Why Australia Is Making Facebook and Google Pay the Media

And why it might not work

Photo: Eric Mclean/Unsplash

News media are in crisis. Like many other industries, they’ve lost a huge chunk of revenue to the pandemic as advertising has dried up. What makes it worse for media is that they were already in deep trouble.

The New York Times calculated on April 10 that some 36,000 newsroom employees in the United States had been laid off, furloughed, or taken pay cuts since the coronavirus hit. The number now is surely higher. A running list maintained by the nonprofit Poynter stretches for pages; it can’t keep up with the pace of cuts. It’s all happening to a sector that had already lost half of its workforce between 2008 and 2019 according to Pew Research. Now, The Guardian is predicting an “extinction-level” crisis for U.S. newspapers.

A cruel irony is that the demand for news has spiked even as the supply shrivels. Traffic to top news sites as of mid-March was up 30%, the Wall Street Journal reported. Those clicks don’t directly boost their bottom line, though, if businesses aren’t buying ads. Some outlets have seen a rise in subscriptions, but even that effect has likely been blunted by many publishers’ decisions to take down their paywalls for their coronavirus content. (Medium, whose business is based on subscriptions rather than ads, is among those that have made pandemic-related stories available for free.)

How things got this bad for news media is a long story, but it’s partly a tale of two business models. News media pay journalists to produce content that draws readers. Internet platforms such as Google and Facebook aggregate content produced by others. The latter turns out to be more attractive to both readers and advertisers and can be done on a vast, global scale at essentially no marginal cost. And so Google and Facebook have sucked up some 60% of the U.S. market for online advertising, a share that’s only growing as the media’s share dwindles away. That’s why Google’s parent company Alphabet and Facebook are among the world’s richest corporations while many news organizations are underwater.

One straightforward way to solve this, if we assume that news media’s continued existence is important, is to get internet companies to pay them for their content. Australia announced last month it will start doing just that. The country’s government said it will release in July a draft of rules that will require platforms to compensate news organizations for excerpting their stories in products such as Google News and Facebook’s News Feed. The move came as the government said voluntary talks between media companies and the internet giants were not making sufficient progress.

The concept isn’t brand-new: Some European companies have tried similar policies under the banner of copyright law with mixed results at best. The copyright justification rests on publishers’ ownership of the intellectual property behind their stories and restricts platforms’ aggregation or curation of those stories unless they pay a licensing fee of some sort.

Australia is taking a different approach on the basis of competition law. Here, the justification involves countering the platforms’ dominant market position, which allows them to essentially dictate their preferred terms to publishers, by forcing them to negotiate instead. That may be a more promising framework.

But how promising is it, really? And could it work in other countries, like the United States?

I talked with two people who spend their days trying to figure out the future of news: Emily Bell, director of the Tow Center for Digital Journalism at Columbia University, and Ken Doctor, an industry analyst and author of the book and blog Newsonomics, a term he coined to describe the economics of digital media. I also talked with representatives from Google and Facebook.

On three points, they all agreed:

  1. The news industry needs help, urgently.
  2. The internet platforms that disrupted publishers’ business models have a role to play in supporting them.
  3. Forcing tech companies to pay media companies is unlikely to be the silver bullet that saves the industry.

Where they disagreed was on whether, for all its drawbacks, it might be worth a try anyway.

Google and Facebook, as you might expect, think it’s the wrong approach, although they’re being careful not to say that outright. “We’re disappointed by the government’s announcement, especially as we’ve worked hard to meet their agreed deadline,” Facebook said in a statement. It pointed to its voluntary investments in news, including local news, as its preferred approach. Google was a bit more diplomatic in its public statements, saying it was “surprised” by Australia’s move but will continue to work with publishers there to reach an agreement.

Left unsaid, for now, is the implied threat that one or both platforms could respond by taking their ball and going home. In 2014, Google shut down Google News in Spain in response to a law there requiring it to pay publishers for linking to their content. It has not returned. While there’s debate about exactly how much Google’s pullout hurt Spanish publishers, who saw their traffic decline as a result, it certainly didn’t result in the new revenue stream that media backers had in mind.

Facebook may have an even stronger argument against a scheme that would force it to pay for linking to publishers’ content. That’s because their articles are posted to the News Feed by users — including the publishers themselves — rather than being surfaced automatically by Facebook’s software. When France tried to require it to pay publishers to show previews of their articles in the News Feed, it simply stopped showing them unless the publisher agreed to waive the fee. Otherwise, when a user posted a link to that publication, Facebook would only show the URL with no accompanying headline or image. Again, that might hurt news organizations more than it hurts Facebook, whose primary appeal is not news but the social connections between its users.

Despite the risks, Bell believes some sort of wealth transfer from big tech companies to the producers of news makes sense at a time of desperation in the media industry.

“If you take the approach that we know there’s a crisis, we know where money exists that could help, and we think we should be in control of the policy that extracts it from one place to another — I don’t think that is the wrong approach,” she said. “I think it’s the right approach. Are they doing it on the right basis is the question.”

