Google ordered to pay for news in Canada; U.S. should be next

Canada’s new media bargaining policy is finally forcing Google to pay news publishers for its online use of their stories.

This is a great step forward in the global effort to address unfair use of news content by dominant tech platforms, and stabilize news outlets that are essential to civic engagement and democracy.

It extends Canada’s leadership in pursuing a multifaceted strategy to save local news and should help advance similar policies under consideration in California, Congress and in other countries.

But it’s not quite time to raise a Labatt’s.

Under the tentative deal announced by the Canadian government on Nov. 29, Google will pay publishers $100 million Canadian annually.

That sounds like a lot but it’s much less than the $172 million the government anticipated when its Online News Act passed in June, and $329 million it expected from Google and Facebook in 2022.

An economist who recently analyzed what Google and Facebook parent Meta owe news publishers in the U.S. told me a more fair payment would be in the range of $750 million Canadian.

“The optimist in me says we’ve moved from the point where Google refused outright to pay anything, and now they’ve decided to pay $100 million, but this is way less than they should,” said Haaris Mateen, an assistant professor of finance at the University of Houston.

Mateen co-authored a November study that estimated Google owes U.S. publishers $10 billion to $12 billion annually, and Facebook $1.9 billion, for the value news adds to its platform.

Their study estimated 17.5% of Google’s search ad revenue should be paid to news publishers. It estimated the value of news-related searches and value that news adds to its properties, then split that 50-50 with publishers.

Using that approach, Mateen estimated fair payments in Canada would be around $750 million.

Canada’s agreement caps payments at 2% of Google’s approximated revenue in Canada, down from 4% originally envisioned.

If the U.S. adopts a similar formula, under the Journalism Competition and Preservation Act proposed by Sen. Amy Klobuchar, D-Minn., publishers would share around $1.4 billion in payments from Google, he said.

How extensively these deals benefit newsrooms hemorrhaging jobs depends on the details, including final language of the Canadian policy coming later this month.

One big question: How much will go to broadcasters and state-funded public media and how much to “traditional media” like newspapers and digital news sites?

“If the distribution is equal, based on the number of journalists, then the traditional news sector will be a loser for sure,” said Jeff Elgie, CEO of Village Media, an Ontario-based publisher of 25 digital titles.

Google and Meta made content deals with Village several years ago but Meta’s deal is ending soon, as it purportedly backs away from news in the face of legislation requiring it to pay all publishers, not just a select few.

Google’s contract is written so that when legislation takes effect, it may cancel its deal with Village and make further payments subject to the legislation, Elgie said.

Elgie is skeptical about the legislation. He fears it will be a net loss for Village and similar outlets, which may already be getting paid and depend on web traffic from tech platforms.

Such complexities create splits within the media industry over these policies even though the first one, in Australia, was widely beneficial. Platforms are paying more than $200 million Australian, preventing newspaper closures and restoring small and large newsrooms.

This dynamic is also at play in Congress and California, where policymakers are hearing opposition from coalitions representing hundreds of smaller and digital outlets, even though the legislation will help thousands of local newspapers survive, preserve tens of thousands of jobs and build sustainable businesses online.

Tech giants are sowing this division by providing grants to some small outlets and nonprofits, which are now vocal opponents of policies requiring tech companies to universally pay for news that adds value to their platforms.

Google and Facebook also use threats and blockades to oppose and weaken these policies. Google threatened to leave Australia and Facebook briefly blocked news there in 2021, when its policy was enacted.

As Canada’s policy crystallized, Facebook in June blocked news on its Canadian sites and Google threatened to follow suit.

The bluff apparently worked again. Criticism grew and the government lowered the payment requirement to appease Google at least.

I’ll bet Facebook will end its blockade after details are hammered out. Trustworthy news is too valuable to exclude from its platforms, especially its fledgling Twitter clone.

Whistleblowers revealed that Facebook’s blockade in Australia was tactical. It deliberately caused havoc to gain leverage as the government drafted rules requiring it to pay for news, The Wall Street Journal reported last year.

Despite the questions and rancor, Canada’s measure is welcome progress. It further affirms that dominant tech platforms can easily afford to fairly compensate news outlets and the Australian template works, giving elected leaders a straightforward way to help save local journalism.

“Overall, having a large tech platform that benefits from our content, having them subject to legislation and regulation, we think is a good thing,” said Paul Deegan, CEO of the News Media Canada trade group.

While this isn’t a silver bullet, when combined with Canada’s other policies to help save local news, particularly a tax credit for newsroom jobs, “that is going to make a very meaningful difference,” he said.

Then you really are talking about saving journalism and all the benefits to communities and governance that entails.

Deegan said the combination of tax incentives and compensation by tech platforms is expected to end the layoffs in the news industry and spur reinvestment, which would then boost subscriptions and ad sales.

“I think between the two, this finally gives us stabilization, but it goes beyond stabilization,” he said. “It’s getting us on the footing that we can invest back in the newsroom … that’s really what we want, we want them to invest in their newsrooms, hire journalists, create content, hold the powerful accountable.”

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