Google takes the FTC to school

Google just issued a response to the Federal Trade commission’s staff discussion draft on potential recommendations to support the reinvention [read: preservation] of journalism [read: newspapers]. (here was my reaction). It’s a wonderful document that takes the FTC — and the news industry — to school on the First Amendment, copyright, fair use, antitrust, media history, business, and technology. The government and publishers should be embarrassed to need such remedial education.


This says it best:

The large profit margins newspapers enjoyed in the past were built on an artificial scarcity: Limited choice for advertisers as well as readers. With the Internet, that scarcity has been taken away and replaced by abundance. No policy proposal will be able to restore newspaper revenues to what they were before the emergence of online news. It is not a question of analog dollars versus digital dimes, but rather a realistic assessment of how to make money in a world of abundant competitors and consumer choice.

Google’s doc leads off with promotion of its efforts to work with news organizations: Living Stories, traffic sent to news sites, technology help, and so on. They might as well just have linked to James Fallows’ paean and Eric Schmidt’s Wall Street Journal op-ed. You’ve heard these points before. My problem with them, as I’ve said, is that Google is trying to make friends with an industry that only wants enemies to blame for its failures. But at last, Google stops pulling punches and slaps down the industry’s self-deluding myths and the FTC’s dangerous ideas.

“[T]he current challenges faced by the news industry are business problems, not legal problems,” Google says,”and can only be addressed effectively with business solutions. Regulatory proposals that undermine the functioning of healthy marketplaces and stall the pace of change are not the solution.”

Google points out that newspapers’ circulation peaked between 1890 and 1920; that newspapers declared radio would kill them and only newspapers should hold the sacred and hallowed mission of news; that newspapers declared TV would kill them and characterized broadcast reporters as “parasites” (a lovely tip of the hat to Rupert Murdoch). We won’t buy that again. “The internet, rather than being the cause of journalism‘s downfall, provides a unique opportunity for news organizations to renew and reinvigorate journalism,” Google says.

Google lectures the FTC and the industry on internet business basics: “Unfortunately, the Discussion Draft does not acknowledge the basic economics of search engines and similar services and instead erroneously suggests that search engines are somehow cannibalizing newspaper advertising revenue rather than serving as an important connection to potential consumers.” Aggregators, Google points out earlier, send traffic and business opportunities to publishers. And Google does not make a significant amount of revenue from news … just as newspapers do not (subsidizing it with more lucrative verticals).

Google lectures the FTC et al on the unbundling of news. Fact o’ life. It then offers a primer on how publishers should be treating the readers who come to them via links.

Google restates the FTC’s dissection of newspaper revenue: 80% advertising, 17% newsstand, 3% subscriptions. “Pay walls,” it says, “could be an effective way to raise the 3% revenue figure.” A zinger for publishers. But Google’s fine with pay walls if publishers want them. It’s just not fine with government regulating them. “Innovating to create products and services that consumers want to pay for,” Google says, “is the only way to guarantee long-term subscription revenue growth, and none of the policy proposals are designed to foster that kind of innovation.” A zinger for the FTC (one I wish Google had dwelled on more since it does know innovation.)

Another zinger to the industry and the FTC comes as Google points out that classified revenue implosion had “nothing to do with copying or free-riding and everything to do with the emergence of a new, more effective and more efficient product into the marketplace. The FTC would ordinarily regard such a situation as a cause for celebration – consumers are getting a better product at a lower price – not an opportunity to slow down that innovation through regulation.”

Google salutes the flag the FTC raised on making government information more accessible — but then Google went the extra step to suggest “harmonization of state and federal law relating to copyrightability of government information.” There, the agreement ends.

Google decries proposals to extend copyright law and limit fair use and repeats its fine arguments against the antiquated notion of hot news from its FlyOnTheWall brief. “Facts, hot or cold, cannot be protected by copyright since there is no author of them,” Google instructs the FTC. “This has been the law of copyright since its inception….”

Google goes after proposals to establish taxes and fees to support legacy news operations. And it attacks efforts to let news organizations fix prices and charge aggregators. The doc makes the FTC eat its own words: “The FTC‘s long-standing position regarding antitrust exemptions properly subordinates a desire to advantage individual firms (here, print news organizations) to the need for a competitive, even playing field that offers the maximum good to consumers.”

Bottom line: There’s no need for the FTC’s meddling:

….Google continues to work with publishers to find ways to ensure that journalism survives and thrives on the Web. We remain optimistic about the future of journalism: The Fourth Estate is too crucial a part of a functioning democracy, and the Internet too powerful a medium, for journalism to die in transition to a Web-first approach. News organizations have more readers than ever, more sources of information than ever, more ways to report and tell stories than ever, and more potential ways to generate revenue than ever. Journalism will change, but the free market and free society will ensure that it won‘t die.

