Actually, in the book I go much earlier. Upton Sinclair wrote a book of media criticism in 1912 that was the genesis for my theories. Yellow journalism predates Bernays by more than a few decades.
One thing he argued is that before professional journalism, the media was much like today's blogs; everyone knew their content reflected the owner's biases. Then with the consolidation of newspapers (due to economic reasons), to the point where a city might have only a couple dailies, overt bias "stank like old fish", so professional journalism arose. (And journalism schools along with it.) With it came a neutral-sounding objective tone, which hid a number of biases (like what's covered — and what's not, reliance on "official sources" who are elites, and so on). But of course, the content reflects the owners and advertisers' general interests, as we'd expect from media corporations which like staying in business.
Given that, I'd wonder if good, carefully-researched professional journalism is more insidous than yellow journalism. I'll look more closely at your (and Sinclair's) work.
(But to address your other point, it may be. Chomsky's media criticism focusing heavily on this)
Some context: (http://www.youtube.com/watch?v=O0D0E42AA4I&t=16m30s)
The whole interview is worth listening to if one can tolerate the (at times considerable) douchiness of the interviewer.