In a world characterized by war and populism, the importance of quality information and credible news outlets cannot be overstated. Local news plays a vital role in maintaining a healthy information ecosystem. However, news publishers have faced significant challenges in monetizing their content in recent years, particularly as referral traffic and ad revenue from social media platforms continue to decline.
The dominance of large platforms and their control over news distribution prompted Australia’s competition authorities to introduce the News Media Bargaining Code in 2021. This code compelled Google and Meta to enter into agreements with several Australian media organizations, addressing the longstanding issue of platforms paying for news. It has also served as a model for other countries seeking to compensate their own media businesses.
However, determining fair compensation in this context is a complex task. Our new report suggests that the amounts Google and Meta should be paying news publishers are much higher than previously thought, and significantly more than what the tech companies themselves claim.
Australia’s News Media Bargaining Code set a precedent by successfully pressuring Google and Meta to reach voluntary commercial agreements with media organizations. It was a groundbreaking piece of legislation, as noted by La Trobe University Professor Andrea Carson.
According to the Australian Competition and Consumer Commission, payments made under the code amount to approximately A$200 million annually. Unsurprisingly, other governments are looking to Australia’s law as a potential solution for securing payments for their own news industries. Countries such as Indonesia, New Zealand, South Africa, and Switzerland have all considered similar legislation. Japan conducted a study on the online distribution of news content and warned tech platforms about potential antimonopoly law violations resulting from low payments to publishers.
In Brazil, attempts to introduce legislation for platform remuneration were initially thwarted due to pressure from Google but are now being revived. In the United States, Senator Amy Klobuchar introduced the Journalism Competition and Preservation Act, which would enable collective bargaining by news publishers. Additionally, the California State Assembly passed the California Journalism Preservation Act, which would require large tech companies to share their advertising revenue with news outlets. However, the implementation of this bill has been postponed until 2024.
Google and Facebook have expressed opposition to these laws and have even threatened to remove news from their platforms in various countries. Facebook temporarily removed news in Canada in August and in Australia in February 2021 before reinstating it.
While Google and Meta argue that news is not central to their business and can be de-emphasized or dropped altogether, reports indicate that they continue to provide small payments to publishers. In fact, our interviews with individuals from different outlets suggest that Google has recently increased its payments to publishers worldwide, possibly as a preemptive measure against impending legislation.
Globally, publishers have estimated the amounts they believe they are owed under platform remuneration acts similar to Australia’s. However, these figures are often subject to non-disclosure agreements when publishers enter into direct agreements with Google and Meta.
Our working paper is the first to estimate the amount owed by Google and Meta to US publishers. We have made our methodology public to ensure transparency and reproducibility. Our findings indicate that in the US, these tech giants owe news publishers between US$11 billion and US$14 billion annually. This is significantly higher than the amounts currently being paid out, which we know about through interviews and publicly disclosed cases.
At the heart of our study and its conclusions is the concept of “surplus” in economics – the additional value created when two parties engage in a mutually beneficial interaction. Importantly, this value exceeds what would be generated if the parties operated independently. Digital platforms benefit from having access to diverse, credible, and timely news content provided by publishers, enhancing user engagement and attracting advertisers. News publishers benefit by gaining a platform through which they can distribute their content to a wider audience.
Our methodology identifies this additional surplus value generated from the platform-publisher interaction and utilizes insights from bargaining economics and historical benchmarks to calculate a “fair” payment owed to news publishers. Our approach is transparent, replicable, and adaptable to different markets and geographies. With this report, we aim to broaden the discussion surrounding the payments that major digital platforms such as Google and Facebook owe to news publishers.
The Conversation reached out to Google for comment but did not receive a response before the deadline.