the audit

Newser, The Fly on the Wall, and Aggregation

March 19, 2010

Rarely will you see an aggregator state his business model so forthrightly as Michael Wolff, founder of Newser, does today in discussing publishers charging for news:

Here at Newser, we’re particular eager for the charge walls to go up. You’ll be able to pay to spend more of your time and effort reading the New York Times, or you can come to Newser and for no money at all spend less time and effort getting the news in the Times.

Sounds like simple theft, and a quote that could come back to haunt Wolff if the Times ever decided to take him to court.

It’s one thing to give someone a synopsis of a story and add criticism or analysis. It’s quite another to systematically summarize someone’s content without adding anything yourself. Wolff, in a battle with Mark Cuban some months ago, couldn’t even bring himself to make the argument that aggregators are good for those they aggregate:

We’re doing a service to news organizations because a portion of our our readers click through to the original story.

One paragraph later:

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People who go to aggregator sites don’t really click through to the original story.

So why should they publishers sit by and let people like Newser rip them off? Right now it’s probably because even a defunct local newspaper like the Seattle Post-Intelligencer with a skeleton staff manning its site still gets half again as much traffic as Newser does in a given month.

But if and when the paywalls do go up, and I’ve been clear that I think they’ll have to, that will change the calculus. Some readers will have an incentive to skirt paying by going to skim sites like Newser and you can expect those who get skimmed will pay a lot closer legal attention to them.

Wolff will yell “free speech.” But the First Amendment isn’t a suicide pact. Don’t believe it? See yesterday’s ruling by a federal judge in New York regarding, a news service (paywalled, natch) that aggregates Wall Street research:

She said “free-rides” on banks’ research efforts because it make no effort to produce the recommendations or contribute to the underlying analyses…

“While it may be true that Fly is a news aggregator and is in direct competition with other financial news aggregators, both large and small, each of these news aggregators is in direct competition with the firms when they report the firms’ recommendations in a timely and systematic manner such that the firms are deprived of the opportunity to communicate them first-hand to their clients,” she wrote.

While noting the 2003 global research analyst settlement, the availability of discount electronic trading platforms, and the financial crisis might have hurt the banks, resulting in reduced staff, Cote said “these other events aside, the misappropriation of their recommendations by Fly and others has also had a profound effect on their business model.”

In other words, news parasites aren’t protected by the law. Uh oh.

As far as I can tell, most everyone has missed the broader implications of the ruling. Time to double back and give them a closer look.

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR’s business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum.