World Congress of Constitutional Law 2014
Workshop 14: New Challenges to the Freedom of the Media
The Market Reality for an Ailing Democratic Institution:
Why the Two-sided Market Theories Provide Inadequate Justification for
Unrestricted Media Consolidation1
Ming-Li Wang2
(draft)
1 Introduction
Growing reliance on advertising and increasing consolidation in ownership are two
apparent phenomena for the media3 of the Internet era. The trend worries many, for good
reasons that go beyond economic concerns over consumer welfare. Consolidation reduces
the genetic diversity of the field, figuratively speaking, and it makes private censorship a
much more potent concern. Overreliance on advertising, in the mean time, threatens
editorial independence and journalistic integrity, virtues that made the media a vital
democratic institution in the first place. It also poses greater threat to privacy. Last but not
least, growing imbalance in terms of media power may significantly alter one of
mankind’s inherent features essential to political equality—one person, one voice—and
further widen the divide between the haves and have-nots.
One prevailing justification for the trend is anchored on the findings of recent
economic research on so-called two-sided markets. By offering content for free and
recouping through advertising, it is said, media firms have turned themselves into twosided market platforms. Such markets have a natural tendency toward monopoly (read: do
not blame the monopolists) thanks to network effects. More importantly, with so-called
1
This is a work in progress with many holes in logic and most citations missing; my sincere
apologies.
2
J.S.D., Stanford Law School. Associate Professor of Law, Graduate Institute of Industrial
Economics, National Central University, Taiwan; [email protected].
3
Since this is a paper focusing on the media’s democratic function, it will use the terms the
media and news media rather interchangeably, ignoring the other media functions entertainment.
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“cross-side network effect” in play, it is wise to let the platforms grow, as that will
increase total welfare (read: praise the monopolists). Trying to stop the trend will be futile
at best, or harm the industry and the society at worst.
Though not to be taken lightly, the arguments are flawed. The paper would explain
why, and try to offer a better account on the economic logic of modern media and its
policy implications.
2 The Media Ownership Debate
2.1
The Trend
Neither sponsored content nor media ownership consolidation is anything new. The
penny papers during the antebellum era made a name in both. The timing was just right.
The progress of printing technology had driven down production costs dramatically,
industrialization had gravitated people to the cities, accessible education had improved the
literacy rate of the populace, and commerce was burgeoning. Some daring entrepreneurs
seized the opportunity to revolutionize the business model of the press by charging a mere
penny—one sixth of the going rate—for dailies, increasing sales by leaps and bounds in
the process. The move turned newspapers into enticing media for advertising, which alone
generated enough revenue to make the business profitable.4
In fact, the profits were so good that they not only enabled the penny papers to wean
themselves off political patronage, but also to expand and conquer, gradually retiring the
old press. They also innovated on numerous fronts, making newspapers an indispensable
part of people’s daily digest and a trusted source of accurate information. Gradually the
press changed its public image from a trade of printers to one of journalism, which in time
became an indispensable institution for democracy.
Thus informed, what we are seeing today looks like a rerun, with differences in the
set of conditions. Online presence is now mandatory, bringing with it universal reach as
well as global competition. The free—in both senses of the word—culture that dominates
the online world, in the mean time, has compelled much of the media world to lean more
4
Newspapers in America have always carried a large amount of advertisement, but their
circulation was too small to matter. The penny papers have such high volume in comparison that
they could charge a premium for advertisement. See PAUL STARR, THE CREATION OF THE MEDIA
134 (2004).
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heavily than ever on advertising for survival.5 The two forces have conspired to induce an
ongoing streak of consolidation among media firms, from eye-popping mega-mergers
between global behemoths to acquisitions of national icons and local darlings by betterfinanced competitors or non-media conglomerates. Thanks to deregulation, the marriages
have mostly earned the blessing of regulators with little resistance.
