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Two Misplaced Objections

C. Edwin Baker

Bob McChesney and I have previously worked together on media policy initiatives and are in general agreement on principles and strategies. So rather than quibble about details, I address two major complaints-one economic, the other constitutional-that others often level against the policy orientation that we share.

Limits on Markets

Some critics argue that deregulated markets lead to the best media order. Normal antitrust rules, applicable to all industries, will prevent monopolization from going too far. Media-specific proposals like McChesney's are unwarranted. Free markets allow people to purchase the media content they want. Even advertisers and oligopolistic media giants respond to audiences' desires. Under some circumstances, media giants even respond better than smaller competing media firms. Governmental intervention represents elite paternalism at best-often it merely supports liberal propaganda. This paternalism disrespects personal choices and, in the end, wastes money or distorts media markets in objectionably elitist ways.

This critique is fundamentally wrong. In general, even perfectly competitive markets guarantee neither fairness nor efficiency. Special characteristics of media markets, however, cause esecially dramatic failures in providing the media that people want.

1. The claim that markets provide "the things that consumers want" must implicitly include the caveat: "given the item's cost and people's ability to pay." If costless, people would want more European vacations, fancy sports cars, and even better newspapers. With unlimited ability to pay, many people would fly to New York to see an opera or Broadway play (or have the play brought to them) rather than spend five or ten dollars to see Titanic. Thus, the claim on behalf of the market depends on media products being priced at their real cost. But are they?

Many items' production or consumption affect people other than the items' producers and purchasers-industrial pollution is the most common example of such "externalities." However, the externalities, both positive and negative, produced by the media are exceptionally large. So the price a firm must charge for a media product typically bears little relation to its real cost.

Think for a moment about externalities of media practices and products. Members of the public benefit tremendously if a newspaper's reputation for investigative reporting deters misconduct by government officials or corporate executives, but effective deterrence means that the newspaper has no story to sell. The paper receives nothing for this valuable product. Even when an investigation uncovers spectacular misconduct and publication leads to reform, most people receive the benefit without buying or reading the paper. Similarly, even a person who buys no newspaper, biography, or novel can reap a reward from those who do if their media consumption leads them to be wiser voters or more cultured people. In contrast, you can be hurt by another person's media consumption if it leads to unwise voting, a boring personality, or damage to your material or cultural environment. Most dramatically, you are hurt if consumption by others is one factor in a causal chain that leads them to murder, rape, or rob you. These are all costs and benefits that are not taken into account in the selling or purchase decisions and, thus, lead the market to misprice media products.

In economic terms, these costs and benefits are not brought to bear on the entity producing the content: they are not "internalized" by publishers, for example. Products that create negative externalities are sold for less than their real social cost, while those creating positive externalities must be sold for more than their social cost. Given the economic maxim that a lower price generates more purchases, people will consume more media products that create negative externalities and less of those that create positive externalities than they would if charged the item's real cost. Given the huge externalities, both positive and negative, almost no relation can be expected between the media the market actually provides and the media it would provide if properly priced.

I must quickly caution that the appropriate response to this observation is a separate matter. For a variety of reasons, including problems evaluating externalities, I do not believe that they justify illiberal attempts to control people's media consumption or to prohibit content that some administrator thinks has bad effects. But none of McChesney's proposals takes that form.

2. Unlike tofu or toasters, a large part of the cost of a media product-writing or scripting, investigations needed for news stories, video production costs-occurs in producing the "first copy." Once the first copy is created for the first user, minimal additional "copy" expenses are necessary to supply users. This "public good" aspect of media products-innumerable individuals can consume the "same" product without reducing its availability to the first consumer-is important. As long as the seller is unable to adequately price discriminate, it means that in order to recover the "first copy costs," the owner must sell the media content at a price that denies the product to some people who want it and would buy it at its true copy cost. Markets underproduce. Remedying this type of exclusion, especially in the context of natural monopolies, often justifies governmental subsidies or rate regulation as a form of mandatory price discrimination.

