Abstract:
This chapter discusses the decline of strong copyright protections and how it has impacted the sustainability of independent journalism. Classical liberal theorists argue that (intellectual) property rights are essential for democracy. However, weak copyright enforcement in recent years has allowed digital aggregators to profit from news content without compensating original creators. As a result, news organizations struggle financially, leading to newsroom closures and job losses. The failure of ad-based revenue models forced many newspapers to implement paywalls, but this approach has not fully replaced lost revenue. Digital platforms benefit from broad fair use exemptions, limiting news publishers’ ability to monetize content. While licensing agreements have emerged in response to legal changes in Europe and Australia, fair use remains a challenge in the U.S. Furthermore, the economic decline of the news industry has weakened investigative journalism, reducing access to high-quality reporting. The rise of social media has further commoditized news, diminishing incentives for in-depth journalism. Ultimately, robust copyright protections are necessary to safeguard the press and maintain an informed democratic society.
Chapters in the Book:
- Part 4- The Hidden Costs of Free Stuff
- Chapter 15- Free Stuff and the Decline of the Free Press (p.308-327)
Summary
15. Free Stuff and the Decline of the Free Press
Classical liberal theorists argue property rights are foundational, as they safeguard all other rights essential to a liberal democracy. This view is often traced back to John Locke, who believed that civil society exists to protect property from expropriation. Thus, property rights are central to governance. While Locke defined property as labour and physical assets, James Madison expanded Locke’s idea to include intellectual property as a fundamental right. Madison argued that protecting copyrights and inventions serves both individual rights and the public good. Ultimately, this perspective was reflected in the U.S. Constitution, which granted Congress the power to protect intellectual property. In 1790, Congress exercised this authority by passing the first copyright statute.
This fundamental view of property rights is crucial for a democracy. In the end, a society without respect for property rights would allow powerful entities to seize assets without consequences. In the case of IP, protection is especially important, because intangible goods are particularly vulnerable to imitation. However, the U.S. judiciary have weakened copyright protections in digital markets in recent years. The resulting shift has transferred wealth from content creators to intermediaries and consumers.
In the following, a new perspective will be introduced: how weak copyright protections for news publications threaten the sustainability of independent journalism. In short, weak protection forces news organizations to rely on data aggregation and advertising instead of direct content sales. Thus, aggregation practices commoditize news, often reducing compensation for original reporting. This leads to short-term benefits in the form of free access to news but reduces long-term quality and depth of journalism. This means that a weak-copyright environment risks undermining accurate and insightful news.
15.1. The “News Wants to Be Free” Fallacy
Today, we know that weak copyright enforcement reduces incentives for professional content creation, leading to a decline in high-value original content. However, in the early days of internet commercialization it was expected that open-access models and advertising could sustain content production. Some even believed that artists would rely on digital tips or that journalists would provide news content for free. Thus, many news sites initially adopted open-access models and expected that ad revenue would be enough. However, the ad-based news model largely failed, which lead to a shift toward paywalls for sustainability. As of 2014, more than 70% of all daily newspaper sites in the United States had adopted some form of a paywall. (In 2010, almost none had implemented one.) By 2017, this number rose to 69%. Even the well-known New York Times struggled with an ad-only model and introduced a soft paywall in 2011. The once successful digital-native news sites like HuffPost or BuzzFeed News, struggled as well. The latter shut down in 2023.
In retrospect, the failure of the ad-only model is unsurprising, because newspapers historically relied on mixed revenue from ads, subscriptions, and single payments. This alone already suggests that a purely ad- based model is not economically efficient. As a result, most online news publishers have reverted to mixed subscription/ad-based models. However, with few exceptions, this has not generated sufficient revenue. In general, many consumers remain unwilling to pay for news subscriptions when free alternatives exist, leading to high churn rates for paid news services. This is supported by data: between 2005 and 2020, total U.S. newspaper industry revenue fell by more than half. According to PwC, circulation revenue stayed at $10 billion, but advertising revenue declined sharply from $49 billion in 2000 to under $10 billion in 2020. As a consequence, newspaper closures and journalist layoffs have followed this decline. This meant that U.S. newspaper employment fell by nearly 50% between 2008 and 2019.
