Ftc-economics
Contents
FTC workshop: Three observations by economists/experts: Bloxham, Athey, Evans=
This is page for rough, contemporaneous notes of today's U.S. Federal Trade Commission workshop: "From Town Crier to Blogggers: How Will journalism Survive the Internet Age," held Dec. 1-2, 2009, in Washington, D.C., at the FTC's 601 New Jersey Avenue offices. Your scribe is Bill Densmore, a fellow at the Donald W. Reynolds Journalism Institute at the Missouri School of Journalism. Of course we've tried to provide accurate quotes and summaries. But the FTC has stenographers recording all of the testimony and that should be your definitive source. The home page for this coverage is http://www.newshare.com/wiki/index.php/ftc
Now we wrap up Tuesday's FTC sessions with three background presentations, one by Mike Boxham, director of insight and research of the center ofr media design at Ball State University; from Susan Athey, Harvard University economics professor; and David Evans, a University of Chicago Law School lecturer.
Mike Bloxham: Mapping the Modern Media Ecosystem
He calls hs presentation "a people-centric view of media use."
There is convention wisdom that nobody reads newspapers any more. That's rubbish, Bloxham says. It's not all about online. When you say mobile is where it's heading, what does that mean. We hear all the time that young people don't care about news. He is surrounded at a university by people who do care passionately about news -- "they are totally committed news junkies." This issue is one of presentation.
He displays a chart mapping news consumption by hours of the day.
They observed 350 people on two occasions twice across the United States in a "VCM Study 2009."
Live TV is still the 800-pound gorilla in the room in terms of daily duration hours -- a daily average of 300 minutes viewed used by about 97% of the people studied. Very low: Gaming, magazines and newspapers. Newspapers at about 37% of people using around 45 minutes a day. The web is somewhere in the middle. er
Susan Athey -- Option-based markets
She consults to Microsoft on online advertising markets. She's an economics professor at Harvard University. Her views reflect only her academic research. She's talking about the economics of publishing.
What are the economic forces: there is basic supply and demand. There is confusion about the number of websites vs. user attention. User attention is limited, consumers aren't going to spend 30 hours in a day viewing advertising. Advertising dollars should follow the viewers.
The new economy
- Platform markets: reduce prices fo rmost sensitive side of the market.
- Competing platforms: News outlet v. news outlet
- Competing platforms: news, ad platform, aggregators.
"In the media market, free is often going to be more profitable than pay" if content is undifferentiated. If free is more profitable than paid and it isn't covering your fixed costs then you either need to cut your fixed costs or grow. Growing requires fixed-cost investments. That will create strong pressure for consolidation and concentration. That means regulation, like the FTC, will pay a central role.
When the Bell had a monopoly, they didn't charge for the Yellow Pages. Google has 97% of the search market in Europe, but they don't charge. If reducing your customer base won't send your advertisers away, then it makes sense to charge.
The old world
Publishers deliver known, stable, tailored audience to advertisers. Newspapers have little competition across cities for either consumers or advertisers.
The new world
The change to online browsing -- you visit multiple places. The consumer still has limited time. they are dividing that time among a larger set of outlets. It will reduce the effective supply of eyeballs. Effective supply decrease due to duplicated impressions and hterogeneous audience.
Not all advertiesr compete for consumers on all outlets because of scale.
Publishres compete for consumers to steal market share. For advertisers to reach the same consumers.
There's all this new content that is going to compete for eyeballs. The impact of browing new content is the supply of ad space decreases since framenged content does not attract advertisers, typically less effective advertising.
Ad platforms and internet browsing -- Ad platforms come in to save the day. the ad platforms know the user. they have data, information, matchmaking. Advertisers tend to with with the ad platforms, rather than the publishers because the advertisers can buy the same users in different places. A result: Publishers lose tailored audience, unique info about audience. Platforms: "They own a lot of the consumer information, not the publishers."
Now the aggregator comes and the aggregator gets between the publisher and the aggregator. Competing aggregators compete and that gives advantage to the publishers. One aggregator could compete by offering differentiated content. Publishers could enter the aggregation business but it is hard to do at scale.
The ad platforms can help save you from the problem created by the aggregators. But you have to hope that the add platform that comes in is going to share the revenue.
The consumer time in the end is limited. Publishers have multifaceted competition everywhere they look. Aggregators will potentially own the eyeballs and the information. Publisher scale will help publishers bargain for rents.
"I think it is important that the FTC is trying to put all these issues together . . . because it looks to me like the are going to have a lot of work to do in the coming years."
David Evans -- Univ. of Chicago law school and Univ. College London
The newspaper business is going to continue to shrivel. The big unknown is whether the newspaper industry is the typewriter or the bicycle.
Typewriters or bicycles
The bicycle industry still exists; typewriters do not.
If the demand for journalism is elastic, then maybe Murdoch will get people will pay money. Or the downward spiral will cause it to wane. Either way, it is hard to see how tradidtional journalism will not continue to shrink.
Background analysis on advertising/newspapers
The web has increased ad space, diverted viewers and cut advertising prices. There will be more mobile apps, so there may be some increased advertising space. Traditional journalism is losing out because of advertising decoupling, price is elastic, so traditional journalism is going to go down.
But he thinks new models will emerge: He goes to the basic economics of ad-supported media. The supply of advertising inventory is coming from two things. It's cheap to supply the space online. Viewers are attracted by content -- the bait -- and they are then sold to advertisers. It's a matchmaking business to match content and advertisers. Whether it is efficient at that is a question.
The traditional journalism business is mainly an input into producing viewers for the advertisers. it doesn't produce direct revenue. What's happened to the newspaper industry?
A massive increase in advertising space on the web.
Pageviews: "There are no good metrics of this on the web."
A lot of inventory on the web is substitutable for what is in newspapers. So advertising supply has vastly expanded and there is lower demand for offline content. Time spent with newspapers down 17% between 2004-2009. There's a massive reduction in viewers offline, an accelerated decline begin around 2004.
Newspaper advertising was 40% of newspaper revenue, now down to 28%. eBay and Criagslist and CareerBuilder.com have taken most of it away. Advertising and subscription revenue are declining. There is a spiral downward. Online can't make up for that.
The coming advertising glut
He thinks it will get worse because there is a coming expansion of advertising inventory -- on mobile, social networking. Microsoft has talked about putting ads on Windows. There is Twitter (broadcast media); YouTube. All this new space will further reduce advertising in traditional media and reduce the demand for journalism.
"I think traditional journalism shrinks a lot," says Evans. He thinks the print newspaper business will shrink to something small and sustainable.
His public-policy observations:
- Policemakers should recognize drastically changed economics of media businesses; implications for antitrust, copyright, regulation.
- Hard to see a market failure in the production of traditional journalism; shouldn't subsidize production of something consumer's don't value. Don't mix market failure with nostalgia.
- Expert entrepreneurs to develop new ways of meeting consumer demand for information and engaging in public discourse. "There are lots of entrepreneurs out there doing exciting things."
