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For The Record  

FTR #298 Update on German Corporate Control Over American Media

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NB: This RealAu­dio stream con­tains FTRs 297 and 298 in sequence. Each is a 30-minute broad­cast.

1. Begin­ning with a sto­ry about an award being giv­en to Ber­tels­mann CEO Thomas Mid­del­hoff, the pro­gram high­lights some inter­est­ing aspects of Ger­man cor­po­rate con­trol over the Amer­i­can media. “In a qui­et water­shed of Jew­ish phil­an­thropy, the hon­oree at a UJA-Fed­er­a­tion ben­e­fit din­ner next month will be Thomas Mid­del­hof, the chief exec­u­tive of Ber­tels­mann, a Ger­man media con­glom­er­ate that pub­lished Nazi pro­pa­gan­da for Hitler’s army. Those who choose Mr. Mid­del­hoff, to be hon­ored at the Steven J. Ross din­ner on May 15 stress that Mr. Mid­del­hoff was born after the war and has inves­ti­gat­ed Ber­tels­man­n’s past and made what repa­ra­tions he could . . . . The $1,000-a-plate Ross din­ner, at which Matthew Bronf­man’s broth­er Edgar Bronf­man Jr. was a pre­vi­ous hon­oree, attracts some of the most promi­nent cor­po­rate and media fig­ures in New York. This year, Tom Brokaw, the NBC News anchor, will be the mas­ter of cer­e­monies and Stephen M. Case, the chair­man of AOL Time Warn­er, will present the award . . . . Elie Wiesel, a writer and Holo­caust sur­vivor, will deliv­er the key-note speech. Last fall, ran­dom House, which is owned by Ber­tels­mann, pledged $1 mil­lion to the Holo­caust Sur­vivors’ Mem­oir Project, for which Mr. Wiesel is the hon­orary chair­man. Mr. Wiesel is the hon­orary chair­man. Mr. Wiesel said he agreed to speak because he trust­ed Mr. Mid­del­hoff. ‘While it was in the end Ran­dom House that gave the mon­ey for the sur­vivors’ mem­oirs, the agree­ment was with Ber­tels­mann, and it was Mid­del­hoff who made the com­mit­ment,’ Mr. Wiesel said . . . . Not long after Mr. Mid­del­hoff became chief exec­u­tive in 1998, crit­i­cal sto­ries about Ber­tels­man­n’s war his­to­ry appeared in The Nation mag­a­zine and a Swiss mag­a­zine. Mr. Mid­del­hoff then cre­at­ed an inde­pen­dent com­mis­sion, head­ed by the his­to­ri­an Saul Fried­lan­der, to look into the com­pa­ny’s past. In Jan­u­ary 2000, the com­mis­sion found that Ber­tels­mann had not opposed Hitler, as the com­pa­ny had pre­vi­ous­ly claimed. Rather, it said, the com­pa­ny had ties to the Nazis, and was the largest sup­pli­er of read­ing mate­r­i­al, includ­ing Nazi pro­pa­gan­da, to the Ger­man mil­i­tary. Three months lat­er, Ber­tels­mann announced that it would con­tribute to the Ger­man fund to com­pen­sate work­ers used as slave labor in the Nazi era.” (“Past Col­lides With Clo­sure as Jews Hon­or a Ger­man” by Tamar Lewin; New York Times; 4/30/2001; p. A18.)

2. The giv­ing of this award to Mid­del­hoff is iron­ic and grotesque in a num­ber of dif­fer­ent respects. (Much of the series on Ger­man cor­po­rate con­trol over Amer­i­can media is devot­ed to Ber­tels­mann and there is an abun­dant amount of infor­ma­tion on the firm in the oth­er pro­grams in this series.) The avail­able evi­dence strong­ly sug­gests that Ber­tels­mann is part of the Bor­mann orga­ni­za­tion. (The eco­nom­ic and polit­i­cal com­po­nent of a Third Reich gone under­ground, the Bor­mann orga­ni­za­tion con­trols cor­po­rate Ger­many and much of the rest of the world. It was cre­at­ed and run by Mar­tin Bor­mann, the orga­ni­za­tion­al genius who was the “the pow­er behind the throne” in Nazi Ger­many. The Bor­mann group is a pri­ma­ry ele­ment of the analy­sis pre­sent­ed in the For the Record pro­grams.)

3. Review­ing some of the salient aspects of the Ber­tels­mann firm, we high­light the grotesque qual­i­ty to the grant­i­ng of the award to Mid­del­hoff.  (“Ber­tels­man­n’s Nazi Past” by Her­sch Fis­chler and John Fried­man; The Nation; 12/28/98; p. 1.)

4. “Issu­ing more than 20 mil­lion vol­umes, Ber­tels­mann was the largest sup­pli­er to the army and sup­plied the SS. When Ber­tels­mann applied after the war for a sec­ond pub­lish­ing license, it was turned down by occu­pa­tion author­i­ties. [Ber­tels­mann patri­arch Hein­rich] Mohn had ‘for­got­ten’ to men­tion that he had been a ‘pas­sive’ mem­ber of the SS, as well as a sup­port­er of the Hitler Youth and a mem­ber of the pres­ti­gious Nation­al Social­ist Fly­ing Corps, accord­ing to de-Naz­i­fi­ca­tion files in the cen­tral state archive in Dus­sel­dorf.” (“Ber­tels­man­n’s Nazi Past” by Her­sch Fis­chler and John Fried­man; The Nation; 12/28/98; pp. 1–2.)

5. As indi­cat­ed in the New York Times arti­cle cit­ed above, when the infor­ma­tion about the fir­m’s Nazi past was print­ed in The Nation, Mid­del­hoff formed an “inde­pen­dent” com­mis­sion to inves­ti­gate it. One of the appointees to that com­mis­sion was Dirk Baven­damm (Ber­tels­man­n’s offi­cial his­to­ri­an), whose work and views call into ques­tion the degree of sep­a­ra­tion that the com­pa­ny has effect­ed from its Third Reich her­itage.

6. “His book Roo­sevelt’s Way to War (Roo­sevelt’s Weg zum Krieg) was pub­lished in 1983. Rewrit­ing his­to­ry, he stat­ed that Roo­sevelt, not Hitler had caused World War II. He also wrote that Amer­i­can Jews con­trolled most of the media,’ and he claimed they gave a false pic­ture of Hitler. Did the book impress [Hein­rich’s son Rein­hard] Mohn, then the major­i­ty share­hold­er of Ber­tels­mann? The firm hired Baven­damm as its house his­to­ri­an, and in 1984 he com­plet­ed a his­tor­i­cal study, 150 Years of Ber­tels­mann: The Founders and Their Time—with a fore­word by Mohn. A year lat­er, Baven­damm edit­ed the fir­m’s offi­cial his­to­ry, which set forth the untrue sto­ry that the firm had resist­ed the Nazis and had been closed down by them. Mohn also asked Baven­damm to write the autho­rized his­to­ry of the Mohn fam­i­ly, pub­lished in 1986 under the title Ber­tels­mann, Mohn, Scip­pel: Three Families—One Com­pa­ny. In a sec­ond book, Roo­sevelt’s War (pub­lished in 1993, reis­sued in 1998), Baven­damm accus­es the U.S. Pres­i­dent of enact­ing a plan to start World War II. In the same book he sug­gests that Hitler’s threats in ear­ly 1939 against Euro­pean Jew­ry were a reac­tion to Roo­sevelt’s strat­e­gy against Ger­many. After the rev­e­la­tions about Ber­tels­man­n’s Nazi past appeared, the com­pa­ny announced that it had asked ‘the his­to­ri­an and pub­li­cist Dr. Dirk Baven­damm to look at the new infor­ma­tion and begin to rein­ves­ti­gate the role the pub­lish­ing house played in those days’ and defend­ed his work.” (“Ber­tels­man­n’s Revi­sion­ist” by Her­sch Fis­chler and John Fried­man; The Nation; 11/8/99; p. 1.)

7. In that con­text, it is inter­est­ing to spec­u­late about Ber­tels­man­n’s motives in back­ing the sur­vivors’ mem­oir and con­tribut­ing to the fund to com­pen­sate vic­tims of the Third Reich. (Pub­lic rela­tions con­sid­er­a­tions are prob­a­bly para­mount in this regard.) It is also inter­est­ing to note that the Bor­mann orga­ni­za­tion, to which Ber­tels­mann appears to belong, wields con­sid­er­able in Israel and with­in that coun­try’s sup­port net­work abroad. “Since the found­ing of Israel, the Fed­er­al Repub­lic of Ger­many had paid out 85.3 bil­lion marks, by the end of 1977, to sur­vivors of the Holo­caust. East Ger­many ignores any such lia­bil­i­ty. From South Amer­i­ca, where pay­ment must be made with sub­tle­ty, the Bor­mann orga­ni­za­tion has made a sub­stan­tial con­tri­bu­tion. It has drawn many of the bright­est Jew­ish busi­ness­men into a par­tic­i­pa­to­ry role in the devel­op­ment of many of its cor­po­ra­tions, and many of these Jews share their pros­per­i­ty most gen­er­ous­ly with Israel. If their pro­pos­als are sound, they are even pro­vid­ed with a spe­cial­ly dis­pensed ven­ture cap­i­tal fund. I spoke with one Jew­ish busi­ness­man in Hart­ford, Con­necti­cut. He had arrived there quite unknown sev­er­al years before our con­ver­sa­tion, but with Bor­mann mon­ey as his lever­age. Today he is more than a mil­lion­aire, a qui­et leader in the com­mu­ni­ty with a cer­tain share of his prof­its ear­marked, as always, for his ven­ture cap­i­tal bene­fac­tors. This has tak­en place in many oth­er instances across Amer­i­ca and demon­strates how Bor­man­n’s peo­ple oper­ate in the con­tem­po­rary com­mer­cial world, in con­trast to the fan­ci­ful non­sense with which Nazis are described in so much ‘lit­er­a­ture.’ So much empha­sis is placed on select Jew­ish par­tic­i­pa­tion in Bor­mann com­pa­nies that when Adolf Eich­mann was seized and tak­en to Tel Aviv to stand tri­al, it pro­duced a shock wave in the Jew­ish and Ger­man com­mu­ni­ties of Buenos Aires. Jew­ish lead­ers informed the Israeli author­i­ties in no uncer­tain terms that this must nev­er hap­pen again because a rep­e­ti­tion would per­ma­nent­ly rup­ture rela­tions with the Ger­mans of Latin Amer­i­ca, as well as with the Bor­mann orga­ni­za­tion, and cut off the flow of Jew­ish mon­ey to Israel. It nev­er hap­pened again, and the pur­suit of Bor­mann qui­et­ed down at the request of these Jew­ish lead­ers. He is resid­ing in an Argen­tine safe haven, pro­tect­ed by the most effi­cient Ger­man infra­struc­ture in his­to­ry, as well as by all those whose pros­per­i­ty depends on his well-being. Per­son­al invi­ta­tion is the only way to reach him.” (Mar­tin Bor­mann: Nazi in Exile; Paul Man­ning; Copy­right 1981 [HC]; Lyle Stu­art Inc.; ISBN 0–8184-0309–8; pp. 226–227.)

