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The dominance and obstinance of big tech platforms

April 23, 2020 Chris Pedigo, SVP Government Affairs – DCN

Earlier this month, the French competition authority ruled that Google must negotiate in “good faith” with news publishers to pay them for using news snippets in Google’s News and search products. This is the first European country to enforce the European Copyright Directive, which seeks to ensure that there is a more balanced relationship between content creators and platform aggregators.

The issue at hand is the ability of these aggregators to monetize content that they did not create, to the detriment of those who created the content – often at significant cost. The original value proposition was the delivery of a click/consumer to the content creator’s site. However, over time, aggregators have taken great liberties with the quantity of content they display, often negating the need for consumers to visit the content creator’s site at all.

Snipping snippets

The directive was specifically intended to extend copyright protection to news ledes and snippets. In response to French law that memorialized the Directive, Google announced that it would flaunt the new law altogether by removing from Google News and Google Search the snippet descriptions, news organization brand, and photographs associated with the news articles.

Instead, Google would only display the headline and URL putting the content at a disadvantage to other results. Aggressively but maybe not surprisingly, Google said it would reinsert the snippet description, news organization brand and any photographs if the publishers would give a free license. The French authority ruled that this constituted an abuse by Google of its dominant position.

Coming off the heels of the French ruling, Australia’s Competition and Consumer Commission reached a similar boiling point with big tech platforms. For months the Commission has been negotiating with Google and Facebook on a voluntary code to ensure a fairer balance between news publishers and platform aggregators. And, for months Google and Facebook had been reportedly stonewalling.

Revenue matters

On Monday, Australian Treasurer Josh Frydenberg pulled the plug on talks and announced that the Commission will release mandatory rules in July to compel platforms such as Google and Facebook to, among other things, fairly compensate news publishers for the use of their content. The move could not come at a more important time as over 50 news publishers in Australia have recently closed shop. Meanwhile, Google rakes in approximately 47% and Facebook approximately 24% of digital advertising revenue in Australia.

The impact could be profound, particularly if the platforms respond as Google did in France. Imagine Google search results, news, or your Facebook feed without any reputable media sources. Clearly, quality news content is valuable to the big tech platforms, just as the ability to reach new audiences is valuable to publishers. As the Commission recognized, the current value exchange is not a fair balance of interests.

Big tech, big flex

Of course, these countries’ frustrations with big tech platforms should not be surprising to anyone. Google has a particularly long track record of using strong-arm tactics to achieve and maintain its dominance. A recent example occurred when the European Union was preparing to enforce the General Data Protection Regulation (GDPR), the sweeping data privacy and security regulation.

While GDPR is intended to give consumers greater control over the collection of their data, Google used it as a land-grab opportunity. Just weeks before enforcement began in May 2018, Google announced to industry (and only after journalists were prepared to break the news) their non-negotiable terms for publishers and advertising in complying with the GDPR. Any company which used any Google service or product would 1) need to get express, affirmative consent from consumers for Google to collect consumer data; 2) would not be told how Google would use or secure the data (which would render any consent invalid); and 3) would be liable for any GDPR violation by Google.

Along with several other trade associations representing publishers, we detailed our concerns directly to Google. Of course, it’s not surprising that Google would attempt to deflect as much legal risk as possible. Liability is often a major point of negotiation in any contract. However, Google is so dominant, that this is not a real negotiation.

Perhaps more surprising is that Google did not even entertain the possibility of restraining its massive data surveillance regime. Under the GDPR, companies that collect and use data only on behalf of the website or app (and do not use the data for an unexpected secondary purpose) are considered “processors” of data. Typically, processors are not required to get consumer consent, instead they can rely on other legal bases such as “legitimate interest.”

Reverting to the role of a processor would have placed Google more in line with consumer expectations and it would have made for a much better user experience (e.g. no messy pop-ups asking for vague consent). Instead, Google dictated its “take it or leave it” terms to the industry and consumers. And it’s data profiling would continue uninterrupted. Sounds familiar.

Titanics do sink

The French and Australian rulings could have huge implications going forward. And they are likely only the tip of the iceberg. Many other regulators in Europe and the U.S. are actively looking at the anticompetitive behaviors of big tech platforms. As we noted above, this couldn’t come at a more important time.

As the Covid-19 crisis continues to impact the world, news organizations are redirecting significant resources and personnel to cover the health and economic impact, separate fact from fiction, and hold public officials accountable. More broadly, entertainment companies are working overtime to create and distribute content to audiences “staying at home.” Yet, these content creators are often swimming up-stream to generate sufficient revenue to fund the news and entertainment that consumers love and need because the digital distribution channels are dominated by the big tech platforms.

We’re glad to see public officials pushing back on the anticompetitive behavior of big tech platforms and helping ensure a more equitable balance of interests. As the current crisis has clearly demonstrated: We need quality, reputable, trusted content more than ever.

