When Does News “Syndication” Become Outright Theft?

Published on December 2, 2009

As investors, most of us rely heavily on professional journalists who are paid to uncover breaking stories on the economy and individual companies.  In addition to reading direct sources of information on companies, access to quality journalism can often influence investment decisions.  From a broader standpoint, high quality journalism is also necessary for maintenance of a free society.

The question of when “news syndication” becomes outright theft will be a defining issue of the next decade and will determine whether a viable economic model exists for professional journalism.

Paid Content Firewalls:  Pros and Cons

Rupert Murdoch, Chairman and CEO of News Corporation, has been one of the most vocal opponents of content piracy on the internet.  As we discussed last week in an article on Google, News Corp. is currently in talks with Microsoft to form a partnership where content behind pay firewalls will be indexed exclusively by Bing, Microsoft’s search technology.

News Corp. owns the Wall Street Journal which, along with The Financial Times, has developed a successful model for paid content.  Most, but not all, content on both The Financial Times and Wall Street Journal websites are behind firewalls and available only to subscribers.  However, news syndicators and aggregators have in many cases provided paid content free of charge.  When done against the wishes of the publisher, this can be thought of as nothing other than outright theft.

Obviously, the benefit of a paid firewall is that publishers collect subscription revenue from readers and replicates the model of traditional newspaper subscriptions.  However, charging flat subscription fees will certainly prevent many readers  from looking at a single article that might be of interest.  Micropayments, as described in a recent Economist article, could be a partial solution and has been investigated by both The Financial Times and The Wall Street Journal.

An Alternative Approach:  Advertising Claw Backs

The Financial Times has reported that the Fair Syndication Consortium is exploring an alternate approach that would permit unauthorized content to remain up but to push for a share of the advertising revenue of the sites posting such content.

The consortium of 1,500 newspaper publishers (which notably does not include News Corporation) recently completed a study which found that the average American newspaper story was being copied 4.4 times by unauthorized websites.  The figures are even worse for large national publishers with an average of 15 unauthorized copies.

The idea behind the consortium’s push for advertising claw backs is to allow the internet to continue to serve as an unimpeded distribution channel while content producers receive a share of the advertising revenue generated from syndication.  Primarily, this would involve entering into agreements with large advertising networks rather than small bloggers.  In a study earlier this year, the consortium estimated that the top 25 publishers alone might be missing out on $250 million in revenue due to proliferation of unauthorized content.

It Comes Down to Property Rights

Any publisher who has had content taken through unauthorized syndication knows that it does not feel much different from being the victim of more conventional theft.  On a small scale, The Rational Walk was itself the victim of such theft earlier in the year when a site consisting of nothing but syndicated (and in most cases, stolen) content on Warren Buffett copied entire articles without authorization.  This content was only removed after threat of legal action.

The Fair Use doctrine of United States copyright law allows for a limited use of copyrighted material without seeking permission of the publisher.  This is normally restricted to brief excerpts rather than copying entire works.  The Rational Walk has included such excerpts from many sources, always with attribution and a link to the original source.  Rather than being “theft” such excerpts actually drive traffic to the content creator since some readers will want access to the full source of the quote.

A simple litmus test can be used when deciding whether a syndicator is stealing content:  Does the extent of the reproduction of content remove the need for the reader to visit the original publisher’s site?  If so, the syndicator is benefiting from the work of the original publisher and, if done without authorization, this is nothing more than digital theft which deprives the content owner of subscription and/or advertising revenues.

The future of professional journalism depends on an economic model that supports such journalism.  Investors have a major stake in the ultimate outcome.

When Does News “Syndication” Become Outright Theft?
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