U.S. Markets closed

Why the media is blaming Google and Facebook for its decline

American news publishers want Congress to pass a law that would give them the right to collectively bargain with Google (GOOG) (GOOGL), Facebook (FB), and other major online platforms over the terms that govern how their news content is distributed.

In a hearing before the House Judiciary Subcommittee on Antitrust, Commercial, and Administrative Law Tuesday afternoon, publishers and their advocates blamed plummeting news media advertising revenues on big tech platforms — including Google, Facebook, Apple (AAPL), and Amazon (AMZN) — arguing that the powerhouse platforms had corrupted their ability to monetize their audiences.

Close up of Google News main page on the web browser. Google News is Google's search engine of news services worldwide. Image: Getty

Committee Chair and sponsor of the bipartisan bill, Rep. David Cicilline (D-RI), described the dynamic as an “economic catastrophe for news publishers.”

report published ahead of the hearing by News Media Alliance, whose President David Chavern testified at Tuesday’s hearing, estimated that Google’s news-content-based ad revenue generated $4.7 billion in 2018. The report’s findings, which have met some criticism, say Google’s revenues are gained by “crawling and scraping publishers’ content — without paying the publishers for that use.” NMA said industry ad revenue in 2016 totaled $18 billion, a decline from $49 billion in 2006.

NYPD Police officers stand outside the New York Times Building after reports of a suspicious package was found, in New York City, U.S., October 29, 2018. REUTERS/Jeenah Moon

Pew Research Center study published in 2018 estimated total newspaper industry advertising revenue for 2017 at $16.5 billion, a 10% decrease from 2016. The same report shows a yearly increase in the percentage advertising revenue coming from digital sources between 2011 and 2017. Meanwhile, newsroom employment has been on a steady decline for a decade, falling 23% from 2008 to 2017.

‘They are controlling the game, and playing it too’

The hearing comes as tech giants face increased antitrust scrutiny and allegations that they wield too much power over people’s lives — including the news that they see. If given the opportunity to negotiate as a unit, the news organizations said they would have enough clout to push technology platforms to relinquish some control.

“No one company should be able to decide which publications can exist and which ones can’t,” Sally Hubbard, a witness and Director of Enforcement Strategy, Open Markets Institute, said during testimony before the Committee. Hubbard argued that the competitive imbalance stems from technology platforms participating as both content producers and publishing gatekeepers through platforms like Facebook’s News Feed and Google News.

“Facebook and Google compete against news publishers for user attention data and ad dollars,” Hubbard said. “They are controlling the game, and playing it too. Publishers never had a fair shot, nor do they have bargaining power against the platforms. The platforms can cut them off with a simple tweak of their algorithms. Facebook and Google exploit their middleman positions to divert ad revenue away from publishers and into their own pockets.”

Current U.S. antitrust laws generally prohibit collective bargaining. The new law, if enacted, would provide media outlets a temporary exemption, functioning much like those extended to trade unions after the turn of the twentieth century. The Clayton Act of 1914 carved out an exception permitting workers to band together in negotiations with employers.

“[U]nder the existing antitrust laws, these publishers face a collective action problem. No publisher on its own can stand up to the tech giants,” David Chavern, president of News Media Alliance, testified on Tuesday. “The risk of demotion or exclusion from the platforms is simply too great.”

‘A prisoner’s dilemma’

David Pitofsky, General Counsel of News Corp, described the problem faced by news organizations these days as a “prisoner’s dilemma.”

“Any publisher that tried to withhold its content from a platform as part of a negotiating strategy would starve itself of reader traffic. In contrast, losing one publisher would not harm the platforms at all, since they would have ample alternative sources for news content,” Pitofsky said.

To those who argue that the press and old media have made their own bed by failing to evolve in the face of online competition, Pitofsky urges them to examine the dynamic more closely.

A man holds an iPad with Donald Trump's Twitter feed visible on November 10, 2017. (Photo by Jaap Arriens/NurPhoto via Getty Images)

“We're not losing business to an innovator who has found a better or more efficient way to report and investigate the news. We're losing business because the dominant platforms employ our news content to target our audiences to then turn around and sell that audience to the same advertisers we're trying to serve,” he said. Erosion of advertising revenue, he added, compounds the problem by undercutting news organizations’ ability to invest in high-quality journalism.

“Meanwhile, the platforms have little if any commitment to accuracy or reliability. For them, a news article is valuable if viral, not if verified.”

Matthew Schruers, Vice President of Law and Policy, testified on behalf of Computer and Communications Industry Association, a trade organization that lobbies on behalf of members that include Google, Amazon, Facebook and Yahoo Finance’s parent company, Verizon Media (VZ).

“Economic Analysis would show us the news publishers and digital services fight fiercely for ad dollars,” Schuruers said. “This intense intermediate competition is generally healthy, and undermining it with antitrust exemptions is unlikely to achieve the goal we all share. If competitors collude, prices will be higher, quality will decrease and innovation will slow.”

‘Antitrust laws should protect the pillars of our economy’

Schruers pointed to antitrust exemptions extended to newspaper publishers through the Newspaper Preservation Act of 1970, that failed to fully achieve its stated mission of preserving editorial diversity and independence.

“Over the past decade, digital audiences for news publications have increased by over 200 percent,” the proposed bill, the Journalism Competition and Preservation Act (JCPA), states. “Nevertheless, over that same time period, digital news publishers’ revenues have fallen by nearly half.” The Act goes on to say that dominant technology platforms have become so powerful that they are capable of controlling the terms that govern both whether content may be published, as well as whether published content is discoverable.

For competition matters implicating First Amendment concerns, Pitofsky argued that a higher degree of scrutiny should be applied.

“Informed by history, policy and political values, the antitrust laws should protect the pillars both of our economy and our democracy,” he said. “And there is no industry more central to our democracy in the news media.”

House committee hearings involving broader big tech antitrust concerns are scheduled to take place over the next 18 months. Congressional inquiries and federal regulator investigations have commenced to evaluate whether the world’s largest tech companies should be broken up.

Read more:

‘The full Willy Wonky Tour’: Inside Weed company Cresco’s production house

GOP Senator has ‘pretty good confidence’ Congress will pass weed legislation

These are the biggest threats to the cannabis industry, according to top CEOs in the space

Why the world’s largest marijuana company is doubling its plans for US hemp

Alexis Keenan is a New York-based reporter for Yahoo Finance. She previously produced and reported for CNN and is a former litigation attorney. Follow on Twitter @alexiskweed.

Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, SmartNews, LinkedIn,YouTube, and reddit.