June 9, 2010 at 5:41 pm Leave a comment

The Federal Trade Commission held a workshop this past winter to discuss possible ways to “reinvent journalism,” and has just released the initial findings of the two-day hearing.

Many of the proposed ideas (including government subsidies, micropayments, and antitrust exemptions) have come up repeatedly in the past. But three of the proposals were new to me, and I’d like to outline them here.

Consumer electronics tax. The FTC proposed a 5 percent tax on the consumer electronics (e.g., computers) that are commonly used to view news content online. This tax would generate roughly $4 billion annually, to pay for increased public funding of journalistic enterprises.

Citizen news vouchers. These would give all U.S. taxpayers the option of allocating some of their taxes “to the non-profit media organization of their choice.” People would indicate on their tax returns whether or not they wish to help fund the media, which organization, and how much they want to contribute.

Content licensing. Also known as the “Internet tax,” this solution would do a great deal to bring U.S. copyright law into the 21st century. Under this model, Internet service providers (SBC, Comcast, Road Runner, Verizon, etc.) would be made to pay a content license fee ($5 to $7, writes the FTC) on each account they provide. For example, Comcast has 14.7 million accounts; a $6 annual tax on each account would bring in $88.2 million just from Comcast to be redistributed to newsgathering organizations. With about 96 million Internet accounts in the U.S., that’s more than $576 million in potential revenue.

I believe that content licensing is the best strategy. Though it would be more challenging to radically change U.S. copyright law than to instate new tax options, content licensing appeals to me because it gets to the root of the problem, which is exemplified in a pending case from April of this year. Dow Jones (News Corp.) is suing Briefing.com, alleging that the latter “systematically copies verbatim or nearly verbatim substantial portions of Dow Jones’ copyrighted articles . . . and distributes them in competition with Dow Jones . . . in some cases, within a minute or two after the article is published by Dow Jones.” Briefing.com’s use of Dow Jones’s journalistic labor certainly seems illegal considering Briefing.com actually charges a subscription fee for access to its web site.

“Hot news” is the kind of news that is most in need of increased copyright protection. Hot news was defined by the 2nd Circuit Court of Appeals in 1999 when the NBA sued Motorola for transmitting real-time game scores to its pager users. The court produced the following definition of hot news misappropriation:

  1. The plaintiff generates or collects information at some cost or expense.
  2. The value of the information is highly time-sensitive.
  3. The defendant’s use of the information constitutes free-riding on the plaintiff’s costly efforts to generate or collect it.
  4. The defendant’s use of the information is in direct competition with a product or service offered by the plaintiff.
  5. The ability of other parties to free-ride on the efforts of the plaintiff would so reduce the incentive to produce the product or service that its existence or quality would be substantially threatened.

The NBA ultimately lost the suit, but only because the court concluded, rightly, that sporting events themselves are not copyrightable. But this comprehensive outline set a precedent that may have to be put to use in the Internet age if journalism is to remain economically viable.

A Google-Eyed View of Newspaper Economics

Dow Jones Sues Briefing.com

National Basketball Association v. Motorola


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