The Fourth Estate's Estate

The news industry in the United States faces a funding crisis because the tech giants, particularly Google and Facebook, have acceded to the advertising monopolies once enjoyed by the newspaper industry itself. Breakup of these monopolies is unlikely to restore the news industry’s profits, however, because search and social media will remain better ad distribution channels than the news whether search and social media are competitive or monopolized. A better solution to the funding crisis would be for government to divide the advertising distribution market, reallocating to the news industry some of the ad impressions taken from it by the tech giants. This indirect, property-rights-based approach to government subsidization would address concerns, however misguided, that direct subsidization à la the BBC might lead to political interference in newsgathering. An important collateral benefit would be the opportunity to limit the total amount of advertising consumed by the economy by licensing fewer total ad impressions than are currently consumed. This would lead to an efficiency gain because advertising’s information function has withered in the information age, making advertising almost entirely manipulative in character, and therefore a threat to consumer sovereignty. Ad distribution revenues would not fall, however, because advertising cancels—firms advertise because others advertise, not because advertising increases sales— and so firms will bid up prices in proportion to the decline in available impressions. The proposed division and reduction of the advertising market would be constitutional because the First Amendment only protects commercial speech that promotes consumer sovereignty. Because advertising has become almost entirely manipulative in the information age, the First Amendment no longer protects it.