8. It is iron­ic to note that Holo­caust sur­vivor Wiesel lauds Ran­dom House for its sup­port for the sur­vivors’ mem­oir. Ran­dom House­’s behav­ior vis-à-vis a book authored by a key wit­ness in Holo­caust revi­sion­ist David Irv­ing’s unsuc­cess­ful libel suit against Deb­o­rah Lip­stadt and her pub­lish­er sug­gests that Wiesel’s acco­lades are, at the very least, pre­ma­ture. “[Queens Coun­sel and Lip­stadt attor­ney Antho­ny] Julius won because the pro­fes­sor of mod­ern his­to­ry at Cam­bridge had demol­ished Irv­ing’s schol­ar­ship. Richard J. Evans went through Irv­ing’s sources and pro­duced an exhaus­tive 740-page analy­sis which detailed how Irv­ing had twist­ed evi­dence in the Nazi inter­est. Irv­ing had cen­sored him­self as well as the past by cut­ting ref­er­ences to death camps from his ear­ly work when it was reprint­ed. Evans has writ­ten a book on the affair—Lying about Hitler: His­to­ry, Holo­caust, and the David Irv­ing Tri­al. You are free to buy it in Amer­i­ca and read the pro­fes­sor’s account of the case and reflec­tions on his­tor­i­cal inter­pre­ta­tion. I’ve no doubt it is a seri­ous study. Evans is the author of In Defense of His­to­ry, a patient cri­tique of the wild sub­jec­tiv­i­ty of post­mod­ernist the­o­ry. You were meant to be free to read Lying about Hitler in Britain. But last week, Evans’ pub­lish­ers, Heine­mann, a branch of the Ran­dom House con­glom­er­ate, ordered that the book should be pulped. [Jus­tice] Gray’s ver­dict, which came after years of col­lect­ing evi­dence and months of cross-exam­i­na­tion in an enor­mous­ly expen­sive tri­al, might as well nev­er have hap­pened. Heine­mann said they did not dare pub­lish because Irv­ing was appeal­ing against Gray’s rul­ing. In fact, Irv­ing has been refused per­mis­sion to appeal, and it is that deci­sion he is con­test­ing. In the very unlike­ly event of Irv­ing win­ning and the Court of Appeal agree­ing to con­sid­er Gray’s con­dem­na­tion, the crush­ing evi­dence against him should deny him vic­to­ry. Gran­ta Books cer­tain­ly think so and snapped up Lying about Hitler. Gran­ta did­n’t ‘see any ter­ri­ble legal night­mares’ and was ‘very enthu­si­as­tic and keen to pub­lish.’ We shall still be able to make up our own minds about Evans’ writ­ing. If the sto­ry stopped there, the moral of the cen­sor­ship of Evans would mere­ly be that robust authors should think hard before sign­ing a con­tract with Ran­dom House.” (“With­out Prej­u­dice: A Ploy Named Sue” by Nick Cohen; The Observ­er [Lon­don]; 3/18/2001.)

9. The views and work of Ber­tels­mann his­to­ri­an Baven­damm and the actions of Ran­dom House sub­sidiary Heine­mann in pulp­ing the Evans book should be com­pared with the Nazi tract Ser­pen­t’s Walk.

10. Mr. Emory has dealt with this book exten­sive­ly. Mr. Emory believes that, like The Turn­er Diaries (also pub­lished by Nation­al Van­guard Books), the book is actu­al­ly a blue­print for what is going to take place. It is a nov­el about a Nazi takeover of the Unit­ed States in the mid­dle of the 21st cen­tu­ry. The book describes the Third Reich going under­ground, buy­ing into the Amer­i­can media, and tak­ing over the coun­try. “It assumes that Hitler’s war­rior elite—the SS—didn’t give up their strug­gle for a White world when they lost the Sec­ond World War. Instead their sur­vivors went under­ground and adopt­ed some of their tac­tics of their ene­mies: they began build­ing their eco­nom­ic mus­cle and buy­ing into the opin­ion-form­ing media. A cen­tu­ry after the war they are ready to chal­lenge the democ­rats and Jews for the hearts and minds of White Amer­i­cans, who have begun to have their fill of gov­ern­ment-enforced mul­ti-cul­tur­al­ism and ‘equal­i­ty.’ ” (From the back cov­er of Ser­pen­t’s Walk by “Ran­dolph D. Calver­hall;” Copy­right 1991 [SC]; Nation­al Van­guard Books; 0–937944-05‑X.)

11. This process is described in more detail in a pas­sage of text, con­sist­ing of a dis­cus­sion between Wrench (a mem­ber of this Under­ground Reich) and a mer­ce­nary named Less­ing. “The SS . . . what was left of it . . .had busi­ness objec­tives before and dur­ing World War II. When the war was lost they just kept on, but from oth­er places: Bogo­ta, Asun­cion, Buenos Aires, Rio de Janeiro, Mex­i­co City, Colom­bo, Dam­as­cus, Dac­ca . . . you name it. They real­ized that the world is head­ing towards a ‘cor­po­racra­cy;’ five or ten inter­na­tion­al super-com­pa­nies that will run every­thing worth run­ning by the year 2100. Those super-cor­po­ra­tions exist now, and they’re already divid­ing up the pro­duc­tion and mar­ket­ing of food, trans­port, steel and heavy indus­try, oil, the media, and oth­er com­modi­ties. They’re already divid­ing up the pro­duc­tion and mar­ket­ing of food, trans­port, steel and heavy indus­try, oil, the media, and oth­er com­modi­ties. They’re most­ly con­glom­er­ates, with fin­gers in more than one pie . . . .We, the SS, have the say in four or five. We’ve been com­pet­ing for the past six­ty years or so, and we’re slow­ly gain­ing . . . . About ten years ago, we swung a merge, a takeover, and got vot­ing con­trol of a super­corp that runs a small but sig­nif­i­cant chunk of the Amer­i­can media. Not open­ly, not with bands and trum­pets or swastikas fly­ing, but qui­et­ly: one huge cor­po­ra­tion cud­dling up to anoth­er one and gen­tly munch­ing it up, like a great, gub­bing amoe­ba. Since then we’ve been replac­ing exec­u­tives, push­ing some­body out here, bring­ing some­body else in there. We’ve swing pro­gram con­tent around, too. Not much, but a lit­tle, so it won’t show. We’ve cut down on ‘nasty-Nazi’ movies . . . good guys in white hats and bad guys in black SS hats . . . lov­able Jews ver­sus fiendish Ger­mans . . . and we have media psy­chol­o­gists, ad agen­cies, and behav­ior mod­i­fi­ca­tion spe­cial­ists work­ing on image changes . . . . But all we ever hear about are the poor, inno­cent Jews and the awful ‘Holo­caust,’ when, in fact, there nev­er was an ‘exter­mi­na­tion pol­i­cy,’ a ‘Final Solu­tion,’ or any­thing like it!” (Ibid.; pp. 42–43.)

12. The vision of the future pre­sent­ed in this book should appear sober­ing under the cir­cum­stances. In light of this vision, the actions of Ran­dom House (and Ber­tels­mann) sub­sidiary Heine­mann in destroy­ing the Evans book and the views and actions of offi­cial Ber­tels­mann his­to­ri­an Dirk Baven­damm, the award giv­en to Mid­del­hoff would appear to be less than appro­pri­ate.

Discussion

4 comments for “FTR #298 Update on German Corporate Control Over American Media”

  1. [...] FTR #298: Ger­man cor­po­rate con­trol over amer­i­can media [...]

    Posted by Once Upon a Secret de Mimi Alford: Ramdom House se paie un Démocrate? | Lys-d'Or | February 8, 2012, 2:54 pm
  2. Ger­man pub­lish­ing giant Axel Springer just gob­bled up Busi­ness Insid­er and, accord­ing to the arti­cle below, despite the rather high price paid, Axel Springer’s appetite for more US media firms has yet to be sat­ed:

    Mash­able
    The Ger­man media barons who want to buy up more U.S. media com­pa­nies

    By Jason Abbruzzese
    9/29/2015

    Busi­ness Insid­er founder Hen­ry Blod­get had­n’t ever real­ly heard of Axel Springer until a year ago.

    Now, they’re his boss­es.

    Axel bought BI on Tues­day in a deal that stunned many media watch­ers for its hefty $442-mil­lion price tag — almost dou­ble what Jeff Bezos paid for the Wash­ing­ton Post just two years ago.

    What is less sur­pris­ing is the buy­er. Axel Springer SE might not be a house­hold name in the U.S., but it’s a major play­er in Europe.

    With impe­r­i­al fer­vor to expand its scope to U.S. read­ers, Axel Springer has also been steadi­ly invest­ing in U.S.-based dig­i­tal star­tups includ­ing Ozy.com, Mic.com and NowThis Media.

    Axel is based in Berlin, has about 14,000 employ­ees and brought in around $3.4 bil­lion in rev­enue in 2014. Its main hold­ings are in Ger­man news­pa­pers includ­ing Bild, a tabloid, and Die Welt, a high-brow dai­ly paper.

    Blod­get made the admis­sion about his ear­ly igno­rance of Axel dur­ing a con­fer­ence call fol­low­ing the announce­ment of the acqui­si­tion, not­ing that the com­pa­ny first came up on his radar when BI Pres­i­dent Julie Hansen vis­it­ed the com­pa­ny’s head­quar­ters.

