁴¹ People spend more time engaging in these interactions than they spend reading news, and the interactions themselves are more revealing than news-reading. That enabled social media companies to offer advertisers a larger audience than newspapers and to profile consumers and target advertising in ways that newspapers – even in digital form – cannot.Footnote ⁴² This shifted the flow of advertising dollars from newspapers to social-media giants like Google and Facebook.Footnote ⁴³

The result was the fragmentation of national news markets and the demise of many local news markets. In national news markets, competitors fanned out across the ideological spectrum, picking off legacy papers’ ideologically nonaligned readers, who had been weakly held to the legacy papers by an interest in facts.Footnote ⁴⁴ Expensive fact-reporting could no longer pay dividends in the form of a broader readership and newspapers now had to defend their own ideological turf against assault from new internet entrants, including both news websites and social media users with large followings. A turn to inexpensive opinion-reporting was the only option.Footnote ⁴⁵ This was ruinous competition in the economic sense.Footnote ⁴⁶ Firms were forced to degrade their own products’ quality in order to survive in the market. High-quality fact-oriented reporting was replaced with low-quality opinion-based reporting. This effect was magnified by competition for advertising from social media companies, which reduced the revenues flowing into news, creating a further incentive to substitute opinion-reporting for expensive fact-reporting. In many local news markets, which were too small to support newspapers on reduced advertising revenues, competition from social media had an even more catastrophic effect; newspapers simply disappeared.Footnote ⁴⁷

By the 2020s, the positive externalities created by the monopoly position of twentieth-century newspapers were gone. Newspapers no longer had the incentive or the revenues to invest in high-quality fact production. Ideological centrism had been replaced by ideological fragmentation, and so newspapers no longer exerted a moderating influence on politics. And the influx of competition into news markets, combined with the competition for advertising from social media companies, had starved national newspapers of revenue and driven many local newspapers out of business entirely. Far from being in a position to speak truth to power, newspapers’ continued existence was in doubt, leading to calls for government subsidization.Footnote ⁴⁸

20.3 Newspapers’ Inadequate Response

20.4 Postage and Ad Caps as Alternatives

20.5 Conclusion

By lowering the cost of communication almost to zero, the internet created two challenges for newspapers. The first was that, by making possible the creation of the social-media industry, the internet greatly expanded the amount of commercializable attention in the economy, relegating the quality of the advertising distribution product offered by newspapers to second-class status, and driving revenues so low that newspapers disappeared from many local news markets. The second was that, by enabling virtually anyone to distribute news, the internet greatly increased competition within national news markets, forcing newspapers to substitute opinion-reporting for fact-reporting, fragmenting the industry, and polarizing American public discourse.

Newspapers’ responses have been inadequate. Attempts to force social media companies to share revenues will not restore newspapers’ lost profits because the sharing of news links is a small part of social-media activity. The Tech Giants will not pay enough for links to restore newspapers’ lost revenues. Embrace of a small-is-beautiful ethic in newsgathering, in the mode of Substack authoring, will only increase opinion-reporting, industry fragmentation, and polarization.

One solution to the problem of ruinous competition between newspapers would be to restore some of the cost of communication. The postal service could reinterpret its letter-box monopoly to apply to virtual mailboxes, allowing the postal service to charge postage for internet posts that garner large numbers of views. That would reduce the number of players in news markets and so the opinion orientation, fragmentation, and political polarization that afflict the industry. A solution to competition from social-media companies would be for regulators to cap the number of advertising impressions that social media companies are permitted to distribute per year. Because advertising is a race to the bottom, such a cap would not reduce the amount of money spent on advertising, but it would drive advertising dollars back to newspapers.