The Newspaper Cartel Hearing

Strange enough, C-SPAN seems to be my station of choice while exercising. This time around I watched a Senate hearing headed by John Kerry on the demise of the newspaper industry. Both sales and profits of physical newspapers are being demolished by digital/online newspapers, as people increasingly switch media.

In this hearing, physical newspapers were looking to be able to coordinate pricing online for a limited amount of time - a newspaper cartel, if you will. Right now, they have a sort of Prisoner's dilemma going on. If all the online newspapers could get together and agree to charge for content, then people would have no choice to pay for online content. But without the ability to coordinate (antitrust law prevents it), if the Miami Herald, for instance, became a "pay" site, people would just switch to the Washington Post or the Associate Press online. The stories have been commoditized. The newspaper's solution is to lift antitrust law and allow them to set prices together.

If this type of legislation feels wrong to you, it should. See the fundamental process going on in the newspaper industry right now is that it's getting more efficient. Where there once might have needed to be 10 reporters writing the same story about Obama's trip to Canada, now there only needs be two or three. The stories those two or three write is then disseminated to everyone over the Internet. Whenever you can have two or three people do the job of ten, that's a boost in productivity, which Fareed Zakaria calls the "elixir of modern societies."

On the other side of that, Senators were lamenting the decline of investigative journalism and quality reporting. Who will uncover the scandals? The thought process is that if we have more trained eyes on these stories then we'll uncover more scandals. While this makes sense in theory, there's the correlation issue. If each of these reporters were really bringing enough different perspectives to the table, then their content wouldn't be commoditized - I would need to read the 10 perspectives to get the whole story. As it stands now, though, their content is too similar - their perspectives too correlated - and so one story suffices online. Passing legislation allowing cartel activity will mean that consumers have to pay an artificially high price to keep these unproductive reporters around.

Senators were also complaining about inaccurate reporting online. Where a reporter might have an editor that oversees them, a blogger has no such oversight. A blogger can post whatever facts they want. While this is true, it's the reality they are going to have to face, regardless of whether newspapers die or not. Additionally, I think that there's an important place online for trusted brands. When nytimes.com writes a story, it has significantly more credibility than when random blogger writes it. The NYTimes is then paid for this credibility through links from websites citing the facts. Once again, the number of these trusted newspapers sites will diminish, but they will not go away altogether because they play an important role online.

It's also important to remember in all of this that while newspapers are hurting, television news is not. I would bet that the internet has enhanced CNN viewership instead of hurt it. These large media companies still maintain quality reporters on staff, and I don't see that going away any time soon.

So if you can't tell, I'm strongly opposed to repealing antitrust legislation for the sake of the newspapers. I think it props up inefficient companies and places a larger burden on consumers than is worth the cost. The newspaper industry is going to go through some shrinking pains until they either find a new business model or reach an equilibrium point, but I don't think it will be catastrophic to the quality of news Americans receive in the least. A few trusted brands will be left standing in the end - the majors like NYTimes, Washington Post, and LA Times - and a few will be created. And it would be a mistake to interfere with that natural process.