First, stop the lawyers

There’s some dangerously wrong-headed lobbying from media lawyers in today’s Washington Post arguing for new laws to protect old media from new technology. Bruce Sanford and Bruce Brown of Baker Hostetler argue that Congress should:

* Change copyright law so that “the taking of entire Web pages by search engines, which is what powers their search functions, is not fair use but infringement.” This would be downright suicide for not only the media companies that I assume are their clients but for every business that wants to be discovered on the web. Not being able to analyze an entire page would mean that search engines could not reliably send searchers (aka customers) to relevant pages and that would mean that the owners of those pages would not be discovered. It would tear about the very essence of the web. This is so dangerously ignorant of the architecture of our new world and how it operates as to be stunning. It also is ignorant of the new link economy of the web. Why the hell do they think that companies hire SEO firms – so that Google will do a better job of analyzing all their content. (Who hires these people?)

* Enact as law the “hot news” doctrine to protect against “taking the guts of the content.” Today, you can’t protect knowledge. The fact that, for example, GM has cut 1,100 dealers is just a fact and it is spread – all the more efficiently online – via conversation. You can’t sue me for learning that in a newspaper and repeating it. That is key to the functioning of a community, a market, and a democracy. But these guys are following an effort by the Associated Press to call on the so-called hot-news doctrine to argue this knowledge is somehow theirs. Once again, this exposes shocking ignorance of the speed of the knowledge economy. Bloomberg and Reuters understand this: If they can deliver knowledge faster to their clients so they can exploit that knowledge more quickly than others, then they have value. That is, indeed, hot news. But they are well aware that the unique value of that heat expires in moments – seconds – and once knowledge is known, it is a commodity. But these lawyers want to make business by getting Congress to extend copyright to enable publishers to sue for compensation of sites that practice what they call “linkspoitation” (that is, putting ads around links, which could be defined as every decent commercial page on the internet). How long, I’d ask them, is news hot? A minute? A day? A week? How long before others may repeat that knowledge? Incredible, eh?

* Use “tax policy” (that is, tax dollars – i.e., our money) to “promote the press.” Which press, gentlemen? The press you represent or the press we the people are creating? We out here don’t actually need such a subsidy because we’ve been smart enough to take advantage of the new, free press and we are not saddled with the costs of an old press. Why should we then have to subsidize the market failure and anti-strategic stubbornness of the owners of those old presses? “Congress,” they write, “could provide incentives for placing ads with content creators (not with Craigslist).” That’s just plain payola. They also want “allowances for immediate write-offs (rather than capitalization) for all expenses related to news production.” Except we in the new press don’t have capital expenses for presses and buildings and trucks. Can we write off our PJs?

* Give news companies antitrust exemption so they may collude and form cartels to wall off their content and fix prices together. “As noted in the Kerry hearing,” the lawyers write, “publishers need collective pricing policies for their Web sites to finally break out of the expectation of free content that is afflicting the industry. Antitrust immunity is necessary because most individual news sites can’t go it alone by walling off their content for fees — readers will simply jump to sites that are still free.” That’s called capitalism, gentlemen. The market. I’d rather protect that open market than the failed monopolists who are finally losing control of it.

* They also want to take off ownership restrictions on media companies. There, we don’t disagree. Let the dinosaurs huddle together against the cold wind of change if they want. Well, except such a strategy of consolidation hasn’t worked so well for Tribune Company or McClatchy or Clear Channel or Time Warner or The New York Times Company, has it? (Is anybody hiring this firm for business strategic advice?)

Add it all up and their lobbying is ignorant of the architecture and workings of the internet economy and, for short-term gain for dying companies, willfully destructive to fundamental principles of the law.

Somebody stop these guys.

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In the comments under the Washington Post piece, Dale Harrison makes a great response, which I’ll quote almost in full (hoping he doesn’t sue me):

This is a shockingly misguided analysis and set of recommendations!

A lesson worth remembering is at the turn of the 20th century people had a transportation problem…and the solution turned out not to be a “faster horse”…but a Ford.

And one should note that the Ford didn’t arise out of the “Horse Industry Revitalization Act”.

I think the future of the media business will look as different as Ford and Toyota’s operations look from horse traders and blacksmiths.

Imagine what the passage of such ill-conceived legislation would have done to the car industry a century ago.

It would have strangled the nascent auto industry at birth, postponing it’s inevitable rise while sheltering a dying industry, only postponing it’s inevitable demise…doing great damage to both. Newspapers need to be encouraged to adapt to the future, not retreat behind legislative walls hoping the future will go away.

The newspaper industry’s troubles go to the very core of their historical business model.

What’s historically given value to editorial content is the relative scarcity of distribution versus readers. Newspapers have historically enjoyed natural localized economic monopolies that allowed each of them to exercise monopoly control over the amount of content (and advertising) they allowed into their local marketplaces.

Monopoly constraint of distribution and supply will always lead to prices (and profits) significantly above open market rates. Newspapers then built costly organizational structures commensurate with that stream of monopoly profits (think AT&T in the 1970’s).

The dynamics of content replication and distribution on the Internet destroys this artificial constraint of distribution and re-aligns advertising (and subscription) prices back down to competitive open market rates. The often heard complaint of Internet ad rates being “too low” is inverted…the real issue is that traditional ad rates have been artificially boosted for enough decades for participants to assume this represents the long-term norm.

An individual reader now has access to essentially an infinite amount of content on any given topic or story. All those silos of isolated editorial content have been dumped into the giant Internet bucket. Once there, any given piece of content can be infinitely replicated and re-distributed to thousands of sites at zero marginal costs. This breaks the back of old media’s monopoly control of distribution and supply.

The core problem for the newspapers is that in a world of infinite supply, the ability to monetize the value in any piece of editorial content will be driven to zero… infinite supply pushes price levels to zero!

What this implies is that no one can marshal enough market power to monetize the value of content in the face of such an infinite supply and such massively fragmented distribution. Pay-walls, lawsuits and ill conceived legislation won’t allow the monopoly conditions to be re-constructed.

There are certainly ways to make online news profitable…and many of us are working to develop such approaches…but I can assure you they don’t involve inventing a “faster horse”…

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In Twitter, Howard Weaver asks an excellent question: Wonder who hired them? If newspapers are lobbying Congress, that lobbying should be – must be – transparent.