Spitfire List Web site and blog of anti-fascist researcher and radio personality Dave Emory.

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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