Possibly worse than denying media content to a portion of the potential audience, many desired media products will not be produced at all. Even though the amount that each potential audience member is willing to pay adds up to a sum greater then the cost of producing the good and providing it to them, there may be no single price at which it can be sold profitably. For example, consider a news report for which you would pay $9 and I would pay $5. But suppose, too, that the first copy costs $11 to produce, and the second copy only $1. Neither a selling price of $9 with one purchaser or $5 with two will cover expenses even though two copies would create $14 of value at a cost of $12. Of course, media products are not alone in having this economic characteristic. Many goods provided by governments-parks and roads or, more relevantly here, museums and public libraries-illustrate this feature.

When not heavily subsidized by advertisers those "economically" valuable media products are most likely not to be produced when some potential consumers value them quite highly but for which the willingness to pay drops off at a fairly steep rate among further potential consumers. These characteristics roughly describe media content desired primarily by the poor or by politically and culturally non-mainstream groups.

3. An unusual feature of media products is the seller's capacity to have two unconnected customers for each media sale. In addition to the "consumer" who receives the product, the seller can sell the audience to a speaker. If she sells this to advertisers, as is usual, the advertisers can and do pay to influence the non-advertising content-perhaps rationalizing this on the grounds that those who pay should have a say. Or the seller speaks her own views, a fact made problematic, as McChesney emphasizes, the more ownership is concentrated in a few hands. The claim might be that this opportunity to speak is only fair; an audience that wants content uninfluenced by advertisers' needs or owners' biases merely has to pay a higher price for an uncorrupted product. On its own terms, this response is lame. The unequal distribution of information between the seller and consumer about whether media content has been "adulterated" prevents preference-maximizing outcomes. More to the point, the very nature of many people's desires respecting media content-especially, the desire for a media product to reflect its creators' best professional, artistic, or normative standards-may explain the necessity of going outside the market to a more political sphere to express preferences for how to structure and pay for at least some portions of the media. A market simply is not a good mechanism for registering preferences to have non-market-produced goods.

4. At best, markets respond to people's money-backed preferences. But money is only one way to register or weigh preferences-in fact, a way that has little to say for itself other than that it is the means that the market uses. Like all democracies, our society concludes that some desires should be met independent of a person's ability to pay. Two important items distributed on more egalitarian bases-a basic education and the vote-have much in common with some media products. Maybe media products valued as pure entertainment should be distributed just like bowling balls and speed boats. But some media products are central to democratic participation or have a significant educational role. Arguably they should be made available on terms similar to the vote and to education-namely, more equally than supplied by the market. Moreover, since the poor often prefer different political or educational products than the wealthy (especially if adequate resources have been put into their creation), this conclusion calls for some content to be produced on a highly subsidized basis.

Free Speech, Free Press

Even if markets fail to provide the media that people want, a second objection to McChesney-type reforms is that the First Amendment wisely requires the government to keep its hands off. Certainly media lawyers-who also argued that minimum wage or antitrust laws violated their clients' First Amendment rights-will make this argument. Still, the argument is serious: some constitutional scholars and courts may accept it in some cases. In the end, however, it is founded on neither good legal precedent nor sound principle.

Media lawyers now accept that the press must abide by most laws of general applicability-general taxes, labor and antitrust laws, laws against theft and trespass. But they often assert at least three principles violated by McChesney's proposals. First, laws directed specifically at the media should be presumptively unacceptable because special rules manipulate the press or distort content. Second, special rules are especially objectionable if their effect or purpose is to influence media content. Third, special rules that impose burdens on the media or disfavored parts of it are most objectionable; certainly, the government should not be allowed to dictate that the media carry messages against its will.

Neither history nor the Supreme Court has been kind to these principles. The government has always structured and nurtured a preferred communications order. Since colonial times, newspapers have received subsidized access to the mail, originally with high rates for regular letter writers covering the cost. From the beginning of the nineteenth century, Congress designed these postal subsidies to benefit the type of newspapers and newspaper circulation that it believed would best serve the country. Similarly, although not constitutionally required, governments have always given the press special privileges-ranging recently from reporters' testimonial privileges to interviews with high officials, press facilities, and press passes.

