The latest chapter in the ongoing saga of so-called “link taxes” in the United States has concluded with a whimper in California, with Governor Gavin Newsom’s announcement that Google and the state would partner to create a “News Transformation Fund.” The five-year, $250 million fund to support journalism was accompanied by the shelving of two pieces of legislation: a proposal to introduce a “mitigation fee” on platforms for user data extracted for advertising purposes, and the California Journalism Preservation Act (CJPA), a proposal that would force dominant digital platforms to negotiate with news publishers over compensation for linking to their content. Threats by both Meta and Google to block links to news in the state if the CJPA passed was certainly factored into this change.
Now we’re hearing that advocates for the federal equivalent of that bill, the Journalism Competition and Preservation Act (JCPA), will be using the outcome in California – paired with the recent decision in the Google search antitrust case – to re-lobby for the bill. We’ve written about the many flaws of the JCPA before (spoiler alert: Some of its proponents may have found a way to make it worse). With this post, we are re-lobbying against the JCPA.
A little about the new fund: It calls for $55 million from Google and $70 million from California taxpayers to go to a nonprofit under the auspices of the University of California Berkeley School of Journalism (which already administers a state-funded journalism fellowship program). Google will also continue its Google News Initiative investments and fund a new “AI accelerator” designed to develop ways for journalists to use AI. The plan has been met with mixed reviews. One news industry analyst and author, Ken Doctor, described it as a win because it favors local journalists, avoids a news blockade by Meta or Google (as actually occurred in Australia and Canada as well as threatened in California), sustains Google News Initiative’s other activities in the state, and should start funding news programs shortly (even though no one in Canada has seen a dime since a similar bill passed last year). Journalism professor and author Jeff Jarvis also expressed optimism at the notion of a fund with private and public contributions managed by an independent board, that will be used to support specific proposals meeting specific goals (even though it will send money to hedge funds). Conversely, the state’s dominant journalists union, Media Guild of the West, strongly opposed what they described as a “disastrous deal” forged through a backroom shakedown. Steve Waldman, founder and president of the Rebuild Local News coalition, of which Public Knowledge is a member, thoughtfully described the plan as “both a model and a cautionary tale.”
In our view, the plan got some details right. For example, the funds from the nonprofit will be allocated based on headcount rather than link volume, which would have encouraged clickbait. It targets small outlets and under-served markets via a set-aside of 12% off the top of the fund (apparently reduced from 25% to start), and it excludes broadcasters. But the main idea – furthering Google’s influence and control over news distribution – is still problematic. And many questions about the fund remain, from eligibility to allocation method to sustainability (since it did not involve legislation, it will depend on the vagaries of the annual budget cycle in California as well as Google’s continued good graces).
Some of those same design elements made the fund a big disappointment to the CJPA’s principal lobbyists, the News/Media Alliance and the National Association of Broadcasters and their affiliates. In fact, on September 10 and 11, the News/Media Alliance sponsored a Washington “fly-in” for an estimated 120 news publishers to try to convince lawmakers that the outcome in California proves they need to pass the Journalism Competition and Preservation Act. The theory is that if publishers were empowered to negotiate collectively (without breaking antitrust laws), they would have more clout with the platforms.
The JCPA’s proponents have also pointed to the decision in the Google search case – that Google violated antitrust law in its conduct in search and leveraged its power in the search market to dominate the search text advertising market – as proof that Google is a monopolist with an illegal business model and owes publishers recompense. They believe forcing platforms to compensate publishers for linking to their content should be considered one of the remedies in that case (never mind that the case is related to antitrust law, not copyright law). These proponents say they expect the same decision will happen in the Google ad tech case, which began with opening arguments this week.
