January 12, 2021

Concentrated economic power in the hands of tech giants and hedge funds has helped drive the decline of the news industry, according to a new report by the nonprofit, policy-focused American Economic Liberties Project released Tuesday.

Google and Facebook have monopolized the advertising market, starving online publishers of advertising revenue, the report finds. The other major issue news publishers face is the rise of private equity funds that buy and pillage struggling newspapers.

Titled “The Courage To Learn,” the report provides an overview of antitrust and economic competition policy during President Barack Obama’s administration and covers a range of sectors from agriculture to health care to media. It finds that monopoly power is responsible for “our most serious economic challenges” and includes several recommendations for the incoming Biden-Harris administration.

The issues the news industry faces today are a result of shortsightedness from politicians on the harms of corporate consolidation, according to Matt Stoller, the Economic Liberties director of research and one of the report’s authors.

“People said, ‘Oh, well if we consolidate, things are going to be more efficient,” Stoller said. “The way that we’ll measure whether things are efficient is just through a very narrow lens of pricing to consumers. So if pricing is low and pricing for things like Google and Facebook is low, then that’s fine and it doesn’t matter if newspapers are wiped out.”

The report states that Google and Facebook have taken over the advertising market. Google’s control of a large amount of user data has allowed it to buy up companies involved with online advertising, the report found. As a result, 86% of online advertising space is bought and sold in a “stock market-like ‘advertising exchange’ controlled by these tech giants.” (Disclosure: Poynter has received funding from Google and Facebook.)

Of every dollar put into advertising, middlemen take 30 to 50 cents, the report states. Advertisers no longer have to buy ads in newspapers since they can reach those same readers through other sellers that offer cheaper prices. Essentially, the report argues, news outlets put in the “heavy lifting” of creating content to attract readers only for tech companies to take a large portion of their advertising revenue.

“What’s disturbing is that if you start a new media outlet like BuzzFeed or Huffington Post or something like that where you do good newsgathering, you can’t finance it,” Stoller said.

Both Facebook and Google have started initiatives to fund local news. In 2019, Facebook announced plans to give $300 million to news organizations like the Pulitzer Center and Report for America over three years. Google News Initiative helped launch the “Support Local News” campaign last year to spend $15 million in ads in local news outlets.

The other issue plaguing the news industry is the rise of private equity funds that buy newspapers and lay off staff and reduce benefits to increase revenue, according to the report. The report cites a UNC “news deserts” study that found that in 2014, the largest 25 companies owned 2,199 papers; investment companies owned almost half those.

The rise of hedge funds is well-documented and often cited as one of the driving forces behind news deserts. Hedge fund Alden Global Capital, for example, owns more than 60 daily papers through its MediaNews Group and is notorious for hollowing out newsrooms through cuts in staffing and other operations. Alden offered to buy Tribune Publishing last month — a move that led to the NewsGuild signaling it will legally challenge the takeover.

Policymakers did little to combat this problem, the report states. The authors write that the Obama administration allowed private equity funds to continue to engage in “predatory business models” and strip newspapers — especially those in smaller communities — of their assets.

To save the news publishing industry, the report’s authors urge the incoming Biden-Harris administration to break up Google and Facebook’s control of advertising revenue. They also call on legislators to pass laws that prevent private equity from acquiring newspapers just to lay off workers.

The report identifies two pieces of legislation that could help address the issues they identified. The first is the Stop Wall Street Looting Act, which would make it unprofitable for private equity firms to lay people off. The second is the Journalism Competition and Preservation Act, which would temporarily allow news publishers to collectively negotiate with Google and Facebook over certain pricing terms.

Stoller said he is optimistic policymakers will take steps in the future to break up monopolies like Google and Facebook. He pointed to the antitrust lawsuits both companies face and the support behind them. For example, one lawsuit against Facebook was jointly filed by the Federal Trade Commission, Washington, D.C., Guam, and 46 states.

He encouraged news publishers to become more engaged with policy discussions on the economic forces sapping them of revenue.

“The rules are written in a way that favor Google and Facebook, and you can’t make money in a world where they’re allowed to basically take your content and make money off of it for free,” Stoller said. “So you should be advocating politically for policymakers to change the rules to make them more fair.”

Without action, Stoller said, news publishers would continue to suffer, and the loss of news outlets has consequences for society and ultimately, American democracy.

“You’ll just see people living in these artificial information environments where there is no truth, and society is just one giant flame war,” Stoller said. “You’ll see that there will be much more power in the hands of a small group of people to dictate what we think, what we read, the information that’s available to us.”

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Angela Fu is a reporter for Poynter. She can be reached at or on Twitter @angelanfu.
Angela Fu

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