Digital platforms present a new formidable threat to the news media that market forces will not correct if left to their own devices. The media subcommittee of the Stigler Center’s Digital Platforms Project proposes ways to strengthen independent, strong, and rigorous accountability journalism.

On May 15-16, the Stigler Center will host its third annual antitrust and competition conference. Titled “Digital Platforms, Markets and Democracy: A Path Forward,” the conference will bring together dozens of top scholars, policymakers, journalists, and entrepreneurs.

During the 2018 conference, a consensus emerged that the political and economic issues raised by the market power of tech platforms must be addressed. To provide independent expertise on the appropriate policy responses, the Stigler Center formed the Committee for the Study of Digital Platforms. The committee is composed of four specialized subcommittees: the economy and market structure; privacy and data protection; the media; and the political system. Each subcommittee is comprised of a chair and specialists in different fields (economics, law, data sciences, media, public policy, political science, venture capitalists, etc.). Its ultimate goal is to produce independent white papers that will inform decision and policymaking.

During the conference, the four subcommittees will discuss their initial conclusions. In preparation, we will publish the executive summary of each preliminary report. Find them all here

The internet has contributed immensely to the access and diffusion of information and opened numerous opportunities to improve life across the globe. It has also brought challenges, risks, and harms that may endanger the very democratic and liberal order that it was supposed to advance.  

Perhaps nowhere is that dichotomy more present than in the Fourth Estatethe news media and journalism. The technology that made the diffusion and creation of news cheaper and faster and gave billions of people a voice has also become a tool used by state and private powers to manipulate and propagate disinformation and hate. It has also disrupted the business model of the creators of original news and disintermediated them from their consumers.

Growing concentration in the business sector in the United States and the accumulation of market and political power by large corporations across the developed world has attracted more scrutiny in the last decade. It is now clear that the natural tendency for concentration in modern capitalism is magnified in digital markets, where a handful of corporations enjoying network effects exercise more power and influence globally than any other private entities in the last century. Two of those companies—Google and Facebook—are not only giant economic players that have changed most industries, but also the largest media companies in history. While Google and Facebook maintain that they are technology companies, they not only have unprecedented influence on the production, distribution, and consumption of news, but are also rapidly changing the incentives, behavior, and norms of all the players within the news media ecosystem.

The headlines “Crisis in the News” and “Crisis in Journalism” have appeared for more than a decade. To be sure, media scholars and practitioners have described journalism and the news industry in “crisis” terms time and again throughout history, mostly following technological shocks. This report is not adopting a “crisis” narrative. Rather, it soberly reckons with an era of profound change. We believe that changing technologies have always warranted updates in the laws and regulations that shape the news media. The digital revolution and the ascent of dominant digital platforms call for a significant renewal of the rules in this important sphere again. 

We demarcate two periods in the digital revolution with regard to its impact on the news ecosystem: the first two decades of the spread of the internet, and the last decade, characterized by the rise of a handful of digital platforms. Technology had a profound influence on journalism and the news in both periods, but there are important distinctions between the two. The first twenty years after the invention of the World Wide Web were characterized by a dramatic decline in the cost of distribution and an increase in the accessibility of information. The news industry had to adjust to a shift of advertising and readers to the digital world, causing a decline in revenues and profitability and the loss of the important business of classified ads. ​The last decade has been characterized by yet more advances in technology but with a growing share of digital activity and news consumption moving to digital platforms. This decade is characterized by a profound influence of the platforms on the relationship between news producers and the public and on the very nature of the public sphere.

The introduction of new technologies of mass media has always influenced the nature of news, politics, and society. From the printing press, the telegraph, radio, television, and cable television, each technology brought opportunities and challenges and in turn brought public demand for new laws and regulations. Challenges brought by the platforms go deep: unbundling of the news products; personalization and targeting tools unprecedented in their sophistication and precision; and the atomization of the news media. Together, these challenges have created a new ecosystem of news consumption, more complicated and fragmented than ever and, most importantly, split into a billion individual “feeds” and “editions” for each user. 

