Dudley: Tax credits lifeline for news

Sometimes news breaks at just the right time.

Like recently, when a reader wrote to say he’s skeptical of government support for newspapers that I’ve argued for in columns. He loves newspapers but believes they should be able to “stand on their own two feet.”

I agree with the sentiment. But there’s more to the story, as shown by news about Google’s self-serving manipulation of the digital advertising marketplace, just as I was composing a reply.

A sustainable, independent press is the goal of temporary tax credits now being considered to preserve newsroom jobs and prevent more newspaper closures. They complement longer-term efforts to address unfair competition by digital platforms.

While this transition occurs, it’s better to have news organizations survive with government support than not survive at all. Don’t forget the U.S. government, deeming the news industry essential to democracy, has supported it in various ways since the nation’s founding.

Newspapers are, finally, evolving and repositioning to better compete online. A few are having success and finding new business models. But the overall industry will continue to dwindle, and more newsrooms will shrink and close, as long as the digital marketplace is rigged against them.

There’s now abundant evidence of problems with dominant platforms, including cascades of leaks about Facebook leadership making poor decisions that led to offline harms and apparently misleading investors and policymakers.

Simultaneously, states and the federal government are pursuing antitrust cases against Google and Facebook, based on strong evidence that the company’s business practices broke the law and caused economic harm.

While the platforms dispute the allegations, and the full story will take years of litigation to resolve, there are now reams of material showing how the deck is stacked against newspaper publishers that continue to provide most local news coverage.

It’s not just the skewed advertising marketplace. On top of that, there’s the issue of platforms using publishers’ news content without paying for it, making billions for platforms as newsrooms wither away.

New details of the ad-market distortions were revealed recently when, under a judge’s order, the shroud was lifted from a multistate antitrust case against Google.

Among the revelations: Google gets up to a 42 percent cut of ad sales handled through its system. The extraordinary take shows how much the company dominates the marketplace, the state case led by Texas argues.

Google’s ad exchange handles more than 60 percent of display ad inventory sold in the U.S. The company’s own ad buying tools also win more than 80 percent of auctions hosted on its dominant exchange, unredacted passages state.

In one example, a $6 bid for an advertising spot came through Google’s advertising exchange and an $8 bid from a different exchange. But because Google designed the system to prioritize itself, the $6 bid won, shorting the publisher $2.

“Internally, Google employees grappled with the fact that Google was falsely telling publishers that Google’s header bidding alternative enabled competition and improved yield, since in reality, Google created a program that advantaged itself at the expense of publishers,” the case states.

The case also revealed what it called “an illegal agreement” between Google and Facebook made in 2018, when Google’s dominance was threatened by a new bidding system for online ads that Facebook supported. In return for backing off, Facebook received preferential treatment in Google’s system.

Yes, flaws can be found sometimes in a particular news report or a media outlet, especially with many running on fumes. But the service and local coverage newspapers provide is essential, a public good, and must be sustained.

Temporary tax credits won’t influence coverage or play favorites, but they would stop the death spiral that local newspapers are in. They would buy time for them to retool, as antitrust enforcement and reforms seek to level the playing field.

Meanwhile, newspapers can’t stand on their own two feet when one is being kicked out from under them.

Brier Dudley is editor of The Seattle Times Save the Free Press Initiative.

Article Source: The Columbian