Amen and good night.

Comments to FTC 20 July 2010

Related: Here’s a segment of On the Media this week with me lambasting the FTC:

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  • Since you believe Google has such a masterful grasp of the law and of copyright issues, you can hopefully help me understand something that I’ve never been able to understand.

    I don’t remember which was the first book to have this type of notice printed in it, but this notice has been printed in all the books I’ve ever bought since I was a child:

    “No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise…”

    I am sure you are right in praising Google for their masterful grasp of common law, but please help me understand which part of this notice they didn’t understand when they unilaterally decided they had the right to scan all the books in the world?

    • Michael K Pate

      1) Any book published prior to 1923 no longer has copyright protections as well as many books published prior to 1989.

      2) A huge portion of the works published after 1923 are the so-called orphan works, where the copyright holder can no longer be located. This is a logical consequence of extending copyright from 14 years to 95 years to 70 years after the death of the author.

      3) There are questions as to the limits of Fair Use. Google felt one way. Publishers felt another. That is what the is all about.

      Since there was no way for Google to actually negotiate with all the relevant parties, they were faced with a choice between doing nothing and acting unilaterally, and I applaud their choice.

      • Wow.

        “There was no way for Google to actually negotiate with all the relevant parties, they were faced with a choice between doing nothing and acting unilaterally, and I applaud their choice.”

        So, any time that there is “no way” to negotiate with the *people whose content you are absorbing* then it’s ok to act unilaterally?

        So, since we can’t actually chat with every single person in Afghanistan and negotiate what they want, then it’s ok to “act unilaterally?

      • Hrush

        I have a question; because your comment above is so relevant: Did GOOG not scan books published after 1923 at all?

        Coz, gosh, if they weren’t ‘unilaterally’ breaking copyright law, then how come so many people decided to sue them?

        Because they ‘unilaterally’ decided they had the ‘God-given right’ to scan every book in the world?

      • Michael K Pate

        Your example is not really comparable. It would be difficult but not impossible to actually negotiate with every single person in Afghanistan. It is impossible to negotiate with every one granted a copyright for a book published in 1924.

        From Google’s response to the Author’s Guild in 2005 – “Google further admits that it has scanned some of the Works with obtaining the copyright holder’s permission, but avers that such permission is not required.”

        > how come so many people decided to sue them?

        Since 1909 (when copyright term was first extended), media companies have used the Courts, Congress, federal agencies (see above), and everything else they could think of either to increase profits or protect their business models. Hiring a lawyer is simply much more expedient that some of the other alternatives.

    • Kermonk

      Hey flamebait head – they were stating their option on what is best for the future, not commenting on copyright law.

      Which btw is deeply amoral and need to be reformed as quickly as possible.

      • Kermonk

        Opinion even. And that was @Hrush

      • Hrush

        “Stating their option” is awesome.

        Well done. Fabulous.

        But, when your opinion is “I don’t like the law” so “I’m going to break the law,” is going well beyond “stating their opinion.”

        They’ve already FiNISHED scanning most of the books in the world.

        As per “Michael K Pate” above, they were just unable to reach the authors, but they really wanted to ask: ‘May we steal the last of you?’

      • Andy Freeman

        > They’ve already FiNISHED scanning most of the books in the world.

        “FINISHED scanning most” is unlikely. Let’s do some arithmetic.

        Suppose that they scan 1k books/day, scan 360 days/year, and have been scanning for 10 years. That’s only 3.6M books. The library of congress, which doesn’t have every book, has over 21 million books.

        Note that the LoC adds around 1k books/day….

  • “I know we live in the age of the bailout, but if we ask the government to step in to prevent the creative destruction of every single industry that gets overturned by the Internet, that isn’t progress, it’s regression.”

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  • I’ve been saying this for a decade and it gets boring as no Governments seem to be implementing this basic and simple solution to everything:

    1. Government shall regulate a tax that ALL people should pay for the arts becoming available and distributed online.

    2. The tax may be about $10 per month, per person, in USA and Europe and other rich countries. Less per person in poorer countries.

    3. The tax money brought in will amount to tens of billions of dollars per year, more revenue than ALL artistic industries combined. Add up movies + music + tv + news + books + photos and you will see, that amount to a relatively small amount in tax per person per month worldwide.