By one account, 90 percent of media content is controlled by six conglomerates, and
that is down from 50 firms merely three decades ago.6 The numbers fluctuate over time,
and people may take issue with the methodology of investigation or the definition of
“media,” “content,” and “control.” And yet the big picture is unmistakable.
2.2
The Concerns
The trend of above has raised more than a few eyebrows. To begin with, we need
“organized, expert scrutiny” not just “of government,” but also of business corporations
and anyone that might exert power over interests of public concern. Overreliance on
advertising thus may render a news media vulnerable when a conflict arises between the
interest of its major sponsors and its journalistic obligation to report truthfully. Its editorial
judgment might be put to test as well.
In the penny press era, the only clue for advertisers to make advertising decision was
the circulation number, an imprecise proxy to actual effectiveness of advertisement
targeting. That is no longer the case thanks to still progressing technology in advanced
tracking, filtering and data mining. Advertisers have become increasingly demanding as a
result. Instead of just the placement of an advertisement, for example, some now specify
the click-through rate the media has to deliver. It would be very tempting if some
tweaking in content could help making that target more achievable.
The same technology that makes more perfect targeted marketing possible pose
serious threat to our privacy, too, and what is at stake is not just consumer autonomy.
Privacy is critical for an individual’s inner serenity7 vital to one’s freedom in thoughts,
5
See, e.g., Michael Sokolove, What’s a Big City Without a Newspaper?, N.Y. TIMES
MAGAZINE, Aug. 9, 2009, at MM36, available at
http://www.nytimes.com/2009/08/09/magazine/09Newspaper-t.html.
6
See Ashley Lutz, These 6 Corporations Control 90% of the Media in America, BUS. INSIDER,
June 14, 2012, http://www.businessinsider.com/these-6-corporations-control-90-of-the-media-inamerica-2012-6.
7
See FRED H. CATE, PRIVACY IN THE INFORMATION AGE 23-26 (1997) (on the value of
privacy on individual autonomy).
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expression, and democratic participation. A threat to privacy is therefore also a threat to
democracy.
But for the introduction of new competitors, ownership consolidation among media
firms would weaken market competition, which itself is a concern. What is even more
alarming is decreasing diversity of perspectives and voices, which in turn could harm
democratic discourse on issues of public interest. By enabling the big to get even bigger,
moreover, consolidation increases the imbalance among different classes of people in their
ability to make themselves heard. Minority voices could be further marginalized.
Ownership consolidation between media firms and non-media firms brings us
another set of worries. One mitigating factor for the advertising reliance issue is that
advertisers are plural, making it less likely any single one of them could exert too great an
influence on the media. Merging with non-media firms would nonetheless open the door
for direct interference by specific business interests; all of a sudden the likelihood of
private censorship would grow exponentially. The notorious incident where CBS once
held back a major scoop by the news program 60 Minutes on the big tobaccos out of fear
that it might, among other things, jeopardize ongoing merger negotiation with
Westinghouse is but one recent example.8
2.3
The Counter-Arguments
Not everyone agrees with the gloomy forecasts outlined above. Counter-arguments
have been made in defense of the trend of media ownership consolidation and relaxed
state control over such matters. Some argue that there is no agreed standard of media
plurality, or how many newspapers (or radio stations, TV channels, etc.) per person is,
good, enough, too few, or too many. The market, on the other hand, could tell us what is
efficient, and efficiency is leading the way for greater ownership consolidation.
First, people are accustomed—addicted, even—to free content. To provide free
content, however, the media has to rely on advertising for income. As the critics of the
current trend admit, the sheer number of advertisers should allow the media to stay
independent. If anyone sacrifices journalistic integrity to appease particular sponsor,
furthermore, it would erode public trust, which, unfortunately, is exactly what the media
needs to attract viewers in the first place. Any media owner with a brain would avoid such
moves.
8. See Marie Brenner, The Man Who Knew Too Much, VANITY FAIR (May 1996),
http://www.vanityfair.com/magazine/archive/1996/05/wigand199605.
