The Noisy Channel

 

The Raging Debate Over The Link Economy

August 16th, 2009 · 16 Comments · General

Arnon Mishkin wrote a post last Thursday on paidContent called “The Fallacy Of The Link Economy” that has been generating a lot of discussion, so I figured I’d join in the free-for-all. First, let me try to reduce each person’s argument to a direct quote that best sums up his position.

Arnon Mishkin:

The vast majority of the value gets captured by aggregators linking and scraping rather than by the news organizations that get linked and scraped.

Jeff Jarvis:

Links are worth what the recipient makes of them.

Mike Masnick:

It’s not the link alone that has value or the story alone that has value, but the overall process of building a community.

Erick Schonfeld:

If a news site or a blog can say enough interesting things enough times that news aggregators (or other sites) keep linking to them, then they can build up their brand and reader loyalty.

Sigh. I thought the health care debate was bad enough, but I suppose that almost all impassioned debates come down to opposing sides exchanging half-truths.

In Mishkin’s defense: news organizations are in a catch-22. Many have suggested that if a news organization doesn’t want its content showing up on aggregators’ sites, it simply has to modify robots.txt accordingly. But news organizations can only do so individually–which puts them in a prisoner’s dilemma. Anti-trust law prevents news organizations from collectively bargaining with those who aggregate their content. For all intensive purposes, they are forced to abide by the status quo.

In Jarvis’s defense (yes, I’m actually defending Jeff Jarvis!): there isn’t much point in producing content for which most of the value is captured in a teaser so small as to be covered under fair use rights. As he’s said elsewhere, newspapers are inefficient, and the industry will have to shrink a lot to be healthy.

In Masnick’s defense: I cite my own blog post (also inspired by one of his posts) about monetizing community because participation is inherently uncopiable. It’s hard for me to agree with him more strongly than that!

In Schonfeld’s defense: his argument sounds a lot like the “freemium” strategy, which has a respectable track record. In order to build a loyal customer base, you often need to give away free trials as teasers–and that’s effectively what happens when media sites make some of their content available through aggregators. And, as in the freemium model, the actual product has to be significantly more interesting that the free teaser to earn the consumer’s investment–whether that investment is in the form of money, attention, or loyalty.

So, do I agree with them all? Not exactly. Mishkin’s first prescription to news organization should probably be to cut investment in undifferentiated content. Jarvis should acknowledge that the inability of news organizations to collectively bargain is unfair to them. Masnick–well, I basically do agree with him on the limited point he’s making. I suppose the strongest objection would be that not all media sites should be forced to become communities just because they’re hobbled in their ability to negotiate the monetization of the content they produce. And Schonfeld’s argument assumes the current link economy as a given–and one of the biggest points of contention is whether news organizations should be allowed to try to change that economy.

Sadly, I don’t see any of these guys giving the other an inch, which is why this discussion will probably continue unchanged for the foreseeable future. Hopefully the passion of the debate helps sell, um, papers.

16 responses so far ↓

  • 1 ken ellis // Aug 16, 2009 at 10:29 pm

    The great thing is that, unlike health care, the debate doesn’t need to and never will be resolved by advocates for the various positions. Some companies will put up pay walls, some will give it away for free, some will only block aggregators, some will try to negotiate for rev share with aggregators, and plenty will find places in between or new directions. The marketplace will pick the winners.

  • 2 Daniel Tunkelang // Aug 16, 2009 at 10:44 pm

    Yeah, you’re going to institute death panels, and I’m not letting you near my grandma! :-)

    But seriously, I don’t think it’s quite that simple. Specifically, the debate about whether to allow news organizations an anti-trust waiver is an important one, and I suspect that it will have a dramatic effect on the marketplace.

  • 3 ken ellis // Aug 17, 2009 at 9:55 am

    I still think the debate doesn’t need to be resolved, and it should be left to the marketplace. Why do you think an anti-trust waiver is important? Is it that you think some sort of government intervention is the only way good journalism will survive? My litmus test for government involvement (or disenvolvement in the case of anti-trust) is usually whether some clear evil needs to be remedied, as with the lack of access to affordable health care for many people.

  • 4 Daniel Tunkelang // Aug 17, 2009 at 10:02 am

    As you point out, I’m asking for government dis-involvement. Let me turn the question around: why do you think government intervention in the form of the current prohibition on news organizations collectively bargaining with aggregators (a nice spin that “colluding on prices”, eh?) is necessary? I think the burden should call on those who insist on intervention, not those who would remove it. Then, indeed, let the marketplace decide. Right now the marketplace isn’t being given that opportunity.

    Actually, the near simultaneous announcements by major news organizations that they are all considering erecting pay walls suggests that they are finding ways around the anti-trust regulations. So maybe the point is moot.