Taking a bite out of Apple News+

March 28, 2019 Chris Pedigo, SVP Government Affairs – DCN

This week, Apple announced a new suite of services including Apple News+ and Apple TV+, subscription services for news and video content respectively. It’s an interesting move for Apple, which excels at creating premium experiences, enjoys strong customer loyalty, and has the ability to potentially deliver audience scale. There are, however, serious questions about the revenue split, consumer relationship, app-market dominance, access to content, and Apple’s long-term commitment to publishers.

While few details are available at this point (particularly about Apple TV+), it appears Apple News+ will cost $9.99 per month with Apple taking a hefty 50% cut and distributing the remainder to all of the participating publishers. Tim Cook did not announce a price point for Apple TV+ but it seems likely to have similar characteristics as Apple News+, including a similar revenue split and distribution structure.

A Lopsided Relationship

With these news services, Apple will control not only the relationship with the consumer, but will also control the data about the consumer. It’s hard enough to build a subscription business without having another company serve as the middleman between the content creator and their audience. Moreover, as New York Times’ CEO Mark Thompson put it, “Bundles always dilute the brand.”

More troubling is the fact that Apple runs the app marketplace itself via the App Store while simultaneously offering a media consumption app that competes with publishers’ branded apps as well as those of other aggregators such as Flipboard. An example of the inherent conflict of interest is that Apple places its own apps front and center, pre-installed on more than a billion phones worldwide. Beyond a glaring competitive advantage, controlling the marketplace and delivery mechanism of its competitors’ apps gives Apple unprecedented insights into the transactions of those companies (think Amazon selling its own brands while seeing everyone of its competitors’ transactions).

Market Monopoly

Apple forcing the reported levels of revenue splits and data terms underscores larger concerns about the dominance of platforms. As Senator Blumenthal, who serves on the Senate Judiciary Committee has stated, “[t]here is much stronger agreement among me and my colleagues that there needs to be more aggressive enforcement action on tech companies.” Senator and presidential candidate Elizabeth Warren (D-MA) recently called for the break-up of Apple and the other platforms. Senator Ted Cruz (R-TX) has long voiced concerns about potential bias of big tech firms. Members of Congress are concerned that big tech platforms have too much influence and are harmful to society. Although Apple has avoided a lot of the privacy gaffes of other tech giants, the fact that Apple can boldly propose such lopsided terms shows how the landscape is perilously tilted in favor of the big platform companies.

Bringing further voice to the concerns raised by policymakers, Spotify filed suit against Apple claiming that Apple “purposely limited choice and stifled innovation.” Spotify claims that Apple uses its platform to disadvantage competitors in the music streaming business, including by taking a 30% cut of subscription revenue. While Apple is not proposing to get into the news business, the Apple TV+ product sounds like Apple will be both distributor and competitor.

And, considering the fact that Apple has expressed concerns in how digital advertising works, it seems an ironic choice for the company to favor advertising-based business models over subscriptions for publishers.

Quick Fix or Long-term Success?

Publishers are also rightly concerned about whether Apple will maintain a long-term commitment to this initiative. Facebook famously changes their terms, goals and algorithms about every six months, which makes it extremely difficult for publishers to build a sustainable business. Other social platforms have rolled out paid incentives to content producers only to withdraw them as soon as the programs are off the ground. Publishers have rightly grown wary of purported platform support.

At the end of the day, Apple needs to make a serious commitment to making distribution work for high-quality news and entertainment. As we have seen in Google and Facebook’s own (hardly altruistic) need to invest in the production of content that their business models undermined, building a model that sustains quality content creation is the bedrock of long-term success.

Innovation

NewsON: delivering local news anywhere, anytime

February 19, 2016 Michelle Manafy, Editorial Director – DCN

A fortuitous result of the ever-proliferating sources for news has been that Americans are consuming more of it than they have in a long time. And the majority of Americans—nine out of ten—follow news about their local area very closely or somewhat closely. However, the proportion of Americans who get news from traditional media platforms—television, radio and print—has been stable or declining in the last few years (though for local news, television still holds its own).

Along with a glut of “news” content we’re also seeing content consumption habits evolve: more and more people consume news on mobile—which is not simply a result of the popularity of mobile devices, but reflective of consumers’ anytime, on-demand expectations. This proliferation of news sources and changing consumption patterns has created issues for content companies and consumers alike. Certainly, it increases competition. But it also causes quality issues, as it can be difficult to find trusted and reliable information, particularly for an audience unlikely to sit down to watch the evening news every night at six.

However, broadcast media veterans are not standing idly by. NewsON—launched by ABC Owned Television Station Group, Cox Media Group, Hearst Television, Media General, Hubbard Broadcasting Inc., and Raycom Media (with Sinclair Broadcast Group joining as a partner)—was founded to provide local news to mobile consumers nationwide. As CEO Louis Gump put it, “In an age where fragmentation is common, we believe creating something that makes it easy for viewers to find trusted news brings great consumer benefit.”

The NewsON app provides access to live and on-demand local newscasts and local news clips. The free, ad-supported app features flexible navigation that encourages discovery, offering instant access to broadcast-quality video. It also enables people to search by market via an interactive map and for curated content that links coverage of breaking news events from multiple stations. NewsON is available for Apple iPhone and iPad, Android phone and tablet, and on the Roku platform.