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The above reasoning can be best understood by way of economic theories on twosided markets. Such markets are characterized by the existence of a special kind of
network effects called cross-side network effects, and all markets of network effects tend
to gravitate toward and eventually collapse into one signal provider. In other words, they
have a natural—irresistible, i.e.—tendency toward monopoly. Observing from this angle,
Media moguls merely follow the flow of the market. They do not dictate how the market
moves; economic efficiency does. It is therefore inefficient to impede rational ownership
consolidation; doing so would only hurt the total welfare. If some media firms choose to
lean more heavily on advertising revenue, it is also justifiable under the theory of “nonneutrality” in price structure, another trademark of two-sided markets.9
If media ownership consolidation has reduced the diversity of viewpoints, the
defenders also argue, the Internet has more than made up for it by introducing foreign
media into domestic markets and new sources of news and information in almost
unlimited abundance. Just like the other three “estates” that changed composition from
time to time and from state to state, perhaps it is time for someone else—the Internet—to
be the fourth estate. If that is still not enough, we will always have the good old antitrust
law to guard the bottom line.
3 The Media in Two-sided Markets
The defenders for the current trend have made some good points, but their key
assertions—the ones circling around the concept of two-sided markets and network
effects—are flawed due to inadequate understanding on the complexity of such markets.
3.1
Two-sided Markets: The Basic Model
Two-sided markets, according to economists, are “markets in which one or several
platforms enable interactions between end-users, and try to get the two . . . sides ‘on
board’ by appropriately charging each side.” 10 The credit card market is a oft-cited
example. A credit card platform (Mastercard, for instance) has two groups of end-users:
the retailers and the consumers.11 Consumers use credit cards for the convenience they
9
The relevant concepts and theories mentioned in this paragraph will be explained in greater
detail in the next section.
10
Jean-Charles Rochet & Jean Tirole, Two-Sided Market: A Progress Report, 37 RAND J.
ECON. 645, 645 (2006), available at http://www.jstor.org/stable/25046265.
11
For simplicity I am leaving out the banks from this analysis.
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provide (leaving aside for the moment other auxiliary benefits usually associated with
credit cards). Retailers, on the other hand, accept credit cards to attract customers. These
two groups of end-users need each other, and the success of a credit card platform hinges
on how well it could satisfy their mutual demands.
This amounts to what economists call “cross-side network effects.” In economics,
“network effect”—or “network externality”—exists when the value of a product or service
to a user varies depending on the number of others also using it. A telephone in my home,
for example, has greater value to me if more people in the society also have telephones.
In a two-sided market, this “spilling over” effect takes place at the other side of the
platform. The more end-users there are on one side of the platform, in other words, the
greater value end-users on the other side can expect. In addition to credit cards, classic
examples of two-sided markets include department stores, computer operating systems,
video gaming consoles, dating services, . . . and so on. While network effects in
economics are not always positive, it is so in a typical two-sided market, because it is for
this very reason the platform exists—to link and integrate the two sides, so that the
externality can be internalized to complete a positive feedback circle, leading to higher
total welfare.12
By bridging two groups of end-users in a mutually beneficial way, a platform
provides a valuable service to the two groups of end users and it charges them for it. The
charges levied on the two groups, however, do not have to be equal. In fact, many twosided market platforms lean heavily on one side for income. If the total charge is the
“price level,” of which the composition—how the total is divided among the two groups—
is the “price structure,” then a key feature of two-sided markets, according to the
pioneering works by Rochet and Tirole, is the presence of “non-neutrality” in price
structure. In a two-sided market, moreover, the volume of transactions, and profit as well
as the economic efficiency of a platform all depend not only on the price level, but also
the price structure.13
Because of positive network effects when we look at the platform from the outside,
total welfare for the whole society would be maximum if everyone is on the same
platform as long as the increase in consumer welfare outpaces that of production costs.
12
See David S. Evans, The Antitrust Economics of Multi-sided Platform Markets, 20 YALE J.
ON REG. 325, 331-34 (2003).
13
See generally Rochet & Tirole, supra note 10.