    ...

    Axel’s acqui­si­tion of BI imme­di­ate­ly gives the Ger­man com­pa­ny a place in the U.S. dig­i­tal media mar­ket. Many of the oth­er major dig­i­tal media star­tups includ­ing Vice, Buz­zFeed and Vox have tak­en hun­dreds of mil­lions of dol­lars in invest­ments that have effec­tive­ly made them too expen­sive for oth­er com­pa­nies to buy. BI remained among the few that were big enough to make a dif­fer­ence but afford­able enough to go after.

    While most of Axel’s Euro­pean hold­ings are of the lega­cy news­pa­per and mag­a­zine type, the com­pa­ny has been mak­ing inroads on dig­i­tal media through a vari­ety of invest­ments.

    In Octo­ber 2014, Axel made a $20 mil­lion invest­ment in Ozy Media, a dig­i­tal news start­up. Its also dip­ping its toe in some pure tech such as its invest­ment in vir­tu­al real­i­ty com­pa­ny Jaunt. Its dig­i­tal prop­er­ties now account for around 70% of its prof­its.

    Dan O’Keefe, gen­er­al part­ner at ven­ture cap­i­tal firm Tech­nol­o­gy Crossover Ven­tures, which has stakes in oth­er dig­i­tal media com­pa­nies, said that there is a clear fit between what Axel has been look­ing for and what BI does.

    “I thought it made a lot of sense,” he said. “It gives Axel Springer a nice toe hold in a com­plete­ly dig­i­tal, eng­lish-speak­ing prop­er­ty here in the Unit­ed States.”

    Springer’s inter­est in busi­ness-focused media was laid bare when reports began to emerged ear­li­er in 2015 that it was in talks to buy the Finan­cial Times. It came as some sur­prise when it was out­bid by Japan­ese media con­glom­er­ate Nikkei that end­ed up pay­ing $1.3 bil­lion for the salmon-col­ored insti­tu­tion.

    O’Keefe not­ed that there aren’t too many oth­er com­pa­nies like BI that have been able to cap­ture a younger, online audi­ence.

    “It’s chal­leng­ing. Few have done it suc­cess­ful­ly,” he said. “I do think that assets such as those deserve a pre­mi­um val­u­a­tion.”

    ...

    That being said, Axel paid about nine times as much as BI’s pro­ject­ed rev­enue for 2015 — con­sid­ered pricey for this kind of media deal. On the oth­er hand, it is far less than the price tag for the FT, which sold for near­ly 35 times its prof­it.

    The deal had pro­duced some­thing of a nar­ra­tive that Axel had set­tled for BI after miss­ing out on the FT.

    Not so, said Axel Exec­u­tive VIce Pres­i­dent Christoph Keese.

    Keese said talks with BI began well before the FT sit­u­a­tion, although he could not com­ment on Axel’s report­ed bid on the salmon-col­ored paper.

    As for where the com­pa­ny is head­ed next, Keese said Axel has kicked the tires on a wide vari­ety of media com­pa­nies in the Eng­lish-speak­ing world. They’re not nec­es­sar­i­ly thirst­ing for anoth­er, but they’re far from out of the game.

    “We have looked into almost every inter­est­ing prospect on the US mar­ket that has been talked about for the past 18 or 24 months,” he said. “We decid­ed not to go with some and we decid­ed to go with oth­ers.”

    “As for where the com­pa­ny is head­ed next, Keese said Axel has kicked the tires on a wide vari­ety of media com­pa­nies in the Eng­lish-speak­ing world. They’re not nec­es­sar­i­ly thirst­ing for anoth­er, but they’re far from out of the game.”
    So Axel Springer might be done with its cur­rent round of cor­po­rate feast­ing. Or not. It has­n’t decid­ed yet. But if it does decide to make more inroads into for­eign media mar­kets, Axel Springer may find it has com­pe­ti­tion from the oth­er Ger­man media giant with an appetite for for­eign acqui­si­tions, Ber­tels­mann. Although, since Ber­tels­mann appears to be try­ing to diver­si­fy away from pub­lish­ing with its numer­ous pur­chas­es over the past year, com­pe­ti­tion with Axel Springer for for­eign media firms may not be a prob­lem:

    The Wall Street Jour­nal
    Ber­tels­mann Says Its Buy­ing Spree Isn’t Over
    Media giant’s many piece­meal deals are an effort to diver­si­fy amid chal­lenges to pub­lish­ing

    By Ellen Emmer­entze Jervell
    May 5, 2015 12:05 p.m. ET

    BERLIN—Media con­glom­er­ate Ber­tels­mann SE & Co. is hedg­ing its bet on pub­lish­ing.

    The com­pa­ny last year spent more than €1 bil­lion ($1.12 bil­lion) world-wide on acqui­si­tions, buy­ing a tele­vi­sion-pro­duc­tion com­pa­ny, a ser­vice provider for fash­ion e‑retailers, a logis­tics firm and a bill-col­lec­tion agency. It also acquired U.S. e‑learning com­pa­ny Relias Learn­ing, pay­ing rough­ly $540 mil­lion, accord­ing to a per­son famil­iar with the mat­ter, mark­ing Bertelsmann’s biggest Amer­i­can acqui­si­tion since it bought pub­lish­er Ran­dom House in 1998. Since ear­ly 2014, it has bought com­pa­nies at a pace of more than one a month.

    “We want to diver­si­fy even more,” said Chief Exec­u­tive Thomas Rabe. “We will keep up this brisk pace.”

    As a close­ly held com­pa­ny, Ber­tels­mann doesn’t have to appease activist share­hold­ers, although it does have bond­hold­ers. Mr. Rabe says run­ning a pri­vate com­pa­ny lets him avoid mov­ing rash­ly, even as he reshapes Bertelsmann’s core media busi­ness­es for the dig­i­tal age. He is grad­u­al­ly sell­ing wan­ing busi­ness­es like print-pub­lish­ing and expand­ing in online video, through deals like the acqui­si­tion of Van­cou­ver-based YoBo­Ho, a pro­duc­er of fam­i­ly pro­gram­ming on YouTube, announced on April 21. As with its oth­er acqui­si­tions, terms weren’t dis­closed.

    The ques­tion for Ber­tels­mann is whether scat­ter­ing efforts over a wider area is smarter than a tight focus on pub­lish­ing, espe­cial­ly when the pub­lish­ing busi­ness is nav­i­gat­ing tricky new Inter­net and e‑book waters. An indi­ca­tion of how well Bertelsmann’s strat­e­gy is work­ing may come Thurs­day, when it reports first-quar­ter earn­ings.

    Aside from a brief for­ay into chick­en farm­ing in the 1960s, diver­si­fi­ca­tion out­side of the media indus­try is new for Ber­tels­mann. For most of its 180-year his­to­ry, Ber­tels­mann was a book pub­lish­er. Found­ed in 1835, the com­pa­ny for a cen­tu­ry pub­lished Chris­t­ian lit­er­a­ture and hym­nals.

    In the 1930s it sup­port­ed the Nazi regime, pub­lish­ing nation­al­is­tic and some­times anti-Semit­ic lit­er­a­ture, and grew rich as the military’s main book sup­pli­er, accord­ing to an offi­cial com­pa­ny his­to­ry. Shut by the Allies, Ber­tels­mann soon reopened, launched a book club and by the 1950s was boom­ing.

    The book club recent­ly closed, a vic­tim of the Inter­net. Mr. Rabe believes diver­si­fi­ca­tion will help ensure Ber­tels­mann itself doesn’t share that fate. In light of that, Ber­tels­mann has moved into busi­ness­es includ­ing TV pro­duc­tion, call-cen­ter oper­a­tion, music-rights man­age­ment and online edu­ca­tion.

    Media still account­ed for rough­ly 70% of Bertelsmann’s €16.7 bil­lion in rev­enue last year. It is co-own­er of the biggest con­sumer book-pub­lish­ing com­pa­ny in the world, the Pen­guin Ran­dom House joint ven­ture with Pear­son PLC, ham­mered out in 2012. Online learn­ing and ser­vice-out­sourc­ing are rel­a­tive­ly new fields for the com­pa­ny, but those two new “pil­lars” of its busi­ness already boost­ed com­pa­ny mar­gins last year, said the 49-year-old Mr. Rabe. He aims to boost annu­al rev­enue to €20 bil­lion with­in five years.

    Asked whether Ber­tels­mann is inter­est­ed in tak­ing full con­trol of Pen­guin Ran­dom House, Mr. Rabe says that hinges first on what Pear­son does. In Octo­ber, Pear­son will have the option to sell its stake, and Ber­tels­mann would then have the option of buy­ing it. Ber­tels­mann hasn’t decid­ed what to do, but says the book pub­lish­ing busi­ness is doing very well, and that it seems sen­si­ble for Ber­tels­mann to take over the shares because pub­lish­ing has been its core busi­ness for almost 200 years.

    Bertelsmann’s 2014 rev­enue was its high­est in sev­en years. Its net prof­it, how­ev­er, was hurt by one of its “declin­ing busi­ness­es,” in Mr. Rabe’s words: the print­ing busi­ness. Rev­enue at its mag­a­zine pub­lish­er, Gruner + Jahr, also declined last year. Mr. Rabe said he is strug­gling to mon­e­tize the mag­a­zine busi­ness, but that he is “look­ing at ways to turn it around.” Ber­tels­mann is work­ing on trim­ming down its print­ing busi­ness.

    Bertelsmann’s approach con­trasts with some rivals that have been com­pelled by activists to pare ancil­lary oper­a­tions. Once-sprawl­ing French con­glom­er­ate Viven­di SA, for exam­ple, recent­ly bowed to investor pres­sure and sold its videogames and telecom­mu­ni­ca­tions units—assets that account­ed for more than half of its revenue—to focus on media.

    Mr. Rabe’s strat­e­gy gets sup­port from the company’s share­hold­ers: three foun­da­tions that togeth­er hold 80%, and heirs to founder Carl Ber­tels­mann, the Mohn fam­i­ly, who hold 20%.

    ...