News media and journalism are broad subjects with many categories and definitions. This report is focused mainly on what we think is most important for the functioning of democracies: accountability journalism and investigative journalism that reveal information crucial for readers as citizens; and types of news gathering, investigation, and analysis that provide not only private benefits but positive externalities to society at large.

While the authors of this report do not believe that there was ever a “golden age” of quality independent journalism that we can revive, we do believe that digital platforms present new formidable threats to the news media that market forces will not correct if left to their own devices. We review some of the main market responses that try to improve the sustainability of independent journalism, and identify their contributions and their shortcomings.

Our report is based on the assumption that independent journalism is a crucial pillar of democracy, but that the production of investigative and accountability journalism has always been underfunded and under-produced by the market, seeing as original producers of this kind of journalism can at best capture only a small fraction of the benefits to society.

The report identifies four areas of immediate concern to the news media:

1. The gradual decimation of the business model that enabled many news outlets to produce accountability and investigative journalism for decades. Especially acute is the collapse in the revenues of local news outlets and the closure of such news outlets across the developed world.

2. The loss of the distribution of news by the traditional news organizations to algorithms controlled by digital platforms, and the growing concentration, power, and control that a handful of these platforms have as gatekeepers of the news across the globe.

3. The opacity of the algorithms that control the distribution and the spread of information, and the lack of publicly available information on news consumption in the platforms’ ecosystem.

4. The weak economic and legal incentives for these powerful gatekeepers of the news to prioritize quality content and to limit false information. 

While the threats to the quality news ecosystem are significant, this report’s policy recommendations are wary of direct intervention in the management of the platforms and their relationship with both users and news producers. ​The power that a handful of platforms have as gatekeepers and their immense influence on the flow of information is the reason that any state or regulatory intervention should be measured and limited. The potential combination of state power with private monopoly power ​is of great danger to news, politics, society, and democracy.

“The report’s starting point is the observation that the marriage between quality accountability journalism and advertising revenues has always been fraught with conflicts of interests, biases, races for attention, and challenges to the autonomy and integrity of news organizations.”

Our policy recommendations are limited to the topics that directly relate to news. Yet they have to be read together with the policy recommendations of the subcommittee on market structure, which offers a list of proposals meant to increase competition in the digital world, give users more power and control over their data, and limit the market power of the platforms and their ability to entrench their dominant market position.

The dramatic shift of advertising dollars from traditional news outlets to a few digital platforms has many stakeholders in the news industry calling for regulatory intervention that will reverse or halt this trend. This report takes a different approach: We are not focusing on finding ways to return to a “glorious” past when a larger share of advertising was allocated to traditional news outlets. 

The report’s starting point is the observation that the marriage between quality accountability journalism and advertising revenues has always been fraught with conflicts of interests, biases, races for attention, and challenges to the autonomy and integrity of news organizations. There is a large body of research, evidence, and surveys that documents the influence of advertisers on the agenda, content, and framing of reporting and the direct and indirect bias, censorship, and self-censorship caused by dependence on advertising. Ownership and control also distorted the news in the pre-platforms era. There is evidence of biases and distortions in news reporting caused by ownership and control of news outlets by tycoons, oligarchs, and politically connected business groups. The shift of readers to the internet and the rise of digital platforms has exacerbated these biases, as the business model of many news outlets collapsed; publishers became more dependent on a few large advertisers, and newsrooms were presented, for the first time, with granular real-time data on the virality of single stories, which enabled them to adopt editorial strategies that market single stories instead of full editions. 

Reversing the shift of advertising dollars from the digital platforms back to traditional media may prove not only to be swimming against the stream but may actually further incentivize news outlets to chase clicks and virality. In the race to get more clicks and exposure through the sophisticated, targeted, personalized, advertising-maximizing platforms, publishers may give more power and editorial decisions to the platforms in the curation of news. Nevertheless, publishers will always be behind platforms in the competition for monetization of those clicks, as they will find it difficult to compete against the vast data troves and artificial intelligence capabilities held by giant tech companies. 