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That is why the defenders of media ownership consolidation argue sponsored media has a
natural tendency toward monopoly.
3.2
Same-side Network Effects
With cross-side network effects being the distinguishing characteristics for twosided markets, it is perhaps understandable, though not necessarily wise, to ignore sameside network effects in such markets. To begin with, the increase of end uses may enhance
the welfare of others on the same side of a platform. The more players a video game
console platform attracts, for instance, it becomes easier to find teammates for group
games, to exchange games and tricks with others, and to make conversations. That
explains why gamers tend to flock to a particular gaming platform, even at times when
there is no change on the other side of the platform (i.e., no new games). Since such sameside externalities are positive, they would further enhance the cross-side network effects
already associated with gaming platforms and strengthen the overall network effects.
Same-side network effects could be negative as well. Too many gamers might lead
to short-term shortage of popular games, for example. This is not unique for two-sided
markets; any market of finite supply might see competition of various degrees among
consumers at some point. Non-neutral price structure in two-sided markets, however,
suggests users on one side of a market platform have to pay more, sometimes significantly
more. The consequences of negative same-side network effects could be more pronounced
as a result. The strength of negative same-side network effects of the sort, moreover,
might change the overall dynamics of a two-sided market.
3.3
Modern News Media: Two-sided Markets with Twists
Given the introduction above, it should be rather apparent that today’s news
publishing—at least so far as general news is concerned—mostly operates on a two-sided
market model. Instead of trying to recoup their investments by charging the
readers/viewers directly, most news publishers serve as two-sided market platforms, with
advertisers and viewers as the two groups of end users. Price structures vary from
platform to platform, but they are most certainly non-neutral. Some publishers—onlineonly publishers in particular—go as far as charging one group (the viewers) nothing,
leaning entirely on advertising revenue.
There are a few twists, though. Compared to other, more typical two-sided markets,
the needs of the two user groups here are not exactly reciprocal in nature. While on one
side the advertisers indeed sign up to get viewers for their advertisements, the reverse is
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not true. The news viewers—at least the majority of them—have not come on board for
the advertisements; they are drawn in by the content provided by the platform instead. In
other words, cross-side network effects are not both positive in both directions. Risking
over-simplification, a large majority of viewers probably consider increased exposure to
commercial advertisement a nuisance, or worse.14
That is not to suggest the viewers do not benefit from the increase of advertisers at
all. The more advertisers a news platform attracts, the better off the platform is financially,
and is thus in a better position to provide content of value to its viewers. The viewers
therefore do gain when there is an increase of advertisers on the other side. The gain is
neither direct nor guaranteed, however. Its realization depends on two intervening factors:
the platform’s willingness to invest (part of) the extra profits into more or better content,
and, no less importantly, its ability to execute.
Given the incompatible cross-side network effects, a news platform is no longer a
neutral facilitator as is a typical two-sided market platform, such as a dating club. An old
fashioned dating club acts as a pure matchmaker with the simple mandate to gather as
many people of opposing genders (or, more accurately, sexual orientations) as possible
and put them in a room, literally speaking. Some ice-breaking activities may be called for;
a little wine would probably help, but in general the mutual attraction between the two
groups of people serves as the main catalyst. That is why for a regular platform operator,
the hardest part is to get the platform off the ground in the first place. Once succeeded in
getting things going, the platform has a tendency to roll on its own.
The task for news media operating on the two-sided market business model is much
more onerous. One usually starts by courting viewers. The penny papers accomplished
this by using large and bold types (screaming “MURDERS!” or the like) on the front page,
hiring energetic boys to push for sales on busy sidewalks and, most importantly, setting
the price per issue at a small fraction of the going rate of other (traditional) news dailies.
Modern online news outlets have been following the same recipe, with splashy headlines,
large photos, video and multimedia content. Better yet, instead of collecting pennies, they
now give away all those for free.
