Hot News Becomes Cold in a Nanosecond in the Modern World

Today in 1846, the first telegraph link was established between New York City and Boston. From the AP Archives: “In the spring of 1846, Moses Yale Beach (1800-68), publisher of The New York Sun, establishes a pony express to deliver news of the Mexican War.   His pony express speeds dispatches ahead of the Great Southern Mail from Mobile to Montgomery, Alabama, where the mail coaches carry them 700 miles to the nearest telegraph point near Richmond, Virginia. In offering an equal interest in the express venture to the major New York City daily papers (four of whom accept), Beach effectively organizes what soon became known as The Associated Press. The papers that joined Beach’s venture were: The Journal of Commerce, The Courier and Enquirer, The New York Herald, and The Express. The first dispatches from the Mexican War are carried by the Sun on May 29, 1846.

Telegraphic communications between Washington and New York are established on June 5; the New York-Boston line goes into operation on June 27; and by summer’s end, the telegraph extends from New York to Albany and Buffalo, and from Philadelphia west to Harrisburg, creating a telegraph network. Editors now actively collect news as it breaks, rather than gather already published news.”

As Richard John points out in Network Nation, the establishment in 1846 of the New York Associated Press (not the Associated Press, which descended from the Western Associated Press, a Chicago-based rival of the NYAP), was a reaction to the  New York and Offing Telegraph Association (Offing was the furthest point on the Atlantic horizon that was visible by telescope), a corporation with a special telegraph charter from the New York state legislature, owned and managed by Samuel Colt (of later small arms fame) and William Robinson. Richard John: “By publicizing the news gathering potential of the electric telegraph, [Colt and Robinson] challenged two powerful institutions: the Post Office Department and the New York City newspaper press.” And he quotes from a promotional pamphlet published by Colt and Robinson: “It is evident that the system of telegraphing news is destined to supersede, in a great degree, the publication of commercial newspapers in this and other northern cities.”

Newspapers survived the telegraph and the telephone, partly because of successful monopolistic business practices (as exemplified, among many other examples, by the NYAP in the 1880s), and mostly because of the invention of mass advertising. Will they survive the Internet?

In today’s issue of the Wall Street Journal, L. Gordon Crovitz compares two court cases, one from 1918, the other from last week. In the 1918 International News Service v. Associated Press the court found that INS (which had copied AP stories) “misappropriated a ‘quasi-property right’ by ‘endeavoring to reap where it has not sown, and by disposing of it to newspapers that are competitors of complainant’s members . . . appropriating to itself the harvest.'” Crovitz continues: “Last week’s case, Barclays Capital v., turned out differently. The website uses the Internet to redistribute information the way Hearst’s newswire used the telegraph. The plaintiffs in the case, which include Merrill Lynch and Morgan Stanley, invest in research about companies and markets and then share their market-moving trading recommendations with their biggest trading customers. They make the recommendations public only later, after funding the research through trading commissions. undermined this system by reporting these recommendations quickly after their distribution to big investors; it’s hard to keep secrets these days. A trial judge had sided with the banks and ordered the site to wait until 30 minutes after the opening of the stock exchange to republish the banks’ buy-sell-hold recommendations, giving the banks’ customers time to trade. But the Second U.S. Circuit Court of Appeals ruled last week that the website could continue its work. Unlike in the Hearst newswire case, is not free riding when it collects and distributes news about banks’ research. ‘The firms are making the news,’ Judge Robert Sack wrote. ‘Fly, despite the firms’ understandable desire to protect their business model, is breaking it.'”

Crovitz concludes: “Google and Twitter filed a brief in Theflyonthewall, warning: ‘Hot news becomes cold in a nanosecond in the modern world.’ They don’t want restriction on their business practices. But as in the cases of the not-so-innocent Hearst newswire and, Internet aggregators profit from the work of others as they undermine their business models.”

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