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  • The FTC Confuses Newspapers With Journalism as it Seeks New Media Tax

    Last week my wife and I bought a used car, the better to ferry our children between sports events. For this we went to the websites of nearby dealers, researched different cars online and, after settling on one vehicle, quickly called up its history–inspections it had passed, the fender bender in 2007, etc. Our online investigation helped us make an educated decision that fit our family budget. It was just another example of how the explosion of information online has transformed the lives of everyone for the better.

    Now comes the latest Federal Trade Commission “discussion draft paper” suggesting that these advances must be hobbled, taxed and maybe even reversed–because they hurt the newspaper industry. Dead-tree media’s salvation, it seems, lies in hobbling social media and making search engines as user-unfriendly as possible.

    Oh, and newspapers will need one more thing: government subsidies. That’s why we need the tax hikes–especially on Internet and 3G phone users.

    Turns out, the way we bought our car is killing newspapers. As James Fallows observes in this month’s Atlantic, newspapers never made money on hard news. He quotes Google’s chief economist Hal Varian:

    Serious reporting, say from Afghanistan, has simply never paid its way. What paid for newspapers were the automotive sections, real-estate, home-and-garden, travel, or technology, where advertisers could target their ads.

    The Internet, Fallows concludes,

    has been one giant system for stripping away such cross-subsidies. Why look to the newspaper real-estate listings when you can get more up-to-date, searchable info on Zillow–or better travel deals on Orbitz, or a broader range of movie showtimes on Yahoo? Google has been the most powerful unbundling agent of all. It lets users find the one article they are looking for, rather than making them buy the entire paper that paid the reporter. It lets advertisers reach the one customer who is searching for their product, rather than making them advertise to an entire class of readers.

    The FTC finds this pernicious. It proposes more than a dozen remedies, several of them silly, some outright dangerous.

    Among the latter: a proposal to extend the Copyright Act to make facts proprietary. That’s right, a paper would own the facts it uncovered, not just the way it phrases them. Poor Daniel Patrick Moynihan, who once told another senator, “Sir, you have the right to your opinions, but not to your own facts.” The gentleman from New York must be rolling in his grave.

    Why make facts proprietary? The FTC paper notes that “the copyright act allows parasitic aggregators to ‘free ride’ on others’ substantial journalistic investments, by protecting only expression and not the underlying facts, which are often gathered at great expense.” The silly proposals include these jewels:

    • Establish a “journalism” division of AmeriCorps “to ensure that young people who love journalism will stay in the field.”
    • Increase funding for PBS and NPR “to build and maintain strong newsrooms at the state and local levels.”
    • Establish a National Fund for Local News, financed by current or new fees on “telecom users, television and radio broadcast licensees, or Internet service providers”–all to be administered through state Local News Fund Councils. (Ah, new local bureaucracies with taxing authority–what could possibly go wrong?)
    • Give news organizations a tax credit for every journalist they employ. This could help pay their salaries.

    Do you sense a theme here? Save “responsible” journalism by having government subsidize it. What better way to assure fierce journalistic independence and watchdog vigilance?
    The FTC rather spreads itself on revenue-raising proposals:

    • Small Business Administration-insured loans for new nonprofit journalism organizations.
    • Higher postal subsidies for newspapers and periodicals.
    • A broadcast spectrum tax (call it the “Tax on Rush”) “which should result in a fund of between $3 and $6 billion.”
    • A tax on consumer electronics (dubbed “the iPad Tax” by the New York Post) worth “approximately $4 billion annually.”
    • A Spectrum auction tax, “with the proceeds going to the public-media fund.”
    • Advertising taxes, including a 2 percent sales tax on ads that would generate “$5 to $6 billion annually.”
    • An ISP-cell phone tax, which at “3 percent on the monthly fees would generate $6 billion annually.”

    You get the picture: Soak a burgeoning and vital business to keep a dying one on life-support. The FTC is making several tragic mistakes. The first is to confuse the delivery method with the goods delivered. To use the oft-repeated analogy, they assume the horse and buggy is essential to providing transportation.
    The FTC says

    newspapers have not yet found a new, sustainable business model, and there is reason for concern that such a business model may not emerge.

    Here, they confuse journalism with newspapers, and an informed public with newspaper jobs. In fact, Americans have never been better informed or more engaged. As my family’s car-shopping experience shows, the possibilities are endless.

    What needs to be saved is not newspapers but content. The Internet (which we seem to forget, is all of about two decades old) has not been good yet at creating a successful business model for content creation.