Luring the other group of target users—advertisers in this case—is relatively
straightforward. A platform boasting more viewers is more attractive to advertisers, just as
14
This is apparently an over-simplified account of viewers’ interests. Some people, for
instance, buy newspapers solely for the classified advertisements and some others might actually
enjoy some of the advertisements.
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in any normal two-sided market. Caught in a triangular relationship, however, nothing is
normal here. Assuming the role of a jealous lover, the viewers watch the host’s every
move with suspicion. Just about everything the latter does to attract advertisers risks
alienating its viewers. On the flip side, the more a media try to curtail the effect of
advertisements by, for example, making them less intrusive, would risk displeasing the
advertisers. This is the first dilemma a news platform has to cope with.
The picture becomes even more complicated after we bring same-side network
effects into the equation. Since news is pertinent to current affairs, it belongs to most
people’s daily social exchanges. The more people reading or watching the same source as
I do therefore makes it easier for me to connect with them. Network effects of this sort are
relatively feeble nonetheless. Most newsworthy events are covered by plural sources,
reading any of which is usually enough to make conversations. They would be
significantly stronger should a media platform regularly provides exclusive material of
interest, which entails higher production costs.
The situation is murkier on the other side of the platform. Too few advertisers on the
same platform means heavier load for everyone since advertisers shoulder the lion’s share
of the costs. Up to point at least, therefore, existing advertisers do enjoy new company.
Advertisers are competitors against one another, on the other hand, juggling for better
spots or better time slots. They also compete on attractiveness of their advertisements.
More advertisers equal to higher degree of competition as a result.
Whether the combined same-side network effects are positive or negative would
depend on the platform’s cost curve and its ability to manage same-side competition. The
former gave news platforms a second dilemma. Any increase in same-side network effects
on the viewers’ side may help attract more viewers to the platform and then more
advertisers. Doing so would nonetheless raise production costs, which would either cut
into profits or discourage some advertisers.
To better manage same-side competition on the advertisers’ side, on the other hand,
points to better targeting techniques. Simply put, if a front page advertisement attracts the
attention of 70% of the readers, a newspaper would do well if it could know who the rest
of the 30% are and give them another version of the paper with a different front page ad
with no downside for the first advertiser. Newspapers have been doing this for years with
localized editions, but online media can do much more with better results, though at the
expense of viewer privacy.
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4 Policy Implications
4.1
No Natural Tendency Toward Monopoly
The fact that sponsored news media are not standard two-sided markets should give
us pause before further loosening up media ownership control. Since the cross-side
network effects from the advertisers’ side to the viewers’ side are largely negative,
meaning growth in advertising is detrimental to the growth of viewers, the cumulative
network effect for the platform might not stay positive at all times, and might not to be as
powerful when it is. There are also negative same-side network effects on the advertisers’
side which further cut down the total network effect. It is therefore not always more
efficient to have bigger media platforms; the theory of natural tendency toward monopoly
for media markets is clearly a myth.
That is not to suggest that no big media could succeed or that no media platform
could somehow keep the net network effect positive as the platform grows. Both positive
and negative network effects, same-side and cross-side alike, are results of complicated
functions of numerous variables. Deft platform operators could minimize adverse effects
advertisements have on viewers and reduce the necessity for advertisers to compete for the
few most-wanted spots through better arrangements in the time, location and manner of
ads presentation. Recent development in target ads—advertisements narrowly tailored for
individuals could achieve both as well, privacy concerns notwithstanding.
This paper does argue that natural monopoly is not a destiny for the media, however,
and we should remain vigilant when we see mega mergers that involve media firms.
