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Research explores the best way to balance big tech and journalismAugust 3, 2022 | By Rande Price, Research VP – DCN @Randeloo
The Australia 2021 News Media Bargaining Code and the European Union (EU) 2021 Digital Copyright Directive are two examples of policies that establish a more equitable financial arrangement between big tech platforms and digital news organizations. They center around the understanding that platforms derive a benefit from news content and that publishers are not compensated for the way in which these platforms profit from their content. Courtney C. Radsch examines the different policies in her report, Making Big Tech Pay for the News They Use to offer insight into the legislation and its implementation.
With the exception of non-profits, most news organizations employ a commercial model. In the simplest terms, advertising is used to drive revenue to support the news organization. However, intermediaries – notably Google and Facebook – now stand between the publisher and the advertiser. Since search and social media are key ways in which people discover and consume news online, these platforms benefit from the user traffic derived from publishers’ content. They collect personal data on users and group people into demographic and special-interest categories to target advertising to them on their platforms.
Radsch’s research examines how policymakers are working to redirect revenue to compensate news outlets more equitably.
Her report classifies the different policies into three distinct groups:
- Digital taxation,
- Competition policy (or antitrust), and
- Intellectual property.
In recent years, taxing digital advertising has gained interest. In 2019, the U.S.-based Free Press proposes a small tax on revenues generated from targeted advertising. This policy was established with Google and Facebook in mind. The taxed revenue would be used to fund public interest media systems.
Radsch notes it’s problematic that the policy does not identify who will monitor and implement a payment distribution system for the news media companies.
While not covered in this report, in 2021, Connecticut, Indiana, New York, Oregon, and Washington introduced state proposals for a new tax on revenues from digital advertising or to expand the state sales tax to digital advertising sales. Interestingly, none of these proposals allocate the tax revenue to news organizations. Connecticut plan suggested the revenue from the tax be dedicated, in part, to funding online bullying prevention efforts and training for social isolation and suicide prevention.
Maryland became the first state to enact such a tax in February 2021. However, these state tax laws face court battles since they likely run afoul of the Constitution’s Commerce clause. This clause restricts the ability of states to regulate commercial activity across state lines, and the Internet Tax Freedom Act prohibits states from levying taxes solely on digital goods or services.
Other policies are exploring making platforms pay for the news they use, headlines, photos, and snippets. This type of policy forces the platforms to negotiate directly with publishers rather than the government. Australia made headlines in 2021 when it passed this type of legislation requiring Facebook and Google to share algorithmic information with and pay licensing fees to news organizations. The code states that news media companies can bargain individually or collectively for payment from platforms to use their content.
As a result, Google and Facebook threatened to pull their services from the Australian market. Facebook did shut down its service for one week. Both companies ultimately acquiesced and signed deals with Australian publishers.
Intellectual property rights
Many question whether the “fair use” exception in copyright law, the use of a small amount of copyrighted material without prior permission, applies to Google and Facebook.
The 2021 EU Digital Copyright Directive created a right for press publishers, not just authors, to claim copyright, including for snippets of news. In addition to individual publishers being able to strike deals with the various platforms, the Directive allows collective management organizations to negotiate licensing fees and distribute them back to publishers.
In 2021, members of the U.S. Congress proposed a new version of the Journalism Competition and Preservation Act of 2021. This bill would create a four-year safe harbor from antitrust laws for print, broadcast, or digital news companies to collectively negotiate with platforms regarding the use of the news companies’ content. In other words, media news companies could collaborate to discuss bargaining with Google and Facebook without fear of antitrust violation. Despite bipartisan support, the bill appears to have stalled.
Profits and progress
Google and Facebook claim that news content generates little revenue. However, their earning calls suggest otherwise. These companies benefit tremendously from the trusted content and audiences that news publishers deliver.
Radsch’s report calls for platform transparency, including sharing traffic reports and the number of ads served around each news item. This would be a good first step to revealing the amount of revenue the news content generates on the platforms. Once this amount is determined and platforms equitably paid for news content, the relationship between the two can reset. Given the importance of advertising revenue to journalism, it’s important to get this right. Radsch’s report offers guidance and insights that will help policymakers move forward meaningfully.