    But companies such as Google, which realize that they depend on content, are busy coming up with 21st century ways to create new models–rather than using the state’s power of taxation to keep a 17th century industry on life support.

    As Varian told Fallows in the Atlantic piece:

    If you were starting from scratch, you could never possibly justify this business model. Grow trees–then grind them up, and truck big rolls of paper down from Canada? Then run them through enormously expensive machinery, hand-deliver them overnight to thousands of doorsteps, and leave more on newsstands, where the surplus is out of date immediately and must be thrown away? Who would say that made sense?

    Why does the FTC want to do any of this? I am not a mind reader, but the FTC is an “independent” agency run by people appointed by the Obama Administration, which has been antagonistic to an Internet it cannot control and nostalgic for the good old days when the news was controlled by a handful of mostly liberal newsmen.

    The FTC is merely suggesting these proposals. It adds, “we welcome additional proposals, which can be submitted” here. I suggest you write to them.?

    Cross-posted at The Huffington Post.

    Follow Michael Gonzalez on Twitter @Gundisalvus

    Posted in First Principles [slideshow_deploy]

    12 Responses to The FTC Confuses Newspapers With Journalism as it Seeks New Media Tax

    1. jgreene New Jersey says:

      The Statists are losing their power to control the message so they are resorting to once again stripping away the People's liberty to choose.

      Newspapers per se, are DEAD. Other than local news, and local basic services they are useless. The large liberal rags of the MSM like the NYTimes, LA Times, Washington Post have lost much of their audience to instant coverage of national and international "news" and opinions on the news.

      Left wing MSM Democrat propoganda no longer holds the attention of anyone with a brain. Governments solution is to tax YOU to control YOU. Go straight to hell, FTC. Your days are numbered as an arbiter of competition.

    2. Over50 says:

      Yeah, and what about town criers? Those damn newspapers put them out of business. We need to subsidize town criers. Think of all the jobs.

    3. Richard Aubrey says:

      We already don't trust politicians.

      We already don't trust journalists.

      Why is a politician-certified genuine journalist going to be trusted?

    4. Dave, Toronto says:

      Minor nit, only two of the five commissioners of the FTC were nominated after Obama's selection. The rest are Dubya's. That being said, on of Dubya's nominations was selected to be the new chairman by Obama.

    5. Samue Tai, Los Angel says:

      Apparently, this has been garbled in transmission. See FTC correction below:


    6. Pingback: Instapundit » Blog Archive » THE FTC: Confusing Newspapers With Journalism….

    7. ted, virginia says:

      How many of newspapers endorsed the big-government candidate hoping for such a handout? They all saw the writing on the wall years ago.

    8. Ralph Gizzip says:

      Rope. Tree. Bureaucrat.

      Some assembly required.

    9. ron, Virginia says:

      Lets tax the auto industry so we can save the horse and buggy!!!

      Get real.

    10. America says:

      The media is already a huge left wing machine with few cogs in opposition. Ask ANY main sewer media hack (print or TV) to recite the Journalist's creed. I dare you. They will either look at you with glazed eyes – as in they don't even know what you're talking about – or they will start foaming at the mouth.

      The internet in a decade has battered down their arrogant, ivory towers even as the "journalists" have moved full tilt into editorialized news spin. Now, they are scared that their numbers will continue to decline until nearly all print news media and much of the MSM will be marginalized out of existence. Look at the numbers. Newspapers across America are stopping the presses, the number of subscribers to MSM journalism keep falling. Why?

      Because Americans are long past being tired of the stilted stuff they spew. Traditional news purveyors know we can & do get our information from multiple sources on the internet at a fraction of their cost. But even the subscription money is a piddling issue to them. They know that once we turn our backs on them their advertisers will too. THAT’s why the MSM hopes to bed down with the Fed Gov and tax users to prop up their media scam. One more "share the wealth" plan to keep those who don't deserve to be in business cranking out their tripe at taxpayer expense. And the Fed Gov is more than a willing accomplice as long as the message is "approved."

      There are plenty of examples of government intervention in media for us to see how badly it ends. USSR, North Korea, China, Iran.

      Isn't it interesting that 230+ years ago the framers of the US Constitution knew exactly what they were doing!?!

    11. Pingback: Thoughts on FTC Attacks on New Media | Free Market Mojo

    12. Pingback: Obama’s FCC & FTC tag team to subjugate the Internet | RedState

    13. Pingback: Government Newspaper « David Szymakowski

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