4.2
No Clear Solution for Advertising Dependency Yet
While not necessarily preordaining monopolies, advertising dependency has given
rise to a lot of questions on the continuing viability of news media as a democratic
institution. There has been only one serious alternative in history, which is state/public
sponsorship. The pros and cons of public media as an alternative to sponsored private
media has been well documented;15 this paper has nothing to add. Suffice it to say that the
15
See generally, e.g., Enrique Armijo, Media Ownership Regulation: A Comparative
Perspective, 37 GA. J. INT’L & COMP. L. 421 (2009); PETER J. HUMPHREYS, MASS MEDIA AND
MEDIA POLICY IN WESTERN EUROPE 111-98 (1996) (detailing the establishment and transition of
European public-service broadcasting systems); Simeon Djankov et al., Who Owns the Media?, 46
J.L. & ECON. 341 (2003) (arguing that “government ownership undermines political and
economic freedom” after extensive empirical research); C. Edwin Baker, Media Concentration─
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model of news media as public service has been losing its luster due to increasing funding
difficulty.
A second possibility is for news media to go back to the single-sided market
business model and charge the viewers directly. Short of some dramatic events, however,
it is difficult to see anyone already spending years trying to perfect a two-sided market
business model to dial back the clock. State intervention is equally unthinkable, and it is
probably unconstitutional anyway.
A third possibility is to maintain journalistic standards through regulation without
changing the media’s business model. Trying to protect the media’s journalistic integrity
and editorial independence by putting a leash on their neck would strike most as absurd,
however, and any such regulation would face serious challenge in court.
The bottom line is, we need to find a better business model for news reporting, or
tweak our regulatory regimes so that incumbent models—be it commercially sponsored or
state/public funded or a mixture of both—could continue to serve democracy the best they
can. Or, an alternative has to be found to take the place of news media in democracy
altogether. The next section will discuss the most mentioned candidate.
4.3
The Internet Is Not an Adequate Substitute
Some cyber-romantics might be watching the demise of traditional news media with
thinly veiled smirks, contemplating the loss of the old media could be the Internet’s gain.
From good old Usenet newsgroups and online bulletin boards to middle-aged chat rooms
to born-in-this-century Web 2.0 phenoms like blogs, Digg, Twitter and social networking
sites, our regular news intake nowadays comes from a great many of new sources unheard
of before. In Taiwan at least, one cannot watch news programs on TV for an hour without
seeing some footages lifted off from Youtube. What is it stopping us from turning to
Youtube directly for news, then, one might wonder.
If news media could no longer provide the “organized, expert scrutiny of
government” suggested by Justice Stewart,16 others will, too. Thanks to the gigantic public
forum provided by the Internet, in fact, public offices have been subject to much greater
scrutiny than ever. The ongoing student movement in Taiwan as of this writing (the
Sunflower Movement) is just the most recent reminder of how an angry electorate could
Giving Up on Democracy, 54 FLA. L. REV. 839 (2002) (critically analyzing media ownership
deregulation).
16
Potter Stewart, “Or of the Press,” 26 HASTINGS L.J. 631, 634 (1974-1975).
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rise up en masse against an arrogant and paternalistic government, despite—or perhaps
because of, one is tempted to say—feeble checks from the opposition party and the
traditional media. During the turbulent two weeks (still counting), online forums of all
shapes and forms have provided ample space for discussion on the service trade agreement
at issue, the democratic process needed to pass an agreement like this, and other related
issues. While such grass-roots public scrutiny may be uneven in organization and
professional quality, it makes up for it with greater intensity, more spontaneity, and
untamed curiosity.
Take the rosy glasses off, however, and we will see the picture in a much paler
shade. As the Fourth Estate, the news media of old provided three vital services to the
public: news reporting, scrutiny of government, and a forum for public discourse. Among
the three, the Internet has been quite capable in providing the last two, but the first has
proved to be the most difficult. Most of those new online news sources are merely
aggregators. They might offer native content in commentaries, opinions, parodies, cross
references, or other value-adding contents, but they have fallen far short in first-hand news
reporting, a task at the core of journalism that involves laborious digging, fact checking
and double checking before relaying to the public. Without it, public debates would be
like shooting in the dark that often ended in a show of force, not wisdom.
4.4
Antitrust and Media Ownership Control
Given the lack of either better business model for news media or apparent candidate
to take its position, some sort of regulatory control on media mergers and acquisitions
may be the last line of defense for democracy lest the vital institution crumble.