Sometimes the press or some portion of it has felt burdened or discriminated against by government regulation. Nevertheless, the Court has upheld against constitutional attack all structural regulations as long as the government could reasonably claim that the regulation improved the media environment-for example, contributed to press quality or diversity. Early this century Congress required newspapers to identify as an advertisement any content included for a price-a rule later extended to the broadcast media. And Congress required newspapers to periodically publish the names of their owners, a rule intended to allow the public to identify corporate interests who might be distorting the news. The Court upheld this "forced speech." More recently, the Newspaper Preservation Act exempted certain papers in danger of failing from aspects of the antitrust laws. Although the exemption often causes competitive harm to suburban or weekly newspapers, lower courts rejected their claim that this unequal treatment violates the First Amendment. Similarly, the Supreme Court upheld rules disfavoring newspapers by distinguishing them from all other business corporations in restricting their ownership of broadcast facilities. In the broadcast area, it has upheld not only all regulation of ownership concentration, but also rules favoring local ownership and control. And although broadcasters have long been required to carry content that they would prefer not to carry, the newspaper examples show that broadcasters are not unique in this respect.

When cable systems unsuccessfully challenged a law requiring them to carry programming of local broadcasters, the Court rejected application of the precedent most often asserted as contrary to my thesis here. The cable companies argued that Miami Herald v. Tornillo, 418 U.S. 241 (1974), protected their right not to speak (carry a program). The Court explained that Miami Herald struck down a right-to-reply law because this law "penalized" the newspaper's original decision to make the statement that provoked the desire to reply; the penalty created a danger of deterring valuable speech. Since requiring carriage of local broadcasters does not turn on anything the cable system says, it creates no penalty or deterrence. Rather, this structural rule is reasonably understood as preserving desirable features of the communications order.

Criticism of intervention fares no better if we turn from precedent to principle. Principles must reflect some rationale for the constitutional guarantee. The press consists mostly of legally structured entities that produce and sometimes distribute communicative content. As major institutions, the press as a whole and these legal entities individually can only be valued instrumentally, in terms of how they serve people. In this respect, the press and its freedom differs from the individual and her liberty-the latter having the intrinsic value that our moral practices place on human autonomy and self-determination. This value difference suggests different functions for constitutional guarantees of speech and of press freedom. The free speech guarantee responds to the intrinsic value of individual liberty, whereas protection of the press reflects its contribution to an effective democracy-or, more broadly, the advantage of people having an independent source of information and vision. This difference can explain why a leading free speech case stops the state from forcing a school child to salute the flag while the Court found no similar principle at stake when Congress forced a cable company to carry local television programming. No intrinsic value is at stake in the cable company case, and instrumentally, the rule could plausibly improve the communications order. In fact, in the cable company case, if freedom of choice were to be protected, it is not obvious which person(s) among those who make up the company should be the beneficiary. When the Court in Miami Herald invalidated the right of reply law "because of its intrusion into the function of editors," the language surely left open the possibility of statutorily protecting editors' choices from interference by, for example, owners.

Even given this merely instrumental justification for protecting press freedom, if the market could be expected to provide a press adequate for democratic and cultural needs, then maybe all governmental interventions should be ruled out. But that cannot be expected. An independent, robust, and diverse press is threatened by private power and the market as well as by government power. First Amendment doctrine should be designed to protect against governmental abuse while allowing government responses to private threats and market inadequacies. Thus, censorship and all governmental attempts to suppress content should be unconstitutional. So should governmental burdens not reasonably explicable as promoting a better, more diverse, more independent press. Otherwise, structural interventions, especially governmental interventions explicable as improving and diversifying media content-including McChesney's proposals-should be upheld. These principles conform almost perfectly with the outcomes, if not the specific language, of existing precedent.

In a case over fifty years ago involving the newspaper industry, but repeatedly cited by the Court to justify broadcast regulation, Justice Hugo Black had this view all worked out. Black explained: "It would be strange indeed . . . if the grave concern for freedom of the press . . . should be read as a command that the government was without power to protect that freedom. . . . Surely a command that the government itself shall not impede the free flow of ideas does not afford non-governmental combinations a refuge if they impose restraints upon that constitutionally guaranteed freedom."

Originally published in the Summer 1998 issue of Boston Review

 



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