While many of the broadcasters with whom NewsON works have individual apps and make much of their content available digitally, Gump points out that the app has the advantage of offering information from multiple sources within a given local market, which allows consumers to dig in on topics of interest. It also allows people anywhere to find locally-produced video on a given topic, which is likely to offer insights and depth not available from national sources. As examples, Gump sites the New Hampshire Presidential primary and weather events such as the January 2016 blizzard that affected several east coast states, with distinct coverage being offered in local markets.

For the broadcasters that work with NewsON—120 stations in 92 markets, covering 76% of the U.S. population—Gump says NewsON delivers expanded audience reach across all demographics. While Gump would not comment on specific financial terms, he says “the economics at NewsON are weighted heavily in favor of the stations.”

A third benefit, which Gump describes as “kind of extra credit,” is shared learning. “Any TV station group that doesn’t have a strong digital offering and isn’t investing in innovation probably has some big problems,” he said, also pointing out that NewsON provides additional opportunities for experimentation and shared learning among participants. He’s seen confirmation that there’s an increasing desire to time-shift news viewing, but also sees behaviors that debunk the popular notion that people only want to watch short-form video.

NewsON, says Gump, was founded on three main principles: “Do the right thing; serve our customers; and move forward.” As he points out, people are looking for content that meets their needs, on their terms and it is essential to focus on those needs and expectations—with a consistent future-focus. And to that end, he says we can expect to see more partnerships this year, with the goal of increasing local content offerings in existing markets and adding new markets to the mix, as well as significant product updates and evolved advertising capabilities.

Perspectives

Apple’s Growing Power in Mobile News

June 18, 2015 Mark Glaser, Founder and Publisher – MediaShift

For most of its life, Apple was about hardware: computers, then iPods, iPhones, iPads and the Watch. But along the way, Apple also delved into software but mainly tried to be a platform for content (think iTunes). Now it’s moving in a new direction, putting more emphasis on news curation with its coming News app and offering up mobile ad-blocking in Safari—two moves that have publishers scratching their heads.

The News app, similar to Flipboard, operates as a reader where users can choose from more than 50 publishers they’d like to follow (including the New York Times, Conde Nast and Bloomberg, with more coming). Plus, people can receive customized content that will become more personalized with time as the app gets to know their preferences. The News app will replace Newsstand, the original news app on iOS where news unfortunately ended up, well, dying. But the News app won’t just be an aggregation via algorithm–Apple will also depend on old-fashioned human editors.

The positive buzz surrounding News has less to do with originality and more to do with Apple’s gargantuan reach, as the app is bound to make a splash when it debuts on hundreds of millions of devices this fall. It may come as a pleasant surprise for consumers who aren’t already tapped into some kind of newsfeed–but the reality is that a growing number of young people get their news via social media and not specialized apps.

Losing Control?
However, it’s not easy to tell what the News app and other updates with the new iOS might mean for publishers–both in terms of advertising and editorial control.

The Wall Street Journal calls the News app an addition to the “distribution shift” for publishers with offerings such as Facebook’s Instant Articles or Snapchat’s Discover, both of which offer streams of content within their platforms. Individual news apps aren’t the primary contact with news anymore; they feed into these broader platforms.

“In partnering with outside parties, publishers tap into huge audiences, but also inherently relinquish some control,” the Journal’s Lukas Alpert and Jeffrey Trachtenberg wrote.

Editorial control is one thing, but financial control is another, and not just on the apps-as-readers. Apple has said that publishers can keep 100 percent of the revenue from the ads they sell themselves, and 70 percent of the revenue Apple’s iAd advertising platform generates. That mirrors exactly the deal that Facebook is offering with Instant Articles.

Ad Blocking Coming
But when it comes to ads outside of the News app, an update that wasn’t announced publicly but only revealed in Apple’s developer documentation is perhaps more important to publishers right now: “AdBlocking is coming to the iPhone with iOS 9.”

Blocking the annoying little ads that pop up on browsers has almost become routine among users, and if that trend picks up on mobile, it doesn’t fare well for publishers. They already don’t generate a lot of revenue on mobile–take the New York Times, which earns only 10 percent of its digital advertising revenue on mobile. So the pressure is on for those numbers to become higher if mobile continues to become the preferred entry point for content consumption. As Joshua Benton wrote in Nieman Lab, “If iOS users–the majority of mobile web users in the U.S., and disproportionately appealing demographically–can suddenly block all your ads with a simple free download, where is the growth going to come from?”

One idea, from TechCrunch’s Danny Crichton, is for publishers to copy a model not too different from cable channels, and “get together and create a basic subscription package that would offer a completely ad-free and tracker-free viewing experience.” Another way, he argues, is to “radically rethink” how to do advertising on the Internet, perhaps with a more simple ad model.

No easy answer exists, obviously. Letting go of editorial control is one thing, but not having financial control is a whole other battle. Most of all, it sounds as if Apple would like to get on the “friend or foe?” list for publishers alongside so many other social platforms.