The news media bargaining code could backfire if small media outlets aren’t protected: An economist explains

What's New in Publishing 23 Feb 2021 07:23

When I was the chief economist at the US Federal Communications Commission, we oversaw was the acquisition of DirecTV, the satellite pay-TV platform, by News Corp in 2003.

Prior to the merger, DirecTV did not own significant content, and content-rich News Corp did not own a pay-TV distribution platform.

Economic analysis showed the merged entity would have the incentive to raise the price of certain TV channels, such as the Fox broadcast network and Fox sports channels, that were sold to rival pay-TV distribution platforms and cable companies such as Comcast.

To counteract this anti-competitive harm, we developed what is known as the FCC arbitration mechanism if firms could not agree on a price for a channel.

This is the same mechanism the Morrison government’s news media bargaining code would impose on Facebook and Google in Australia to force them to compensate Australian media companies for linking to and using their content.

In the US context, the arbitration mechanism worked. In particular, News Corp founder Rupert Murdoch complained about his inability to raise prices and subsequently sold DirecTV to get out of the arbitration requirement.

What happened when Google News was shut down in Spain

But thanks to the use of individual data, they were able to dig deeper and found the decline was concentrated on a specific set of users. People who specifically relied on Google News to initiate a news search reduced their news consumption by about 20%.

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