Also this week, Senator Amy Klobuchar (D-MN), along with several other sponsors of the JCPA, sent a letter to the Federal Trade Commission and Department of Justice highlighting the risks that generative AI, specifically AI-generated overviews, “may pose to competition and innovation in digital content, including journalism.” (The request mirrored one made in a letter to the FTC and DOJ from the News/Media Alliance last May.) The accompanying news release from Senator Klobuchar references the JCPA as a means to “allow news organizations to jointly negotiate fair compensation for access to their content by dominant online platforms.”
Link taxes are a bad idea, but must-carry provisions are a worse one.
Some proponents of proposals to require payment from platforms for indexing, linking, and displaying news have now gone further. Noting the pattern of Meta and Google threatening to remove links to news websites to avoid legislation, a recent op-ed asked that federal regulators “help ensure news organizations get the compensation they deserve and prevent retaliatory measures from Big Tech” by writing a must-carry provision into law that “would require covered platforms to carry news.”
Where do I start? How about with the impact on our information systems that would come from forcing platforms to carry news from the most extreme of sources? Then there’s the First Amendment, which the Supreme Court has repeatedly confirmed protects platforms’ expressive rights, including the right to decide what content to carry. The op-ed claims that the U.S. already has must-carry provisions for other communication platforms, such as local broadcast requirements on cable, and that they were deemed constitutional in Turner v. FCC. But in the cable context, must-carry provisions require cable operators to carry a broadcaster’s signal within their local market for free. Or, under retransmission consent, broadcasters can choose to negotiate for payment from cable operators – which is what most popular commercial stations choose to do. Stations that assert their must-carry rights cannot also demand compensation from the cable operator.
There is no precedent for a “must-carry and must-pay” provision in U.S. law. And in Turner v. FCC, the must-carry provisions of the 1992 Cable Act were upheld in part because they were content-neutral regulations, justified by the specific facts of the highly-regulated, government-licensed broadcast industry. A must-carry provision that pertains exclusively to news publishers (not all online publishers) is not content-neutral and would not pass constitutional scrutiny. Ironically, the JCPA already has what we would describe as “must-carry provisions” (and we mean that in a bad way) because of its language prohibiting platforms from “discriminating” or “retaliating” against publishers that participate in negotiations. It is one of the many reasons we oppose the bill.
What about the other California bill that died, and its proposal for a “data extraction mitigation fee”? Well, as strongly as we have opposed link taxes, we have supported the idea of a digital tax or user fee rooted in a public interest obligations theory of news policy. Approaches like the data extraction mitigation fee – or our own proposal for a “Superfund for the Internet” funded by federal user fees required from platforms – are worth developing. This is particularly true now that the Organization for Economic Co-operation and Development (OECD) has failed to establish a global approach to corporate taxes, including the prohibition on digital taxes the U.S. had hoped to achieve. We also support the notion of tax credits for journalism, an idea successfully implemented in Canada that has since been expanded.
Depending on how far back you go, the decline in revenue for news organizations is due to many factors. A major one was that in the rush to capitalize on early internet traffic, news organizations gave away their content for free, maybe forever changing attitudes about the value of news. Disintermediation was a factor, though it started well before the monopolistic scale of Meta and Google. (Does “Craigslist” ring a bell? Pundits said it was killing news as early as 2013.) Then also factor in the consolidation, asset-stripping, and headcount reductions by hedge funds and venture capitalists. That said, we agree with the Media Guild of the West and the JCPA’s proponents on one very important point: It will require structural change to materially transform the relationship between the dominant digital platforms and publishers. But we shouldn’t be treating these symptoms of monopolization state-by-state (Illinois, which is considering similar legislation, should take note).
We can also agree with a point from the opinion commentary I quoted earlier: If it were not for Google’s monopoly on search, new competitors could emerge and “develop alternative and perhaps lucrative ways to surface and rank journalism on search that would have buoyed the sector’s financial viability.” That is why we support antitrust enforcement – including both cases against Google, and the cases against Meta and Amazon – and new legislation to break down their power through a national privacy law and by requiring data portability and interoperability. As one editor recently put it, “fighting monopoly may be the best way to save journalism.”