Crucially, digital-native news sites, which initially benefited from lower costs, were not able to counter these effects entirely due to financial struggles themselves. This suggests that the industry still struggles to identify a viable business model despite not having legacy print costs. One partial reason may be that the total revenue of the news industry has declined in the digital era, leading to financial instability. This development becomes concerning where these funding shortages have resulted in reduced investments in investigative journalism, which plays a critical role in democratic societies.
Nonetheless, there are two groups in the digital content economy that have profited from the free, ad-based model. The first are individual users, who have access to news for free. The second group is composed of digital intermediaries like search engines, which appropriate headlines and excerpts from original-source news sites. A 2012 European Commission report found that aggregators like Google News were the most successful in the digital news ecosystem. Google News’ rise has occurred at the same time that newspaper ad revenues have fallen dramatically, while the online ad industry revenues have grown significantly. For example, mobile and desktop internet advertising made up over 52% of global ad spending by 2020, benefiting platforms over news publishers. As these trends suggest, weak copyright enforcement has made it difficult for news publishers to capture sufficient returns on their content.
15.2. Fair Use and the Decline of the News Industry
By using content without payment while retaining economic benefits, digital platforms have largely profited from the judicial promotion of the fair use doctrine. The generous expansion of fair use allowed content aggregators to use copyrighted material with minimal legal risk. Ultimately, fair use reduced costs for aggregators by eliminating the need for licensing agreements with news publishers. At the same time, a broad fair use doctrine threatens the ability of news organizations to generate sufficient revenue to cover reporting costs. In response to that, some argue that news publishers benefit from click-through traffic from aggregation platforms. However, this argument is flawed. A 2020 study found that hopes of news publishers gaining a portion of Google and Facebook’s ad revenue had largely disappeared. The reason is that the average user consumes news via headlines and excerpts on platforms without clicking through to the original-source website. This is shown by several studies as well. For example, a 2014 study showed that Facebook users occasionally visit news sites directly, but this is not the norm.
The harsh realities of the digital news landscape raise an important legal implication. If aggregators are replacing news organizations, then there is no credible argument that for fair use doctrine to cover aggregators’ use of snippets. Accordingly, some Federal Courts have specifically rejected fair use defences when nominal use of copyrighted content caused commercial harm to the original creator. As a policy matter, aggregators argue that without fair use, licensing content from multiple sources would be logistically infeasible. This argument is, however, not credible. Given their technological capabilities, platforms could easily implement a micropayment-based licensing system to compensate news sources. In other words, if search engines can auction ads in nanoseconds and deliver targeted ads worldwide, they can also support a licensing system for news content.
15.3. Licensing Alternatives to the Fair Use Exemption
It’s hard to reconcile the idea that a broad fair use exemption is vital for news content considering the fact that micro-licensing transactions exist for the use of digital images. For instance, licensing services like Getty Images and Shutterstock have already successfully monetized digital content through structured pricing options. There is reason to believe that stronger copyright enforcement could have led to the emergence of similar licensing models for digital news. Specifically, laws restricting intermediaries from using unpaid news content or increasing their legal risk have led to licensing deals with content producers.
For example, the 2019 EU Copyright Directive restricted aggregators from using news snippets without consent. This resulted in Google licensing content from more than 300 European publishers. Another example is Australia’s 2021 law, which required platforms to pay for “core news content,” prompting Facebook and Google to negotiate licensing deals with news providers. Similarly, in 2023, OpenAI faced copyright lawsuits over using news content in ChatGPT and subsequently successfully signed licensing agreements with major news organizations. Around the same time, Apple reportedly explored licensing deals with news publishers for its generative AI services. These transactions show that challenging broad fair use is essential for news aggregation services and social media. Fair use mainly benefits aggregators by reducing their costs and logistical burdens. Even in the context of licensing transactions between aggregators and publishers, fair use mainly distorts negotiations and allows aggregators to secure better licensing terms.