    His acqui­si­tions are pos­si­ble in part thanks to some can­ny dis­pos­als. In 2000, Ber­tels­mann decid­ed to sell its 50% stakes in AOL Europe and AOL Aus­tralia to Amer­i­ca Online Inc. short­ly before the dot-com bub­ble burst, pock­et­ing fat prof­its. In 2008 it sold its 50% stake in the record music com­pa­ny Sony BMG Music Enter­tain­ment to Sony Corp. before online stream­ing gut­ted the music indus­try.

    Ber­tels­mann has been acquis­i­tive for more than a decade, but it has been under Mr. Rabe that it aggres­sive­ly branched out beyond media.

    The objec­tive, Mr. Rabe says, is “find­ing the right seg­ments” for invest­ment.

    Soon after becom­ing CEO he iden­ti­fied edu­ca­tion as a promis­ing field, par­tic­u­lar­ly online and in the U.S. In 2014, he bought a stake in online-course provider Udac­i­ty. Last year he des­ig­nat­ed edu­ca­tion as one of Bertelsmann’s three future core busi­ness­es, along­side media and ser­vices.

    In the ser­vices seg­ment, he expand­ed into busi­ness­es relat­ed to sup­ply-chain man­age­ment, pay­ment pro­cess­ing and bill-col­lec­tion for online busi­ness­es.

    Mov­ing judi­cious­ly and tak­ing the long view are hall­marks of pri­vate com­pa­nies but “we know that being pri­vate­ly owned can bring prob­lems,” said Zacharias Saut­ner, a finance pro­fes­sor at Frank­furt School of Finance and Man­age­ment. With lim­it­ed out­side pres­sure, man­agers of diver­si­fied pri­vate firms face less scruti­ny of deci­sions on how to allo­cate resources among divi­sions, he said. “Who’s to con­trol that the mon­ey ends up where it should?”

    But crit­i­cism of diver­si­fi­ca­tion has come “under much rethink­ing” over the past decade, says Har­vard Busi­ness School Pro­fes­sor Bharat Anand. While diver­si­fi­ca­tion may destroy val­ue on aver­age, he said “there are sub­stan­tial dif­fer­ences across diver­si­fied firms” and his research indi­cates that up to 40% of diver­si­fied com­pa­nies cre­ate val­ue.

    Diver­si­fi­ca­tion “works very well for some, not at all for oth­ers,” said Prof. Anand, who has taught pro­grams for senior Ber­tels­mann exec­u­tives.

    Mr. Rabe said he is con­fi­dent Ber­tels­mann is doing what is best for its own­ers.

    “I would say we’re already a very broad com­pa­ny,” he said. “But we want to become even broad­er.”

    “I would say we’re already a very broad company...But we want to become even broad­er.”
    Broad­en­ing Ber­tels­mann through fur­ther acqui­si­tions also prob­a­bly won’t be a prob­lem.

    Posted by Pterrafractyl | September 29, 2015, 5:44 pm
  3. Read this arti­cle from the Novem­ber 4, 2016 Dai­ley Mail (UK) “Mark Zucker­berg and Sheryl Sand­berg are inves­ti­gat­ed by Ger­man pros­e­cu­tors for ‘fail­ing to remove racist posts that vio­late anti-hate speech laws’ from Face­book”

    - The arti­cle is loaded with psy­cho­log­i­cal inu­en­do The both the founder Marc Zucker­berg and his Chief Oper­at­ing Offi­cer are Jews an Amer­i­cans who are the tar­get in this article/investigation. This can sub­con­cious­ly cause a neg­a­tive bias a lib­er­al or anti ‑Nazi Ger­man Cit­i­zen.

    The fol­low­ing excerpt is sad­ly com­i­cal when one con­sid­ers that Ber­tels­mann is owned by the Under­ground Reich.

    “They include what some might con­sid­er mere­ly angry polit­i­cal rants but also clear exam­ples of racist hate speech and calls to vio­lence laced with ref­er­ences to Nazi-era geno­cide. Fol­low­ing a pub­lic out­cry and pres­sure from Ger­man politi­cians, Face­book this year hired Arva­to, a busi­ness ser­vices unit of Ber­tels­mann, to mon­i­tor and delete racist posts.”

    One has to ask the ques­tion if the Nazi linked Face­book investor Peter Thiele had any influ­ence on this selec­tion.

    http://www.dailymail.co.uk/news/article-3906588/German-prosecutors-investigate-Facebook-hate-postings.html

    Mark Zucker­berg and Sheryl Sand­berg are inves­ti­gat­ed by Ger­man pros­e­cu­tors for ‘fail­ing to remove racist posts that vio­late anti-hate speech laws’ from Face­book

    Ger­man pros­e­cu­tors are inves­ti­gat­ing Face­book founder Mark Zucker­burg over alle­ga­tions that the site failed to remove racist posts.

    Attor­ney Chan-jo Jun has filed a com­plaint to courts in Munich alleg­ing the com­pa­ny broke nation­al laws against hate speech and sedi­tion.

    Face­book’s rules for­bid bul­ly­ing, harass­ment and threat­en­ing lan­guage, but crit­ics say it does not do enough to enforce them.

    The site has also been accused of fail­ing to staunch a tide of racist and threat­en­ing posts on the social net­work dur­ing an influx of migrants into Europe.

    Pros­e­cu­tors in Ham­burg ear­li­er this year reject­ed a sim­i­lar com­plaint by Jun on the grounds that the region­al court lacked juris­dic­tion because Face­book’s Euro­pean oper­a­tions are based in Ire­land.

    A spokesman for Jun’s legal team said: ‘There is a dif­fer­ent view in Bavaria.

    ‘Upon Jun’s request, Bavar­i­an Jus­tice Min­is­ter Win­fried Baus­back said that Ham­burg’s view was wrong and Ger­man law does indeed apply to some of the offences,’ it said.

    Jun’s com­plaint named Face­book founder and chief exec­u­tive Zucker­berg and nine oth­er man­agers at the com­pa­ny, includ­ing Chief Oper­at­ing Offi­cer Sheryl Sand­berg.

    Face­book said it had not vio­lat­ed Ger­man law and was work­ing on fight­ing hate speech online.

    A spokesman said: ‘We are not com­ment­ing on the sta­tus of a pos­si­ble inves­ti­ga­tion but we can say that the alle­ga­tions lack mer­it and there has been no vio­la­tion of Ger­man law by Face­book or its employ­ees.’

    Jun has com­piled a list of 438 post­ings that were flagged as inap­pro­pri­ate but not delet­ed over the past year.

    They include what some might con­sid­er mere­ly angry polit­i­cal rants but also clear exam­ples of racist hate speech and calls to vio­lence laced with ref­er­ences to Nazi-era geno­cide.

    Fol­low­ing a pub­lic out­cry and pres­sure from Ger­man politi­cians, Face­book this year hired Arva­to, a busi­ness ser­vices unit of Ber­tels­mann, to mon­i­tor and delete racist posts.

    A rash of online abuse and vio­lent attacks against new­com­ers to Ger­many accom­pa­nied the influx of hun­dreds of thou­sands of migrants last year, which led to a rise in the pop­u­lar­i­ty of the anti-immi­grant Alter­na­tive for Ger­many (AfD) par­ty and has put pres­sure on Chan­cel­lor Angela Merkel.

    Posted by Anonymous | November 5, 2016, 2:22 pm
  4. There’s a pret­ty notable sto­ry in the pub­lish­ing busi­ness emerg­ing: Ger­man pub­lish­ing giant Axel Springer is effec­tive­ly tak­ing itself pri­vate. The part­ner in this process of tak­ing Axel Spring pri­vate is Kohlberg Kravis Roberts (KKR), which is going to buy out all of the minor­i­ty share­hold­ers at a 40% pre­mi­um. This will leave just KKR and the main share­hold­ers led by Axel Springer’s 76-year-old wid­ow Friede Springer. Friede and CEO Math­ias Doepfn­er con­trol 45.4% between the two of them. Axel Springer’s grand­chil­dren own anoth­er 9.8%, and the remain­ing 44.8% is free float­ing. It’s that 44.8% that KKR is going to buy out, but the stakes owned by the grand­chil­dren could also be sold to KKR, poten­tial­ly giv­ing it a major­i­ty stake. As part of the deal, Friede would be guar­an­teed a say in com­pa­ny’s strat­e­gy even if KKR secures a major­i­ty stake.

    As the fol­low­ing arti­cle notes, KKR also part­nered with Ber­tels­mann in 2009 when they cre­at­ed a joint music ven­ture. Ber­tels­mann bought out KKR’s share in 2013 (for a nice prof­it for KKR), so KKR has a recent his­to­ry of part­ner­ing with Ger­man media giants. KKR has pledged to stay in this busi­ness with Axel Springer for at least 5 years. So it sounds like we might be see­ing a sim­i­lar strat­e­gy here, where KKR acts as the finan­cial mus­cle for a new cor­po­rate strat­e­gy and if it works KKR will get to cash out with a hefty prof­it. It also sug­gests that Axel Springer will almost be entire­ly owned by its main share­hold­ers if KKR ends up sell­ing its shares back to them in five years.

    As the arti­cle also notes, Axel Springer’s main share­hold­ers are also plan­ning on an acqui­si­tion spree. This is at the same time the com­pa­ny issued a prof­it warn­ing. So at the same time Axel Springer is warn­ing about its prof­its, it’s also part­ner­ing with KKR (which has very deep pock­ets) to buy up more media prop­er­ties. Keep in mind this in tak­ing place in the con­text of a indus­try melt­down across the dig­i­tal pub­lish­ing sec­tor so there’s prob­a­bly quite a few good deals avail­able for an enti­ty with deep pock­ets. And that appears to be the broad­er sto­ry here: one of the biggest pub­lish­ers in the world appears to be get­ting ready to take part of the inevitable con­sol­i­da­tion of the deeply trou­bled dig­i­tal pub­lish­ing indus­try and KKR is going to be financ­ing it:

    Reuters

    KKR offers 40% pre­mi­um to buy out Axel Springer minori­ties

    Dou­glas Busvine
    June 12, 2019 / 12:44 AM

    FRANKFURT (Reuters) — U.S. pri­vate equi­ty investor KKR on Wednes­day offered a 40% pre­mi­um to buy out minor­i­ty investors in Axel Springer in a deal that entrench­es the influ­ence of the main share­hold­ers at the pub­lish­ers of Germany’s Bild news­pa­per.