    4. Next step, statistics are made. Google, Government and plenty others can measure accurate statistics on the amount of times each byte is transfered, each character is read, each frame is watched, each photo is enjoyed. This is what the Internet is for. Measuring who sees what and when and how often. I can say much more about how exactly those statistics can very reliably be made. Based on those statistics, all creators of contents can be compensated by payments based on popularity, quality and influence of their works on the public.

    5. For text for example, you could allow rights of remix and quoting all you want, as the original authors of every text can be directly compensated. Google knows who posted what text first on the web. Google knows how to directly compensate the source more than the re-writer and leecher of stories!

    I’m available for interviews at my site, contact me for more details. You know this is the only solution. Google’s $5 Billion per year is nice, but it’s a tiny drop in the bucket of what the world of creators really should be compensated. By my basic tax plan, the compensation directly to creators will be increased by 50 times compared to what Google AdSense is paying.

    • Epic!

      Yes, lets require mandatory payments for art, and lets the government decide how to distribute profits. I don’t see any way this could possibly not work.

      • Yeah, like there is mandatory taxes that people pay for libraries, for schools, for hospitals, for roads.

        It is not so much letting the government decide how to distribute the profits, they will simply enforce that common sense algorithms and transparent statistics by several independent providers are used to determine how exactly to distribute all the money.

      • Andy Freeman

        > Yeah, like there is mandatory taxes that people pay for libraries, for schools, for hospitals, for roads.

        And that justifies mandatory taxes to give everyone a a pony…. After all, everyone wants a pony.

        Hint: the existence of a tax to pay for somethings does not imply that using taxes to pay for other things else is justified.

    • Andy Freeman

      Hmm. So you think that creators should not be allowed to decide their prices. Britney will get the same amount of money per minute of play as the Chicago Philharmonic.

      Which reminds me – who owns “I have a dream”? It’s easy to count. However, it predates King.

      > each byte is transfered

      Great! I claim “a” and . What? You don’t think that I own those bytes?

      > Google knows who posted what text first on the web.

      Which isn’t necessarily the same as the creator. Oops.

      • 1. Of course Google knows who created phrases, paragraphs. Simply do a Google search and see which result is the oldest. Teachers use that feature all the time to figure out if their pupils copied some texts from the web illegally for their dissertations.

        2. Analog fingerprinting technology will recognize when different versions of the same song are song by different singers and bands. It’s not only based on manually entered meta data submitted by artists themselves and by their fans. Digital fingerprints recognize when the exact same data is transfered. Which means, statistics on p2p downloaded files can be done by scanning files that are displayed by users with the users consent.

        3. The algorithm for payment will be simply based on popularity, based on number of plays, based on originality and user ratings, based on influence and how many people remixes your creations. Ask Google cause they will tell you all these things can be measured in a way to totally avoid gaming and cheating.

      • Andy Freeman

        > Of course Google knows who created phrases, paragraphs. Simply do a Google search and see which result is the oldest.

        Nope. Google doesn’t (and can’t) find things in the order that they are appear on the web and the first poster often isn’t the author. (I’ve worked on crawlers at a “major search engine” so I’m willing to argue at a technical level.)

        Hint – most of the web is actually unseeable by crawlers. Worse yet, the first crawlable instance often comes from someone other than the author.

        > Which means, statistics on p2p downloaded files can be done by scanning files that are displayed by users with the users consent.

        And users are going to consent to this because….

        > The algorithm for payment will be simply based on popularity, based on number of plays, based on originality and user ratings, based on influence and how many people remixes your creations.

        Like I said, you’re not letting artists decide how much to charge. For some reason, they hate that.

    • Mr A

      This is effectively the model we have in the UK – albeit to support a single media organisation (the BBC).

      The ironic thing is that the BBC is THRIVING under this model, producing high quality, well respected content. Most private media organisations hate this system, not because they can’t compete, but because they have to match the quality of the BBC (i.e. if they churn out crap, no one bothers reading/listening/watching).

      In terms of regulation, there is a very effective barrier between government collection of money and editorial control. It really isn’t that complicated and works extremely well.

      A regulator that doled out money based on quality (rather than commercial pressure) might work very well.

    • This is a great idea. Lets change “manditory” with “voluntary” call the solution Flattr ( and start using it!

  • Just some basic calculations:

    $10 per person per month = $8 Billion per month for USA + Europe = $100 Billion per year

    Of those $5 Billion per year that Google AdSense is currently paying, probably that half of it goes to those corporate moguls. So my calculation is that $2 Billion that currently really goes to the content creators x 50 = $100 Billion per year.

