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Policy / DCN perspectives on policy, law, and legislative news surrounding digital content

Here are 3 big changes coming for digital media

October 22, 2020 | By Chris Pedigo, SVP Government Affairs – DCN @Pedigo_Chris

In case you haven’t heard, there is an election coming up in a couple of weeks. Regardless of which party wins, the public policy landscape for digital media is likely to undergo some major shifts in the next couple of years. Let’s take a look at three big changes on the horizon:

Google and Facebook will pay for premium content

In 2019, the European Union approved the Copyright Directive and underlying publishers’ right, which gave news publishers legal leverage to demand better terms from platforms. Now, all eyes are on France where a court ruled earlier this year that Google must negotiate in good faith with publishers. Of course, Google will avail itself of all the legal channels to slow down any effort to force them to pay for content. However, it’s likely just a matter of when, not if.

On the other side of the globe, in 2019, the Australian Competition and Consumer Commission (ACCC) to develop a voluntary code to rebalance the relationship between news organizations and big tech platforms. As the latter predictably dragged their feet, the ACCC switched gears earlier this year and moved to the development of a mandatory code, which appears likely to be easily approved by the Australian parliament in 2021.

In response, Google and Facebook have threatened to drop news from their services and/or pull out of these markets altogether. However, we know these are empty threats. For one, there’s common sense. If Facebook’s news feed and Google’s search results were devoid of trusted news organizations, what kind of miserable consumer experience would that be?

Really, given the massive profit margins of these tech companies, and the political scrutiny they are facing on multiple fronts, it makes sense for them to simply buy their way out of this problem. Case in point: Earlier this month, Google launched Google News Showcase, which will pay out approximately $1 billion in licensing fees to a select group of news publishers. As News Corp’s CEO, Robert Thomson, noted, “…the principle and the precedent are now established.” My take: Google sees the writing on the wall and is trying to get ahead of regulators in an effort to set the market.

Also, earlier this month, the House Judiciary Committee issued a lengthy report that summarized their investigation into big tech platforms and laid out a host of legislative solutions. One of those proposals would allow news publishers to collectively negotiate terms with platforms like Google and Facebook. It’s pretty clear which way the wind is blowing. Platforms will pay for premium content in the not-to-distant future.

Consumer privacy laws will impact data collection and profiling, especially programmatic advertising

The EU’s General Data Protection Regulation (GDPR), which went on the books in 2018, was meant to give citizens new rights and protections over their data. Since then, the common narrative from big tech’s apologists has been that GDPR didn’t work. It only resulted in annoying pop-up notices while Google and Facebook cemented their dominance in digital advertising.

I dispute the narrative that GDPR didn’t work. It hasn’t been enforced…yet. The most significant enforcement action to date has been a French court ruling (currently under appeal) that Google improperly gained consent from consumers, which resulted in a $50 million fine. The resolution of that case could have huge implications for the entire industry, not just Google.

Meanwhile, Google, Facebook, Apple, and other companies claim Ireland as their European headquarters, which gives primary jurisdiction to Helen Dixon, Ireland’s Data Protection Commissioner (DPC). Last month, in response to a European court ruling, she announced that Facebook and other companies could not transfer data about European citizens back to the U.S. because the U.S. does not have equivalent privacy safeguards. In response, Facebook sued the DPC and declared that they might pull out of the European market if this ruling stands. (Sound familiar?)

At the same time, there are hundreds of cases pending before the Irish DPC, any one of which could have wide-ranging ripple effects. Adding to the pressure for her to act, the Belgian data protection authority issued an initial finding just last week that the IAB Europe’s Transparency and Consent Framework (TCF) is not compliant with GDPR. While the IAB Europe is expected to push back on these findings, the ruling could have massive implications worldwide for programmatic advertising, in particular the real-time bidding systems for open exchanges.

According to the United Nations, 132 out of 194 countries have enacted some kind of data privacy law – many of which are modeled after GDPR. This November, California voters are likely to approve a ballot initiative called the California Privacy Rights Act (CPRA), which will align California’s privacy law much more closely with the GDPR.

Of course, Google and Facebook have enormous legal and lobbying budgets that they will leverage to forestall regulation and enforcement for a time. But, eventually, the same public pressure that led to the enactment of GDPR and other data privacy laws will lead to the enforcement of these laws, which are primarily targeted at limiting the ability of big tech platforms to collect data about consumers.

Platforms will soon face new responsibilities and liabilities

Policymakers on both sides of the Atlantic seem to be hell-bent to make platforms more accountable for what’s happening across their services. This morning, the U.S .Department of Justice, along with 11 state attorneys general, filed suit alleging anticompetitive practices by Google with regard to the search marketplace.

The suit does not lay out specific remedies but could include breaking up pieces of Google into separate companies and/or imposing new obligations on the company. While the suit is likely to take years to play out in the courts, it dramatically ramps up the pressure on Google while also ensuring the conversation will remain top of mind for policymakers. It’s also widely expected there will be additional suits filed by the bipartisan state attorneys general who have been investigating Google on a range of practices including digital advertising.

Meanwhile, members of both political parties in the U.S. have expressed grave concerns about the anti-competitive practices and dominance of the big tech platforms. Democrats have expressed additional concerns about the impact on democracy, news organizations and vulnerable segments of society. Republicans have lambasted the platforms for allegedly suppressing conservative speech.

Importantly, both parties agree that platforms’ algorithms should be transparent. They think regulators should have greater authority to oversee their actions and mergers. And both sides believe that that Section 230 protections should be significantly narrowed. The CEOs of Google, Facebook and Twitter will likely be walking into a political minefield next week as they testify to Senate Commerce on this sensitive topic under threat of subpoena.

In Europe this month, European Commission Vice President Margrethe Vestager announced plans to move forward by the end of this year with two major legislative initiatives designed to impose a whole new set of obligations on big tech platforms. These big tech companies used to be the darlings of innovation. Now they are nearly uniformly seen as impediments to economic growth and democracy.

What does all this mean for publishers?

Taken together, these three unfolding and inevitable changes should provide a unique opportunity for premium publishers. Obviously, public policy debates are messy. And lawmakers and regulators don’t have the best track record in terms of truly understanding tech.

But, as we’ve seen with enforcement action in Europe, investigations by various competition authorities and hearings before the US Congress, policymakers have gotten a lot savvier and are poised to act in bold, new ways. Going forward, companies that enjoy trusted, direct relationships with consumers and advertisers are likely best positioned to flourish in a world where premium content and contexts will have greater value.