    The buy­out offer of 63 euros per share puts an equi­ty val­ue of 6.8 bil­lion euros ($7.7 bil­lion) on the busi­ness. It will be sub­ject to accep­tances for 20% of Springer’s share cap­i­tal — a thresh­old one ana­lyst said was with­in reach.

    The offer, made in con­cert with main share­hold­ers led by founder Axel Springer’s 76-year-old wid­ow Friede, would guar­an­tee her a say over strat­e­gy even if KKR secures a major­i­ty stake.

    “It’s a part­ner­ship of equals,” CEO Math­ias Doepfn­er told reporters on a con­fer­ence call.

    Between them, Friede Springer and Doepfn­er con­trol 45.4% of Axel Springer. Axel Springer’s grand­chil­dren, Axel Sven and Ari­ane who own a fur­ther 9.8%, are not par­ty to the KKR deal and may decide to sell or reduce their hold­ings, Doepfn­er said.

    The remain­ing 44.8% is in free float and is worth 3 bil­lion euros at the ten­der price. Sub­ject to suc­cess­ful clos­ing, KKR, Friede Springer and Doepfn­er would joint­ly con­trol the com­pa­ny while man­age­ment would remain in place.

    BUYING TIME

    KKR has pledged to stay invest­ed for at least five years.

    This would buy time for Springer, which also pub­lish­es finan­cial news web­site Busi­ness Insid­er, to prospect for acqui­si­tions and build its dig­i­tal clas­si­fieds port­fo­lio, which earns more than four-fifths of its core prof­it.

    “In light of the fast pace of change in the media sec­tor, Axel Springer now needs con­tin­ued organ­ic invest­ments and suc­cess­ful exe­cu­tion of its strat­e­gy,” said KKR’s Philipp Freise, adding that KKR would sup­port this “in a long-term and sus­tain­able man­ner”.

    A banker famil­iar with the deal said Springer’s main own­ers want­ed to uphold the company’s her­itage in news and take their time to expand its clas­si­fieds busi­ness, eschew­ing the idea of a breakup.

    Springer shares jumped by near­ly 12% to trade almost at the buy­out price. They had ral­lied by 20% last week on news of the KKR plan before steady­ing to close at 56 euros on Tues­day.

    “Our growth plans will require sig­nif­i­cant invest­ment in peo­ple, prod­ucts, tech­nol­o­gy and brands over the next years,” said Doepfn­er, adding that the strate­gic part­ner­ship with KKR would cre­ate head­room for organ­ic invest­ments and acqui­si­tions.

    Springer is not in any active merg­er talks now but is on the look­out for oppor­tu­ni­ties, Doepfn­er said. He added that, despite spec­u­la­tion to that effect, eBay’s Euro­pean clas­si­fieds busi­ness was not yet up for sale.

    Ana­lyst Ian Whit­tak­er at Liberum said KKR’s offer for Springer shares would almost cer­tain­ly be accept­ed, adding that it would fuel M&A spec­u­la­tion in Euro­pean dig­i­tal clas­si­fieds at a time of grow­ing eco­nom­ic head­winds.

    PROFIT WARNING

    Even as it dis­closed the KKR buy­out deal, Springer issued a prof­it warn­ing, say­ing it saw a drop in rev­enue in the low sin­gle-dig­it per­cent­age range this year. Its adjust­ed earn­ings before inter­est, tax­a­tion, depre­ci­a­tion and amor­ti­za­tion (EBITDA) face a mid-sin­gle-dig­it drop.

    Look­ing ahead to 2020, the Ger­man pub­lish­er said its invest­ment plans meant that adjust­ed EBITDA would be “sig­nif­i­cant­ly below” the cur­rent year, before an improve­ment expect­ed in the ensu­ing years.

    Doepfn­er said the down­grade was due to the impact on Springer’s flag­ship jobs por­tal, Step­stone, of cycli­cal eco­nom­ic weak­ness and of Britain’s plans to leave the Euro­pean Union.

    Step­stone has also com­plained to the Euro­pean Union over Google’s recent launch of a jobs prod­uct in Ger­many that has grabbed a mar­ket lead overnight, in a reminder of the threat posed to lega­cy media firms by Sil­i­con Valley’s dig­i­tal plat­form giants.

    In bring­ing in KKR, Friede Springer has cho­sen a coun­ter­part with a track record of long-term invest­ments in the Ger­man media sec­tor.

    KKR, togeth­er with Per­mi­ra, bought con­trol of ProSiebenSat.1 in 2007 and sold out in 2014, hav­ing broad­ened the broadcaster’s enter­tain­ment offer­ing and launched a for­ay into e‑commerce.

    The pri­vate equi­ty firm also entered a music rights joint ven­ture with Ber­tels­mann in 2009, sell­ing its stake back to the pub­lish­er four years lat­er.

    ...

    ———-


    KKR offers 40% pre­mi­um to buy out Axel Springer minori­ties” by Dou­glas Busvine; Reuters; 06/12/2019

    “The offer, made in con­cert with main share­hold­ers led by founder Axel Springer’s 76-year-old wid­ow Friede, would guar­an­tee her a say over strat­e­gy even if KKR secures a major­i­ty stake.”

    As we can see, KKR is being brought in a major part­ner, but this is being done in a way that appears to guar­an­tee that ulti­mate con­trol over Axel Springer remains in the hands of its pri­ma­ry share­hold­ers who hap­pen to be the Springer fam­i­ly and CEO Math­ias Doepfn­er:

    ...
    “It’s a part­ner­ship of equals,” CEO Math­ias Doepfn­er told reporters on a con­fer­ence call.

    Between them, Friede Springer and Doepfn­er con­trol 45.4% of Axel Springer. Axel Springer’s grand­chil­dren, Axel Sven and Ari­ane who own a fur­ther 9.8%, are not par­ty to the KKR deal and may decide to sell or reduce their hold­ings, Doepfn­er said.

    The remain­ing 44.8% is in free float and is worth 3 bil­lion euros at the ten­der price. Sub­ject to suc­cess­ful clos­ing, KKR, Friede Springer and Doepfn­er would joint­ly con­trol the com­pa­ny while man­age­ment would remain in place.

    ...

    In bring­ing in KKR, Friede Springer has cho­sen a coun­ter­part with a track record of long-term invest­ments in the Ger­man media sec­tor.

    KKR, togeth­er with Per­mi­ra, bought con­trol of ProSiebenSat.1 in 2007 and sold out in 2014, hav­ing broad­ened the broadcaster’s enter­tain­ment offer­ing and launched a for­ay into e‑commerce.

    The pri­vate equi­ty firm also entered a music rights joint ven­ture with Ber­tels­mann in 2009, sell­ing its stake back to the pub­lish­er four years lat­er.
    ...

    And the plans for this new part­ner­ship appear to revolve around build­ing up Axel Springer’s dig­i­tal clas­si­fieds, which earns the bulk of the com­pa­ny’s prof­its, and acquir­ing new com­pa­nies, which is where KKR’s deep pock­ets could be very use­ful:

    ...
    BUYING TIME

    KKR has pledged to stay invest­ed for at least five years.

    This would buy time for Springer, which also pub­lish­es finan­cial news web­site Busi­ness Insid­er, to prospect for acqui­si­tions and build its dig­i­tal clas­si­fieds port­fo­lio, which earns more than four-fifths of its core prof­it.

    “In light of the fast pace of change in the media sec­tor, Axel Springer now needs con­tin­ued organ­ic invest­ments and suc­cess­ful exe­cu­tion of its strat­e­gy,” said KKR’s Philipp Freise, adding that KKR would sup­port this “in a long-term and sus­tain­able man­ner”.

    A banker famil­iar with the deal said Springer’s main own­ers want­ed to uphold the company’s her­itage in news and take their time to expand its clas­si­fieds busi­ness, eschew­ing the idea of a breakup.

    ...

    “Our growth plans will require sig­nif­i­cant invest­ment in peo­ple, prod­ucts, tech­nol­o­gy and brands over the next years,” said Doepfn­er, adding that the strate­gic part­ner­ship with KKR would cre­ate head­room for organ­ic invest­ments and acqui­si­tions.

    Springer is not in any active merg­er talks now but is on the look­out for oppor­tu­ni­ties, Doepfn­er said. He added that, despite spec­u­la­tion to that effect, eBay’s Euro­pean clas­si­fieds busi­ness was not yet up for sale.

    Ana­lyst Ian Whit­tak­er at Liberum said KKR’s offer for Springer shares would almost cer­tain­ly be accept­ed, adding that it would fuel M&A spec­u­la­tion in Euro­pean dig­i­tal clas­si­fieds at a time of grow­ing eco­nom­ic head­winds.
    ...

    It’s all pret­ty big news for the dig­i­tal pub­lish­ing indus­try. It’s also worth not­ing one of the ironies here: Recall how Axel Springer has been the pri­ma­ry cor­po­rate force push­ing the EU to imple­ment poli­cies designed to either reign in the pow­er of the Sil­i­con Val­ley giants like Google or Face­book at least extract some sort of pay­ment from them (via a ‘link tax’ or some­thing sim­i­lar) that flows back to the dig­i­tal pub­lish­ing indus­try. Well, now that Axel Springer is shop­ping around for new dig­i­tal acqui­si­tions it’s hard to ignore the grim real­i­ty that the fire sale prices Axel Springer is prob­a­bly going to be for these dig­i­tal pub­lish­ing com­pa­nies is due large­ly to the dev­as­tat­ing impact Google and Face­book have had on jour­nal­is­m’s busi­ness mod­el:

    The Week

    How to stop Google and Face­book from stran­gling jour­nal­ism

    Ryan Coop­er
    June 11, 2019

    The last two decades have been per­haps the worst in Amer­i­can his­to­ry for jour­nal­ism. After years of decline, news­room employ­ment fell a fur­ther 23 per­cent from 2008–2017 — a trend which shows no sign of stop­ping.