    We truely and really do need regulation though. There is no way such Global taxation system can work without government regulation. You can have some Rhapsody subscription plan here that is incompatible with the Spotify plan there and the Lala plan over there. Nope and nope. It makes no sense and it does NEVER work for the benefit of content creators if there are competing subscription plans with different DRMs, different walled gardens and different platforms.

    We need one global subscription plan that covers everything, legally. Basically, piracy gets legalized and regulated.

    This truly changes everything, because what happens then is that all intermediaries, all private content hubs are much less central to the system. As money will be taxed directly at all users and paid directly to content creators, intermediaries will not be relevant anymore.

    All content creators simply publish their articles to their blogs, their videos to their Youtube accounts, their photos to their flickrs and there will even be content sites for creators to upload their e-books and audio files directly to a huge digital library, the new servers and hosting could even be supported by the Government just as libraries are paid for by the state.

    • God, I do hope you’re writing a parody.

      • What can I do to get it published? I wouldn’t mind this being heavily edited by some real writers for it to make sense for everyone and not sound like a joke.

        True peer-to-peer journalism and content creation. That’s what you have been advocating all this time!

        Why have a whole industry rely so much on AdSense, with AdBlockers extensions that are cropping up everywhere. Aren’t you getting tired of those advertisements? Even if they are so-called “relevant”, I don’t want to finance our culture by a text ad.

      • Kirkinche

        I personally think it’s a great idea, unfortunately not so great for the music record company and the media corporations; they do not want their business to be reinvented or be put aside like they are with the peer to peer technology.

        The intellectual property is an issue for these companies, not for the author, artist, or musician.

        Who know the meaning of related right anyway? It is the key issue and it is rarely mentioned, it is the right of the publisher get for the printing, recording or broadcasting… it is never mentions and the discussion is diverge to the author right.

    • Andy Freeman

      What makes you think that this is a new idea?

    • Tim

      What you’re suggesting is basically socializing the online entertainment industry.

      Unfortunately if you step outside your little internet bubble and talk to random people in the street you’ll discover 95% of them would not want to pay this extra tax for very little benefit.

      It’s basically the same as having a free market anyway, just more complicated and harder to maintain.

      All we need are more ‘donate to this video creator’ or ‘donate to this blogger’ buttons around the internet and it’ll happen automatically.

  • RosarioM

    Before refrigeration, there was a whole industry around ice. Making it, shipping it, etc. With new technology, that industry disappeared practically overnight. The internet is doing the same thing to traditional newspapers who rather grasp at an old business model than embrace the new technology. Imagine if the government stepped back when refrigeration was taking off to force you to buy ice instead. It sounds absurd…

  • Paul

    I really don’t know which side of this I come down on. Sure all of Google’s points make sense, but then journalism is important – we should be careful before we just let it crash and burn.

    “A zinger for the FTC (one I wish Google had dwelled on more since it does know innovation.)” – maybe they didn’t dwell on it because even *they* (sarcasm intended) can’t figure out a way of doing it….

    The term Dodo has acquired a certain pejorative quality these days, but is the world not a poorer place now that it is extinct? A new business model got rid of them too.

    • Kermonk

      The most important law that needs to be passed is one of honesty, unbiasedness and no profit making in TV – otherwise the world will go the way of America media, with highly biased people appealing to the lowest education dross for the best ratings.

      An before someone says “you can’t be unbiased everybody has an opinion”, yes – but well educated adults can come damn close.

    • Andy Freeman

      > The most important law that needs to be passed is one of honesty, unbiasedness and no profit making in TV

      Why is TV special? Why not radio, print, and the web as well?

  • Jeff this write up was great! Thanks for calling out the FTC and shedding some light on it.

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  • There’s another enormous reason that the FTC doesn’t need to “support the reinvention of journalism”….journalism is reinventing itself nicely, thank you.

    More than 4,700 niche news sites exist now that did not 10 years ago. These are separate from newspaper sites, and most are ad-supported. These are not “citizen journalism” sites. The most interesting aspect of these 4,700+ sites is how many are aggregated into networks.

    Take a look at this growing list, notice the independents, and then scroll to the bottom to take a look at the networks of sites.

    The shift that’s occurring is away from traditional mile-wide-inch-deep toward inch-wide-mile-deep niche news coverage.

    The shift began with tech, business, sports and entertainment, and is now expanding to geographic-based community sites, and environment, health, education and state government niche sites. All these are areas of coverage that metros have been giving up over the last few years as they’ve laid off specialty reporters.

    • Well said, friend Jane.

      Fellow readers, know that Jane and I each came from the old media (we worked together in San Francisco) and even so, we can find a second childhood in this new age. There is growth here.

      • Thanks, Jeff. It was fun then. It’s even MORE fun now!

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