This report sees the seismic shift in advertising dollars to the online world as an opportunity to create a news ecosystem that is supported more by paid subscriptions and public funding than by advertising. The report does not seek to protect, subsidize, or prioritize existing news outlets, but it assumes that journalists will continue to play a central role in the production of accountability journalism.

Our main policy recommendations are as follows:

1. Introducing public funding of news organizations that produce quality investigative and democratic journalism. The allocation mechanism of the funds will be designed to promote competition and entry and limit the entrenchment of incumbent large news media outlets. The funds will be allocated directly by the citizens, independently of any government intervention. Special consideration should be made to the funding of local journalism, which is where we see most of the problem concentrated today.

2. All mergers and acquisitions involving news companies should be subject to a news plurality review in addition to the standard antitrust review. Standard competition policy protects direct consumer welfare and therefore does not take into account the indirect effect that excessive media concentration can cause on citizen welfare. We propose an approach to quantifying news plurality that is neutral to the identity of the owner of the merging entities and to the platform on which news content is delivered. The proposed approach, based on attention shares, has been used in a recent merger decision in the UK.

3. Developing a new regulatory system that will ensure the public is informed about news sources, practices and algorithms. This new regulatory framework and oversight body will set standards for the disclosure of information and news sources, develop a means for source-based reputational mechanisms, and bring light to biases and choices in editorial decisions and algorithms for the presentation of the news. It will produce periodical reports on news consumption and the algorithm design’s influence on the distribution of news and the behavior of users. The digital regulator will set terms and conditions that will allow publishers and original content creators to negotiate with the digital platforms.

4. Digital platforms enjoy a hidden subsidy worth billions of dollars by being exempted from any liability to most of the speech on their platforms (Section 230). We do not propose to repeal Section 230 but rather propose that platforms that would like to enjoy this protection would have to agree to take clear measures to prioritize content, not the maximization of ad revenue.

The pace of change brought by the internet is unlike any previous technological shock. The proposals brought in this report are meant to address the main threats we see today to the news media ecosystem, but they are far from offering complete solutions to an ecosystem that is changing every year. We believe that after rolling out the main policy recommendations above—introducing the public funding of journalism, disclosing the vast data that platforms have on news consumption, and taking steps to limit excess concentration of political power by tech and media players—experts, regulators, and legislators will be equipped with much more information that will enable us to consider further updates to the rules of regulations governing the news media.

Amid growing threats to democratic values and institutions across many liberal democracies around the globe, a bold plan for strengthening independent, strong, and rigorous accountability journalism is needed more than at any other time since the dawn of modern liberal democracies.

Subcommittee on the Media Industry:

  • Chair: Guy Rolnik, Clinical Associate Professor of Strategic Management, University of Chicago Booth School of Business
  • Julia Cage, Assistant Professor of Economics, Sciences Po Paris
  • Joshua Gans, Professor of Strategic Management and Jeffrey S. Skoll Chair of Technical Innovation and Entrepreneurship, Rotman School of Management, University of Toronto
  • Ellen P. Goodman, Professor of Law, Rutgers University
  • Brian Knight, Professor of Economics, Brown University
  • Andrea Prat, Richard Paul Richman Professor of Business and Professor of Economics, Columbia University
  • Anya Schiffrin, Director of the Technology, Media, and Communications specialization, School of International and Public Affairs, Columbia University

DISCLAIMER: The purpose of these preliminary reports is to identify what are the new challenges digital platforms pose to the economic and political structure of our countries.These reports also try to identify the set of possible tools that might address these challenges.Yet, there is potential disagreement among the members of the committees on which of these problems is most troubling, which tools might work best, whether some tools will work at all or even whether the damage they might produce is larger than the problem they are trying to fix. Not all committee members agree with all the findings or proposals contained in this report. The purpose of these preliminary reports, thus, is not to unanimously provide a perfect list of policy fixes but to identify conceptual problems and solutions and start an academic discussion from which robust policy recommendations can eventually be drafted.  

For more on this, check out the following episode of the Capitalisn’t podcast:

The ProMarket blog is dedicated to discussing how competition tends to be subverted by special interests. The posts represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty. For more information, please visit ProMarket Blog Policy