    There are three big rea­sons why. First, the rise of the inter­net, which under­mined tra­di­tion­al news­pa­per rev­enue mod­els, espe­cial­ly clas­si­fied ads. Sec­ond, the Great Reces­sion, which tanked employ­ment of all kinds. Third and most impor­tant­ly, the rise of online monop­o­lies like Google, Face­book, and Ama­zon.

    It rais­es a ques­tion: How can we stop these cor­po­rate behe­moths from stran­gling the life out of Amer­i­can jour­nal­ism? A good place to start would be break­ing up the tech giants, and reg­u­lat­ing the online adver­tis­ing mar­ket to ensure fair com­pe­ti­tion.

    Spend­ing on dig­i­tal adver­tis­ing is pro­ject­ed to sur­pass the tra­di­tion­al sort in 2019 for the first time, and you will not be sur­prised to learn where that mon­ey is going. Last year, Google alone was esti­mat­ed to make more than $40 bil­lion in online adver­tis­ing with $4.7 bil­lion of that com­ing from news con­tent, accord­ing to a new report from the News Media Alliance. That is near­ly as much as the $5.1 bil­lion the entire Amer­i­can news indus­try earned in online ads. What’s more, Google “only” accounts for 37 per­cent of the online ad mar­ket. Face­book makes up anoth­er 22 per­cent — an effec­tive duop­oly that has only been par­tial­ly dis­rupt­ed by (who else?) Ama­zon, which has moved aggres­sive­ly into the mar­ket over the last few years and now takes up 9 per­cent.

    That is why jour­nal­ism has con­tin­ued to floun­der even as the broad­er econ­o­my has improved a lot, and why even dig­i­tal native com­pa­nies like Buz­zfeed and Vox are strug­gling to keep their heads above water. For instance, as Josh Mar­shall of Talk­ing Points Memo explains, Google runs the major ad mar­ket (Dou­bleClick), is the largest pur­chas­er on that mar­ket (through Adex­change), and has priv­i­leged access to all the valu­able data thus obtained. Its “monop­oly con­trol is almost com­i­cal­ly great,” he writes — and that’s just one com­pa­ny. Just as online ad rev­enue got to the point where it might replace print ads, inter­net behe­moths have sucked up a huge major­i­ty of it, leav­ing news com­pa­nies to fight over scraps, or des­per­ate­ly piv­ot to alter­na­tive rev­enue mod­els like video con­tent or sub­scrip­tions.

    Remark­ably, there appears to be some bipar­ti­san sup­port for reg­u­la­to­ry action to give news com­pa­nies a leg up. Hear­ings are sched­uled on Tues­day for a bill which would grant news com­pa­nies an exemp­tion to antitrust law, reports CNN, “allow­ing them to band togeth­er in nego­ti­a­tions with online plat­forms.”

    This would prob­a­bly be worth try­ing, but it’s like­ly not near­ly aggres­sive enough. The jour­nal­ism indus­try is frag­ment­ed, dam­aged, and cash-poor, and would sure­ly strug­gle to com­pete with Google and Face­book even if it could coor­di­nate prop­er­ly. It’s telling that only Ama­zon — anoth­er gar­gan­tu­an, huge­ly prof­itable tech colos­sus — has man­aged to com­pete even a lit­tle.

    A bet­ter approach would be to sim­ply break up and reg­u­late these com­pa­nies. Fol­low­ing Amer­i­can antitrust law, force Alpha­bet (Google’s par­ent com­pa­ny) to break all its major parts into sep­a­rate com­pa­nies — Google for search, YouTube for video, Dou­bleClick for ads, Ana­lyt­ics for audi­ence analy­sis, and so on. Do the same for Face­book, forc­ing it to split off Insta­gram and What­sapp.

    Then reg­u­late the online ad mar­ket. It is out­ra­geous for one com­pa­ny to both run the major ad mar­ket and have first bite at sales on that mar­ket, because it puts oth­er sell­ers and buy­ers at an unfair dis­ad­van­tage — as Mar­shall notes, “the inter­play between Dou­bleClick and Adex­change is text­book anti-com­pet­i­tive prac­tice.” Break­ing Dou­bleClick out into a dif­fer­ent com­pa­ny would solve that par­tic­u­lar instance of abuse of mar­ket pow­er, but it prob­a­bly would­n’t be the end of it. An online ad sales plat­form (like many inter­net busi­ness­es) has high fixed costs but very low mar­gin­al costs — mean­ing it costs a great deal to set up all the servers and net­works, but almost noth­ing to serve one addi­tion­al ad. Once a com­pa­ny has achieved mas­sive scale, like Google has with Dou­bleClick, it has an ever-increas­ing advan­tage over any would-be com­peti­tors. That’s the clas­sic def­i­n­i­tion of a nat­ur­al monop­oly, which if left to its own devices will cer­tain­ly abuse its mar­ket pow­er just like Gild­ed Age rail­roads.

    There­fore, abuse of mar­ket pow­er should be banned out­right with com­mon car­ri­er reg­u­la­tions man­dat­ing equal prices for equal ser­vices across the whole online ad busi­ness — either that, or Dou­bleClick should be nation­al­ized out­right and run as a pub­lic util­i­ty.

    ...

    ———-

    “How to stop Google and Face­book from stran­gling jour­nal­ism” by Ryan Coop­er; The Week; 06/11/2019

    The last two decades have been per­haps the worst in Amer­i­can his­to­ry for jour­nal­ism. After years of decline, news­room employ­ment fell a fur­ther 23 per­cent from 2008–2017 — a trend which shows no sign of stop­ping.”

    The worst two decades in US his­to­ry for jour­nal­ism. That’s the indus­try trend back­drop for Axel Springer’s acqui­si­tion plans. And the pri­ma­ry cul­prit for this sor­ry state of affairs is unam­bigu­ous­ly the near-monop­oly sta­tus over the dig­i­tal adver­tis­ing busi­ness achieved by Google and Face­book. Google alone almost made as much from news ads as the rest of the entire Amer­i­cans news indus­try com­bined:

    ...
    Spend­ing on dig­i­tal adver­tis­ing is pro­ject­ed to sur­pass the tra­di­tion­al sort in 2019 for the first time, and you will not be sur­prised to learn where that mon­ey is going. Last year, Google alone was esti­mat­ed to make more than $40 bil­lion in online adver­tis­ing with $4.7 bil­lion of that com­ing from news con­tent, accord­ing to a new report from the News Media Alliance. That is near­ly as much as the $5.1 bil­lion the entire Amer­i­can news indus­try earned in online ads. What’s more, Google “only” accounts for 37 per­cent of the online ad mar­ket. Face­book makes up anoth­er 22 per­cent — an effec­tive duop­oly that has only been par­tial­ly dis­rupt­ed by (who else?) Ama­zon, which has moved aggres­sive­ly into the mar­ket over the last few years and now takes up 9 per­cent.

    That is why jour­nal­ism has con­tin­ued to floun­der even as the broad­er econ­o­my has improved a lot, and why even dig­i­tal native com­pa­nies like Buz­zfeed and Vox are strug­gling to keep their heads above water. For instance, as Josh Mar­shall of Talk­ing Points Memo explains, Google runs the major ad mar­ket (Dou­bleClick), is the largest pur­chas­er on that mar­ket (through Adex­change), and has priv­i­leged access to all the valu­able data thus obtained. Its “monop­oly con­trol is almost com­i­cal­ly great,” he writes — and that’s just one com­pa­ny. Just as online ad rev­enue got to the point where it might replace print ads, inter­net behe­moths have sucked up a huge major­i­ty of it, leav­ing news com­pa­nies to fight over scraps, or des­per­ate­ly piv­ot to alter­na­tive rev­enue mod­els like video con­tent or sub­scrip­tions.
    ...

    Even worse, it’s entire­ly pos­si­ble that break­ing up Google in order to sep­a­rate the dif­fer­ent com­po­nents like Dou­bleClick and Adex­change that cre­ate this mar­ket stran­gle­hold still might not real­ly address the fun­da­men­tal prob­lem of hav­ing a monop­oly run­ning the dig­i­tal adver­tis­ing mar­ket. Why? Because the nature of the online ad busi­ness is such that there’s a very high fixed costs to get it set up but min­i­mal costs for expand­ing and that’s a recipe for the cre­ation of a nat­ur­al monop­oly. Some ser­vices, like deliv­er­ing elec­tric­i­ty of water to homes, are nat­ur­al monop­o­lies sim­ply due to the phys­i­cal require­ments of pro­vid­ed those ser­vices. But in this case we have a nat­ur­al monop­oly due to mar­ket dynam­ics that make it effec­tive­ly impos­si­ble for com­peti­tors to dethrone the exist­ing indus­try leader. Dou­bleClick is still going to be dom­i­nat­ing the online ad busi­ness and effec­tive­ly stran­gling the jour­nal­ism indus­try whether it’s a part of Google or not:

    ...
    A bet­ter approach would be to sim­ply break up and reg­u­late these com­pa­nies. Fol­low­ing Amer­i­can antitrust law, force Alpha­bet (Google’s par­ent com­pa­ny) to break all its major parts into sep­a­rate com­pa­nies — Google for search, YouTube for video, Dou­bleClick for ads, Ana­lyt­ics for audi­ence analy­sis, and so on. Do the same for Face­book, forc­ing it to split off Insta­gram and What­sapp.

    Then reg­u­late the online ad mar­ket. It is out­ra­geous for one com­pa­ny to both run the major ad mar­ket and have first bite at sales on that mar­ket, because it puts oth­er sell­ers and buy­ers at an unfair dis­ad­van­tage — as Mar­shall notes, “the inter­play between Dou­bleClick and Adex­change is text­book anti-com­pet­i­tive prac­tice.” Break­ing Dou­bleClick out into a dif­fer­ent com­pa­ny would solve that par­tic­u­lar instance of abuse of mar­ket pow­er, but it prob­a­bly would­n’t be the end of it. An online ad sales plat­form (like many inter­net busi­ness­es) has high fixed costs but very low mar­gin­al costs — mean­ing it costs a great deal to set up all the servers and net­works, but almost noth­ing to serve one addi­tion­al ad. Once a com­pa­ny has achieved mas­sive scale, like Google has with Dou­bleClick, it has an ever-increas­ing advan­tage over any would-be com­peti­tors. That’s the clas­sic def­i­n­i­tion of a nat­ur­al monop­oly, which if left to its own devices will cer­tain­ly abuse its mar­ket pow­er just like Gild­ed Age rail­roads.