It might nonetheless be argued that fair use promotes the public’s interest insofar as it improves access to news. Although, this argument is unpersuasive. Subsidizing aggregators at the expense of news publishers simply harms journalism by reducing incentives for high-quality news production. Polls find that the average level of trust in the news in various countries has fallen, and weak copyright protections may have contributed to this trend. The weak IP environment has led to lower-quality news, thus harming democratic societies that rely on a well-informed citizenry.
15.4. Reality Bites: Utopian Alternatives to Copyright
Oftentimes, copyright sceptics argue that alternative mechanisms can support news production even in a weak-IP regime. Two main arguments were initially proposed by IP-skeptical academics, policy advocates, and the tech industry. The first argument claims that lower content production and distribution costs in digital environments reduce necessary returns for investment. The second argument suggests that ad-based revenue models can replace IP rights in securing content production funding. Upon closer examination, neither argument is persuasive.
Regarding the first argument, it is argued that the costs of a news organization can be allocated among content production and distribution activities. Although reproduction and distribution costs are lower online, the cost savings compared to print publications can be overstated. This is because legacy newspapers still maintain print operations. Furthermore, content generation costs, especially for investigative reporting, remain high even in digital environments. Lastly, digital news organizations must invest in technology infrastructure in order to operate online. Crucially, these costs increase if a news organization wishes to sell ads directly, rather than relying on an intermediary. This is partly why local newspapers struggle with these infrastructure costs, particularly when trying to sell ads directly.
The second argument fails as well. At the onset of the internet, it was argued that content producers could generate revenue by giving away content to build a user base for ad revenue. Examples for this argument were Broadcast TV and radio models because they operate under content licenses, unlike online aggregators using fair use. However, the ad-based models in digital news lack the revenue streams that broadcast TV and radio models provided for content production. The market has already proved this point as demonstrated by the fact that the most successful original-source news websites have adopted complete or partial paywalls. Ultimately, the shift to paywalls and external funding challenges the idea that exclusivity is unnecessary for digital content production.
15.5. The New Patronage Model
In the absence of strong property rights, digital news outlets have adopted two strategies to maintain economic viability. First, some news sites have shifted from ad-based to subscription-based models, working for specialized business news publications with higher-income audiences. And while this model may work in small, specialized contexts, most users are unwilling to purchase a subscription for news. Younger users in particular prefer to obtain their news from free social media platforms like Facebook, Instagram, X, and Google. Second, broader news outlets have turned to sponsorships from philanthropic or corporate sources to replace lost revenue due to unauthorized content usage. Specifically, patronage-type arrangements have become common, generating necessary revenue for high-quality news production and distribution. An example for such a system is Jeff Bezos’ purchase of the Washington Post in 2013.
Following the weakening of copyright enforcement, digital aggregators have been forced to support alternative funding models for news content. It appears that Facebook and Google are now among the largest sources of philanthropic funding for the journalism industry. In the case of Google, its funding initiatives mainly focus on developing data analysis, automated content production, and monetization technologies. In 2018, Google extended its funding with a $300 million commitment to the Google News Initiative to promote innovation in news gathering and distribution. On the other hand, Facebook’s funding mainly targets local journalism. These patronage and sponsorship mechanisms are examples of a second-best solutions in a weak-IP environment, where news organizations cannot fully capture revenue from content production. However, these mechanisms necessarily rely on profit-motivated corporations, well-endowed foundations, or wealthy individuals, which may imperil the editorial autonomy of media organizations. The irony is that companies advocating for weak copyright protections are now among the largest patrons of digital journalism.
15.6. Closing Thoughts
At the onset of the internet, there was an optimism that digital platforms would provide free, high-quality news without sacrificing output. However, the lack of effective legal mechanisms to regulate news access has harmed many producers’ ability to generate sustainable revenue. This has resulted in economic losses, undermining the role of an independent press in democracy. While patronage systems can help, they are a second-best solution and fail to provide the independence that strong copyright protections offer. Subscription models work for niche markets but fail in general news. Ultimately, a free press depends on robust copyright protection to ensure independence and reach.
