Deconstructing and Reconstructing Hot News: Toward a Functional Approach
71 Pages Posted: 8 Aug 2012
Date Written: August 7, 2012
Hot news is factual, time-sensitive information ranging from baseball scores to the outbreak of war. In recent years, hot news has found its own niche among legal scholars and courts. When deconstructed, though, hot news is simply information and, like most information, it has a public good character. The problem ultimately is that news is non-excludable and non-rivalrous – discoverers or creators of hot news cannot exclude others from using the news and hot news is not destroyed when used. This means it may be produced at levels that are less than optimal.
The critical element in hot news is lead time. In periods of less technological sophistication, the discoverer and reporter of news could depend on lead time, even if only a few hours, during which it was the exclusive source of the information. In today’s internet-based world, lead time is nonexistent. The most painstakingly gathered and expensive fact-based research can be re-reported within moments of its publication. This inevitably decreases the incentive to do original reporting.
A public response, in the form of state or federal legislation, to a shortage of hot news entails a public investment in a legal regime designed to protect exclusivity for a limited time. During that time, those first discovering the news and reporting it can internalize the benefits of their efforts. When viewed from this perspective, certain standards are important. Society gains the most when hot news is discovered and reported as long as the benefits, however defined, outweigh its costs and those costs are incurred by those most efficient at discovering and producing the news. This leads to several sub-goals. First, there is no reason to protect hot news that would be reported without public intervention. Second, care must be taken to define the type of news that will be protected. In particular, hot news should have a functional definition – one that is consistent with the goal of ensuring news that otherwise would be stifled by the free-rider effect is published. This is a tall order and it is doubtful that a hot news policy can follow the functional definition completely. Nevertheless, without a target, efforts to develop a sensible hot news policy are likely to fall short of the goal of maximizing useful fact finding and reporting while avoiding unnecessary costs.
Although news gathering and reporting has a cost, so does a policy of allowing exclusivity to encourage the same gathering and reporting. For example, during the period of exclusivity, the reporting entity may have a degree of monopoly or market power that allows the entity to increase the cost of access to the information. In addition, others will not be able to report the information themselves even though wider dissemination may be beneficial to the public. Finally, any system of regulation involving an exclusivity policy will create administrative costs. These costs are also part of the analysis.
This Article describes the current state of hot news law and examines the issues that must be addressed in developing a functional and a rational approach to hot news. It describes the general requirements of such a system and assesses three proposals explored by the Federal Trade Commission. Finally, it describes the specifics of proposed federal legislation.
Keywords: information, economics, hot news, copyright
JEL Classification: D62, D80, K11
Suggested Citation: Suggested Citation