    There­fore, abuse of mar­ket pow­er should be banned out­right with com­mon car­ri­er reg­u­la­tions man­dat­ing equal prices for equal ser­vices across the whole online ad busi­ness — either that, or Dou­bleClick should be nation­al­ized out­right and run as a pub­lic util­i­ty.
    ...

    So that’s all going to be a major part of the indus­try con­text in Axel Springer’s upcom­ing acqui­si­tion spree: Google and Face­book have already starved the indus­try of rev­enues and that’s going to be mean a lot of bar­gains. Then there’s the fact that Face­book sys­tem­at­i­cal­ly lied to pub­lish­ers dur­ing the 2016 cam­paign sea­son about the num­ber of view­ers that were watch­ing videos on Face­book, inflat­ing the num­ber of view­ers by up to 900 per­cent accord­ing to a law­suit. As a con­se­quence of these inflat­ed video view­er­ship num­bers, dig­i­tal pub­li­ca­tions made the switch to pro­duc­ing video, which sucked resources away from tra­di­tion­al jour­nal­ism, result­ing in the lay­offs of jour­nal­ists. This lie was told by Face­book from July 2015 to June 2016, a pret­ty cru­cial peri­od of time for jour­nal­ism giv­en the US elec­tion. And accord­ing to the law­suit, inter­nal doc­u­ments show this was a lie Face­book was know­ing­ly telling. So Face­book effec­tive­ly lied the dig­i­tal media indus­try into a busi­ness dead end a few years ago which is also part of the indus­try con­text of Axel Springer’s upcom­ing acqui­si­tion spree:

    The Atlantic

    How Facebook’s Chaot­ic Push Into Video Cost Hun­dreds of Jour­nal­ists Their Jobs

    As media com­pa­nies tried to divine the desires of the world’s biggest plat­form, they fired writ­ers and lost their way.

    Alex­is C. Madri­gal and Robin­son Mey­er
    Oct 18, 2018

    Face­book egre­gious­ly over­stat­ed the suc­cess of videos post­ed to its social net­work for years, exag­ger­at­ing the time spent watch­ing them by as much as 900 per­cent, a new legal fil­ing claims. Cit­ing 80,000 pages of inter­nal Face­book doc­u­ments, aggriev­ed adver­tis­ers fur­ther allege that the com­pa­ny knew about the prob­lem for at least a year and did noth­ing.

    The com­pa­ny denies the alle­ga­tions. “This law­suit is with­out mer­it and we’ve filed a motion to dis­miss these claims of fraud. Sug­ges­tions that we in any way tried to hide this issue from our part­ners are false,” said a spokesman for Face­book in a state­ment, adding that the com­pa­ny noti­fied adver­tis­ers as soon as it dis­cov­ered the prob­lem.

    Dur­ing the peri­od of pur­port­ed wrong­do­ing, from July 2015 to June 2016, jour­nal­ists and news­room lead­ers across the coun­try worked to cov­er an unprece­dent­ed pres­i­den­tial cam­paign in an infor­ma­tion land­scape that Face­book was con­stant­ly, and errat­i­cal­ly, trans­form­ing. Even if, as Face­book argues, it did not know­ing­ly inflate met­rics, it set up new and fast-chang­ing incen­tives for video that altered the online ad mar­ket as a whole. As media com­pa­nies des­per­ate­ly tried to do what Face­book want­ed, many made the dis­as­trous deci­sion to “piv­ot to video,” lay­ing off reporters and edi­tors by the dozen. And when views plunged and video’s poor return on invest­ment became more appar­ent, some com­pa­nies piv­ot­ed back, fir­ing video pro­duc­ers by the dozens.

    First was Upwor­thy, once a a ben­e­fi­cia­ry of Facebook’s algo­rith­mic largesse, which rang in 2016 with 14 lay­offs, part of a move into “orig­i­nal video con­tent.” Four months lat­er, Mash­able laid off 30 employ­ees in a piv­ot to “non-news video con­tent.” That Novem­ber, Fusion laid off 70 peo­ple, in part because big bets with­in social video did not gen­er­ate enough rev­enue.

    In Feb­ru­ary 2017, Thril­list’s par­ent com­pa­ny let more than 20 peo­ple go, but was “con­tin­u­ing to dream in video.” In June 2017, Voca­tiv laid off 20 edi­to­r­i­al staff mem­bers “in an orga­ni­za­tion­al shift to an entire­ly video-first strat­e­gy.” Lat­er that month, MTV News laid off at least nine employ­ees and free­lancers, “with an eye toward cre­at­ing more video.” Fox Sports also released 20 writ­ers and edi­tors on the same day, “replac­ing them with a sim­i­lar num­ber of jobs in video.” The next month, Vice fired 60 employ­ees while promis­ing to focus on video pro­duc­tion. In August, Mic dis­missed 25 peo­ple from its news and edi­to­r­i­al depart­ments to refo­cus on “new mixed-media for­mats in social video.”

    But then the bets on video start­ed fail­ing. After fir­ing its writ­ers and edi­tors in June, Fox Sports had hem­or­rhaged 88 per­cent of its audi­ence by September—a stag­ger­ing feat, as traf­fic to sports web­sites usu­al­ly grows when foot­ball returns. That month, Digi­day report­ed that a “side effect of the piv­ot to video” was “audi­ence shrink­age,” cit­ing sim­i­lar declines at Mic and Voca­tiv. Some of these traf­fic slides have con­tin­ued: In April 2018, Mic’s traf­fic sat at 5 mil­lion uniques, down from 17 mil­lion a year ear­li­er.

    In Feb­ru­ary of this year, Vox Media, the pub­lish­er of SB Nation, Eater, and Vox, laid off 50 employ­ees. “Face­book does not offer a viable path to mon­e­tize our in-depth video work,” its chief exec­u­tive lament­ed in a memo. CNN Dig­i­tal elim­i­nat­ed “few­er than 50” posi­tions, includ­ing in the video depart­ment.

    By our count, nation­al media com­pa­nies laid off more than 350 peo­ple from 2016 to 2018, at least part­ly as a result of Facebook’s herky-jerky incen­tives. Sig­nif­i­cant­ly, this num­ber doesn’t include local news­pa­pers that dropped staff while chas­ing video dol­lars. Since 2014, news­pa­pers across the Unit­ed States have lost more than 7,000 jobs, shrink­ing by 15 per­cent, accord­ing to the Bureau of Labor Sta­tis­tics.

    ***

    Face­book can’t shoul­der the blame for these lay­offs alone. Media exec­u­tives ulti­mate­ly made these deci­sions, and jour­nal­ism was an unsta­ble indus­try long before the first Face­book video. In a Tues­day Wall Street Jour­nal arti­cle, many pub­lish­ers dis­missed the argu­ment that the social net­work was sole­ly to blame for lay­offs.

    But Face­book wrote the rule book, owned the field, and served as the ref­er­ee for the game that strug­gling pub­lish­ers were try­ing to win. If what the suit alleges is true, it now looks like a dis­hon­est umpire, too.

    Start­ing in 2014, Face­book began to report enor­mous video-view­er­ship num­bers, a feat made pos­si­ble by its new­ly alleged infla­tion of met­rics, and also through the company’s con­scious deci­sion to show more videos to users. This sud­den sur­feit of atten­tion was attrac­tive to media com­pa­nies, and espe­cial­ly to those fund­ed by ven­ture cap­i­tal­ists, who often demand fast-grow­ing traf­fic num­bers. But pro­duc­ing video requires more time and resources than writ­ing words, so most com­pa­nies had to cut jobs in oth­er areas to allo­cate new resources to the plat­form.

    Around this time, Face­book also began favor­ing videos uploaded to its ser­vice over links to oth­er video sites, such as YouTube and Vimeo. This effec­tive­ly forced out­lets that already had video depart­ments into upload­ing their films to Face­book and play­ing by the social giant’s rules. Then, in August 2015, it debuted Face­book Live, a fea­ture that first let celebrities—and even­tu­al­ly every­one else—stream live video from their mobile phone.

    A few Live videos became enor­mous suc­cess­es, and the media’s own cov­er­age of them—coupled with its undy­ing hope for a tech­no­log­i­cal savior—helped fan the hype. When 800,000 peo­ple watched a pair of Buz­zFeed staffers explode a water­mel­on on April 8, 2016, Mash­able report­ed that the stunt earned “sig­nif­i­cant­ly more view­ers than were turned into all of cable news in the Unit­ed States.” Wired, mean­while, list­ed sev­en TV shows with few­er view­ers than the explod­ing water­mel­on, includ­ing HBO’s Girls. But the com­par­i­son was inapt: A U.S.-based Nielsen view­er watch­ing TV is just not the same as an anony­mous Face­book user, who could be any­where on the globe, dip­ping in and out of a viral video on Facebook’s News Feed. In any case, Buz­zFeed nev­er repeat­ed its suc­cess. But that didn’t stop reporters from being tak­en off the line of duty, while a pro­mo­tion­al video of water being poured on per­me­able con­crete racked up 100 mil­lion views.

    Yet even before the lat­est rev­e­la­tion, it was obvi­ous that Facebook’s video met­rics were not com­pa­ra­ble to indus­try stan­dards. Face­book defined a “view” as some­one watch­ing some­thing for any longer than three sec­onds. YouTube, the company’s main com­peti­tor, defined a view as 30 sec­onds or more. From a retail per­spec­tive, this was like count­ing win­dow shop­pers as con­sumers. It “fun­da­men­tal­ly deval­ues the num­ber-one met­ric of online video,” the YouTu­ber Hank Green wrote in August 2015, dis­cussing view counts. “Ad agen­cies and brands are con­fused enough with­out Face­book mud­dy­ing the waters by call­ing some­thing a view when it is in no way a mea­sure of view­er­ship.”

    Of course, mud­dy­ing the waters in this way was also use­ful for media com­pa­nies look­ing to sell growth sto­ries to investors. “There’s that sense that not all of these dig­i­tal news start-ups will see con­tin­u­ing hock­ey-stick-like growth,” Ken Doc­tor, a prin­ci­pal ana­lyst at the ana­lyt­ics firm Out­sell, told Digi­day in 2016. “Fall behind in growth, and the cur­rent val­ue of these com­pa­nies may plum­met; it’s a momen­tum game, win or lose.”

    Grow­ing view­er­ship on YouTube is a painstak­ing, time-con­sum­ing process. Doing it on your own site is even hard­er. Grow­ing an audi­ence organ­i­cal­ly on Face­book had also become remark­ably dif­fi­cult. There were only two path­ways to grow: Pay to run ads, or make a lot of Face­book video.

    The video views came easy. You could stack up mil­lions in hours, and those three-sec­ond views looked the same in a bar chart as YouTube’s 30-sec­ond ones. New media start-ups like AJ+, NowThis, Mic, and many oth­ers rushed to cre­ate as much Face­book Video as pos­si­ble. At Fusion, where he was edi­tor in chief, Alex­is saw this hap­pen first­hand. Fusion’s text team stopped grow­ing, while the video side explod­ed. Many of Fusion’s video pro­duc­ers were seri­ous jour­nal­ists, but the very labor-inten­sive nature of video meant the news­room had few­er peo­ple out report­ing and more peo­ple mak­ing text slide in and out of the frame.

    It was not just newish, video-heavy play­ers that found them­selves in a bind. Estab­lished pub­lish­ers that had man­aged to build large, link-based Face­book Pages found them­selves star­ing at a News Feed that had been trans­formed into a stack of videos. There was a real dan­ger of text sto­ries get­ting crowd­ed out. Mean­while, Face­book was eat­ing up all the growth in dig­i­tal adver­tis­ing, due in large part to all the con­tent that pub­lish­ers were putting on the plat­form. Our chaos was Facebook’s con­tent. So even if you didn’t run to Face­book Video, it reshaped the infor­ma­tion ecosys­tem in ways that made it hard­er for jour­nal­is­tic insti­tu­tions.

    Facebook’s mis­ad­ven­tures in video par­al­lel oth­er sit­u­a­tions where the com­pa­ny has moved fast to beat a com­peti­tor but bro­ken things along the way. In 2013, it was Face­book muscling into the media-dis­tri­b­u­tion busi­ness to cut back Twitter’s growth; the com­pa­ny was, to put it mild­ly, unpre­pared for the prob­lems that result­ed. In the company’s effort to push its Live video offer­ing to com­pete with YouTube’s and Twitter’s, the prod­uct launched with­out ade­quate mod­er­a­tion tools. Even this week, after announc­ing new video-call­ing hard­ware that takes aim at sim­i­lar prod­ucts from Alpha­bet and Ama­zon, Face­book gave a mis­lead­ing answer in the press roll­out about the obvi­ous cen­tral con­cern with the device: how the com­pa­ny would use the data it gen­er­at­ed.

    ...

    Face­book over­sees what is prob­a­bly the world’s largest mar­ket for human atten­tion. Time and time again, it has added a new rule to this mar­ket, or cre­at­ed some new way of scor­ing points, seem­ing­ly with­out think­ing about how play­ers would react or adjust to the change. In the past, we’ve assumed Face­book ignored the sys­temic con­se­quences of its actions out of neg­li­gence. Per­haps, as this new law­suit alleges, it was a neg­li­gence so extreme that it rose to the lev­el of fraud.

    ———-

    “How Facebook’s Chaot­ic Push Into Video Cost Hun­dreds of Jour­nal­ists Their Jobs” by Alex­is C. Madri­gal and Robin­son Mey­er; The Atlantic; 10/18/2019

    “Face­book egre­gious­ly over­stat­ed the suc­cess of videos post­ed to its social net­work for years, exag­ger­at­ing the time spent watch­ing them by as much as 900 per­cent, a new legal fil­ing claims. Cit­ing 80,000 pages of inter­nal Face­book doc­u­ments, aggriev­ed adver­tis­ers fur­ther allege that the com­pa­ny knew about the prob­lem for at least a year and did noth­ing.

    Yep, Face­book was telling dig­i­tal pub­lish­ers that videos were get­ting 900 per­cent more view­ers than they actu­al­ly were and the com­pa­ny know­ing­ly told this lie for at least a year. And not just any year. This was from July 2015 to June 2016, accord­ing ot the law­suit, when dig­i­tal pub­lish­ers were going to be mak­ing huge invest­ments in the upcom­ing elec­tion cov­er­age. But Face­book began report­ing enor­mous video-view­er­ship num­bers in 2014, so it sounds like the lie start­ed at least by that point. So dig­i­tal pub­lish­ers did what Face­book advised and switched to cre­at­ing videos. But the promised rev­enues nev­er mate­ri­al­ized:

    ...

    The com­pa­ny denies the alle­ga­tions. “This law­suit is with­out mer­it and we’ve filed a motion to dis­miss these claims of fraud. Sug­ges­tions that we in any way tried to hide this issue from our part­ners are false,” said a spokesman for Face­book in a state­ment, adding that the com­pa­ny noti­fied adver­tis­ers as soon as it dis­cov­ered the prob­lem.

    Dur­ing the peri­od of pur­port­ed wrong­do­ing, from July 2015 to June 2016, jour­nal­ists and news­room lead­ers across the coun­try worked to cov­er an unprece­dent­ed pres­i­den­tial cam­paign in an infor­ma­tion land­scape that Face­book was con­stant­ly, and errat­i­cal­ly, trans­form­ing. Even if, as Face­book argues, it did not know­ing­ly inflate met­rics, it set up new and fast-chang­ing incen­tives for video that altered the online ad mar­ket as a whole. As media com­pa­nies des­per­ate­ly tried to do what Face­book want­ed, many made the dis­as­trous deci­sion to “piv­ot to video,” lay­ing off reporters and edi­tors by the dozen. And when views plunged and video’s poor return on invest­ment became more appar­ent, some com­pa­nies piv­ot­ed back, fir­ing video pro­duc­ers by the dozens.

    ...

    By our count, nation­al media com­pa­nies laid off more than 350 peo­ple from 2016 to 2018, at least part­ly as a result of Facebook’s herky-jerky incen­tives. Sig­nif­i­cant­ly, this num­ber doesn’t include local news­pa­pers that dropped staff while chas­ing video dol­lars. Since 2014, news­pa­pers across the Unit­ed States have lost more than 7,000 jobs, shrink­ing by 15 per­cent, accord­ing to the Bureau of Labor Sta­tis­tics.

    ...

    Start­ing in 2014, Face­book began to report enor­mous video-view­er­ship num­bers, a feat made pos­si­ble by its new­ly alleged infla­tion of met­rics, and also through the company’s con­scious deci­sion to show more videos to users. This sud­den sur­feit of atten­tion was attrac­tive to media com­pa­nies, and espe­cial­ly to those fund­ed by ven­ture cap­i­tal­ists, who often demand fast-grow­ing traf­fic num­bers. But pro­duc­ing video requires more time and resources than writ­ing words, so most com­pa­nies had to cut jobs in oth­er areas to allo­cate new resources to the plat­form.

    ...

    Grow­ing view­er­ship on YouTube is a painstak­ing, time-con­sum­ing process. Doing it on your own site is even hard­er. Grow­ing an audi­ence organ­i­cal­ly on Face­book had also become remark­ably dif­fi­cult. There were only two path­ways to grow: Pay to run ads, or make a lot of Face­book video.
    ...

    This was an indus­try-wide phe­nom­e­na which means it’s an indus­try-wide deba­cle based on Face­book’s lies. And as the arti­cle reminds us, at the same time Face­book lied the indus­try into this mas­sive strate­gic mis­take, Face­book was eat­ing up more and more online adver­tis­ing con­tent much like Google:

    ...

    It was not just newish, video-heavy play­ers that found them­selves in a bind. Estab­lished pub­lish­ers that had man­aged to build large, link-based Face­book Pages found them­selves star­ing at a News Feed that had been trans­formed into a stack of videos. There was a real dan­ger of text sto­ries get­ting crowd­ed out. Mean­while, Face­book was eat­ing up all the growth in dig­i­tal adver­tis­ing, due in large part to all the con­tent that pub­lish­ers were putting on the plat­form. Our chaos was Facebook’s con­tent. So even if you didn’t run to Face­book Video, it reshaped the infor­ma­tion ecosys­tem in ways that made it hard­er for jour­nal­is­tic insti­tu­tions.
    ...

    As we can see, between Face­book and Google, the dig­i­tal pub­lish­ing indus­try has become a lot less sta­ble an indus­try. And this trend appears to be going strong. The indus­try is only get­ting more dis­tressed. It makes for a inter­est play­ing field for a com­pa­ny with Axel Springer’s size. Because it’s clear that the dig­i­tal pub­lish­ing indus­try is going to be fac­ing a big shake­out and it’s going to be the giants like Axel Springer who obvi­ous­ly suri­v­ive that shake­out, but unless some­thing is done to address the monop­o­lis­tic pow­er of Google and Face­book on the online ad busi­ness it’s still unclear what it’s going to take to end the dark times for pub­lish­ing beyond sim­ply hav­ing a large per­cent of the com­pe­ti­tion going out of busi­ness and leav­ing a few sur­vivors. So Google and Face­book are basi­cal­ly dri­ving the dig­i­tal pub­lish­ing indus­try into a peri­od of dis­tress and con­sol­i­da­tion and right into the arms of giants like Axel Springer with the cash need­ed to pick up dying pub­li­ca­tions for cheap.

    So while gov­ern­ments should def­i­nite­ly be look­ing into antitrust moves against Face­book and Google and inves­ti­gate whether or not the online ad indus­try is effec­tive­ly a nat­ur­al monop­oly that requires spe­cial reg­u­la­tions, keep in mind that Axel Springer is already the largest pub­lish­er in Europe and plan­ning on buy­ing up the com­pe­ti­tion Face­book and Google already crushed. It’s a reminder that the sur­viv­ing media giants might need some antitrust inves­ti­ga­tions of their own after the upcom­ing peri­od of indus­try con­sol­i­da­tion that Google and Face­book made inevitable. Google and Face­book should­n’t have a monop­oly on gen­er­at­ing antitrust con­cerns.

    Posted by Pterrafractyl | June 19, 2019, 3:17 pm

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