Generally speaking, two forms of media ownership control are available to most
nations: through merger and acquisition regulation by the antitrust (competition) authority
or via direct media ownership regulation by the communications regulator. The latter
usually bases its authority on legislative mandates to allocate, license, and regulate usage
of airwaves, which is justified on the ground of spectrum scarcity. 17 Many have
nevertheless challenged the soundness of the justification citing progress in digital
communications technology and the abundance of the Internet, and the FCC of the United
States has relaxed its regulation significantly. I would prefer communications regulators to
17
See Red Lion Broad. Co. v. FCC, 395 U.S. 367, 375-77, 389-90 (1969). Another
justification is electronic media’s unique accessibility to children; see FCC v. Pacifica Found., 438
U.S. 726, 749 (1978) (plurality opinion). It is mostly related to content regulation, however, not
ownership control, hence omitted here.
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stay firm on the issue, at least for the a little while longer, but it might not be easy
depending on domestic politics.
The legislative mandates for the antitrust regulator are to maintain healthy market
competition and to protect consumer welfare, both of which are on sound footing that will
not be eroded by new technology anytime soon. It is an open question, then, if antitrust
regulator may take democratic concerns into account when conducting merger reviews
when at least one of the merging companies are media firms. This is a complicated issue
beyond the scope of this paper, however. Suffice it to say there would be a fight if the
regulator dare to try.
Another mission for the antitrust regulator, though controversial and rarely (if ever)
spelt out in law, is to protect domestic firms and industries. This hidden agenda often
leads to a more lenient stance when two domestic merging businesses claim the move
would strengthen their combined position against foreign competition. Without
commenting on the general applicability of the approach (another complicated issue in
antitrust law), I would caution its application when media firms are involved, especially if
we take democratic value into account.
A third major obstacle to effective antitrust media merger control centers on the
problem of market definition, which has always been a source of contention in merger
reviews. Current review guidelines typically call for the use of the smallest relevant
markets that meet a certain meticulous test.18 It is so designed that the market power of the
firms under review will not be diluted in a large market. The downside of this approach is
merging firms strong in nearby markets could get the green light too easily for the merger
is then considered non-horizontal, which in turn calls for a much looser review standard.
This in particular is a cause for great concern in cross-media ownership
consolidation cases. A merger between a TV station and a newspaper in the same local
area is considered non-horizontal with the traditional “small market” approach, for
instance, but it certainly deserves closer scrutiny. A more expansive “news publishing
market” should make more sense here.
Are we not making a mistake in under-assessing the firms’ market power by taking
that approach, however, a mistake the “small market” approach would do well to avoid?
The merging firms’ market shares would look deceptively small, especially if all the news
resources available on the Internet are taken into account. This would not be a problem if
18
See, e.g., DOJ & FTC, HORIZONTAL MERGER GUIDELINES 7-14 (2010) (detailing the
Hypothetical Monopolist Test used in the United States).
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we devise a different set of market concentration standard for cross-media merger reviews.
A big market calls for greater diversity than a narrowly defined market, and the news
publishing market need even greater diversity for democracy’s sake.
5 Concluding Remarks
The press—or the media in its current incarnation—has played an essential role in
modern democracy by informing the public and making available a forum for public
discourse, so much so that it is hailed as “the Fourth Estate.” The trophy is hard earned,
however, and it could not work its magic without a suitable environment. Much of that
environment has changed so much that the same recipe giving birth to modern journalism
is now undermining it.
Some see the trend of increasing reliance on advertising and ownership
consolidation as inevitable, and they largely base their arguments on the so called “twosided market” theories. This paper disagrees. A closer look at the theories show there are
enough differences among two-sided markets that we cannot jump to a certain conclusion
too quickly. The economic logic of the news media—a kind of non-standard two-sided
markets—suggests there is still sound justification for antitrust and communications
regulators to do their jobs, though some tough adjustments may be needed. How they do
will have profound implications on the health of a vital democratic institution.
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