Basing those payments on copyright law, as some European countries have done, is problematic, Bell argued. Journalism thrives on the free flow of information, including broad interpretations of legal concepts such as fair use. So there’s risk, and perhaps some hypocrisy, in banking on strict copyright enforcement when it comes to the distribution of news online.

Under a competition policy such as Australia’s, the goal is not to protect news organizations’ intellectual property but rather to protect their ability to compete on fair terms with the much larger platforms. There has also been some movement on this front in the United States, where proposed legislation would grant media companies an antitrust exception to bargain collectively with the likes of Google and Facebook. That framework might sidestep the copyright problem, but it leaves another set of problems.

One is determining what counts as news. Does an op-ed from a partisan political outlet qualify? How about a film review from a mainstream newspaper? What about a lengthy blog post from an individual that breaks new information about an important topic? Platforms fear a slippery slope by which they end up having to pay pretty much everyone for their content.

Another is apportioning payments. Basing them on objective metrics, such as clicks or shares, risks enriching the largest and most tech-savvy media corporations at the expense of local and niche outlets and subsidizing cheap clickbait at the expense of hard-earned original reporting. Digital media already went through one period in which Facebook traffic seemed like a bonanza rather than fool’s gold. It gave rise to opportunistic outlets such as Upworthy and ViralNova, whose tantalizing headlines played to people’s emotions but led to stories of questionable news value, while punishing traditional news outlets, whose dry, factual headlines fell flat in users’ feeds.

On the other hand, basing the payments on subjective value judgments risks enshrining the platforms, the government, or both as the arbiters of journalistic merit. That’s troubling because it compromises the independence of a press whose role is to hold those institutions to account. (That said, the news industry’s situation is now so dire that a prominent journalist union is asking the U.S. government for money directly.)

Then there’s the thorny issue of ensuring that the money goes to support actual journalism as opposed to simply lining the pockets of corporate honchos and shareholders. That’s a pitfall that Doctor, of Newsonomics, emphasized.

A leading proponent of tech companies paying for content has been News Corp’s Rupert Murdoch, whose properties dominate Australian media and whose Fox News often ranks as the most popular news outlet on Facebook. Forcing Facebook and Google to pay News Corp might boost its bottom line, but it’s not clear that it would lead to more or better journalism.

In the United States, hedge funds such as Alden Global Capital and Chatham Asset Management have bought up some of the largest newspaper chains. Critics say their goal is not to save them so much as to strip them for parts. Alden’s strategy, in particular, appears to involve taking over once-proud papers, then laying off most of the journalists in pursuit of short-term profits. There’s little reason to believe they’d use an influx of tech cash to do anything but reward their investors.

“Half of the daily press is owned by public companies largely controlled by financial players,” Doctor said, referring to the United States. There is a smaller contingent of local publishers with a genuine, long-term stake in their communities that could really use the money, he added. But the industry’s overall consolidation allows Google and Facebook to more credibly make the case for the kind of voluntary, targeted funding of local news that they’ve already been doing.

Both companies have long pointed to the value they provide to news publishers to forestall regulations that would force them to pay to excerpt their content. For years, it was enough to highlight the huge numbers of people they send to news publishers’ sites each day, without which those publishers would lose a big chunk of their ad revenue.

By now it’s clear that ad revenue alone is not enough to sustain most online publishers since Google and Facebook themselves are sucking up an ever-larger share of it. So the Silicon Valley giants have begun funneling resources to news organizations directly, through programs such as the Google News Initiative and the Facebook Journalism Project. These programs include things like partnering with local news startups to try to pioneer new online models, offering grants to pay for newsroom positions, and, lately, doling out money via emergency relief funds. Both have pledged hundreds of millions of dollars to these efforts. The platforms have also made some accommodations for publishers that have put up paywalls to drive digital subscriptions.

Those programs have real value, Bell and Doctor agreed. At their best, they help scrappy local news organizations develop sustainable models for online revenue. But both said it’s not enough, especially in the face of a pandemic-driven recession that’s pummeling pretty much everyone except the tech giants.

To Google and Facebook, the answer is more of the same. While they won’t say it outright, both seem more than willing to keep doling out finite sums to handpicked media partners if it means avoiding onerous regulations. To Bell and Doctor, more of the same is likely to be too little, too late. In addition, Bell warned that allowing Google and Facebook to decide which media to fund could result in a future in which news organizations are both shaped by and beholden to the world’s most powerful corporations.

The Australian government is right that now is the time to restructure the relationship between platforms and news publishers, Bell said. But it would be better off looking to alternative models, such as taxing tech companies to fund public and nonprofit media, than relying on carriage fees that benefit big corporate publishers.

Doctor agreed that the present crisis represents a rare opportunity. He just isn’t optimistic that anyone involved will be able to seize it in a way that achieves the goals they have in mind.

“The truth is also that, in so many American cities, the newspaper properties are essentially past due,” he said. “They are so denuded. The experienced reporters and columnists are all gone,” he said. When it comes to any policy that relies on propping up traditional local news organizations, sadly, “the time might have already expired on the clock for this to work well.”

Senior Writer, OneZero, at Medium

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