  • 5 ken ellis // Aug 17, 2009 at 10:50 am

    I’m not fundamentally opposed to government intervention, but I think the decisions made by the government are frequently sub-optimal. So I’m against what I’d call tinkering. And this would involve another decision — against long-standing antitrust laws that have had a full and rich debate, and that despite their problems I think have been good for the people in a large number of industries. Which is why I say, unless there’s some manifest evil, I don’t want them to do anything. In the case of antitrust, the evils a century ago I think were manifest. Now that I think about it, I guess I should stop saying I have Libertarian leanings and call myself a classical conservative. Oh well.

  • 6 Daniel Tunkelang // Aug 17, 2009 at 11:01 am

    So you’re asserting that the burden is on me to justify changing the interventionist status quo to a non-interventionist regime that allows the free play of market forces? Will have to check my Hayek to see if that makes you a classical conservative. :-)

    But the case is pretty straightforward. News organizations clearly are not in a position of strong market power–they’re struggling. If they were factory workers in comparable straights, leftists would be calling to allow them to unionize in order to exercise collective bargaining power. Meanwhile a few aggregators have taken gatekeeper roles in the link economy–I’d call it more of an oligarchy than a monopoly, despite Google’s enormous advantage over its rivals. The current regulatory regime takes sides in this market struggle. Why are you in favor of that?

  • 7 ken ellis // Aug 17, 2009 at 11:10 am

    Yes, but I’d say they’re struggling not because of Google’s enormous advantage, but because consumers no longer want their papers, and to finance their debt and maintain their current staff of journalists they need more than web advertisements can provide. If Google started to abuse its market position, and say ask publishers to block other aggregators otherwise lose their Google traffic, as Microsoft did with Windows, the government would probably get involved.

  • 8 ken ellis // Aug 17, 2009 at 11:15 am

    and by government getting involved, i mean existing antitrust laws kick in, not legislative involvement.

  • 9 Daniel Tunkelang // Aug 17, 2009 at 11:18 am

    But that’s not here or there. I’m not suggesting that the government regulate Google, but rather that the unregulate the news organizations. Again, I’m making a case for government uninvolvement. Imagine if the status quo were the other way around. Would you argue for imposing regulations on news organizations to prevent them from collectively bargaining?

    And yes, I realize I’m using a loaded phrase. But it really does mean the same thing as colluding, acting as a cartel, etc. I don’t think there’s a neutral term.

    BTW, I’m not claiming that the news organizations can solve their problems overnight through such a strategy. But I think it would at least level the playing field. Then, as you put it, the marketplace could pick the winners.

  • 10 ken ellis // Aug 17, 2009 at 12:48 pm

    If the status quo were the other way around, no, I wouldn’t argue for imposing regulations on news orgs to prevent them from collectively bargaining. I would argue for broad antitrust regulations similar to what we have now, and those would apply to the news industry.

  • 11 Daniel Tunkelang // Aug 17, 2009 at 1:25 pm

    Very nuanced. :-) Let me phrase the question differently. Do you think the current broad antitrust regulations prevent–or should prevent–news organizations from colluding / collectively bargaining with aggregators over the terms of how their content is aggregated?

  • 12 ken ellis // Aug 17, 2009 at 2:02 pm

    My understanding of the law is that they can establish uniform standards, for example linking and excerpting standards more lenient that what Fair Use might provide for. That’s not anti-competitive. But they can’t collectively bargain over dollar amounts or revenue sharing percentages. That to me is a sound general law that protects consumers from artificially high prices and encourages competition. Enjoying the discussion by the way.

  • 13 Daniel Tunkelang // Aug 17, 2009 at 2:06 pm

    Then I think we agree more than we disagree. For example, they could agree, en masse, to exclude bots–something that doesn’t involve pricing but would get them past their current prisoner’s dilemma. I’m not suggesting they do this, but I want to give a hard-hitting example of the kind of collective bargaining power I’m talking about.

  • 14 Daniel Tunkelang // Aug 17, 2009 at 2:07 pm

    Oh, and I’m enjoying this too! As are the lurkers, I hope.

  • 15 jeremy // Aug 17, 2009 at 4:06 pm

    I’d say they’re struggling not because of Google’s enormous advantage, but because consumers no longer want their papers, and to finance their debt and maintain their current staff of journalists they need more than web advertisements can provide.

    It sounds to me like consumers do want their papers, or at least what is in their papers. If consumers really didn’t want the product of the newspapers, then this whole issue would go away, because no one would aggregate that content, and no one would consume that content.

    So people do want it, non?

  • 16 The Early 20th Cenury Link Economy « State of the Fourth Estate // Sep 23, 2009 at 11:53 am

    [...] political blogs, however, clubland papers could rely on the amplifying effect of a link economy. In The Rise and Fall of the Political Press in Britain, Stephen Koss puts it from the point of [...]

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