New Mandates Won’t Solve Old Problems

The coronavirus may have granted a temporary reprieve from the techlash driving policy in Congress, but other nations have stepped into the breach. Australia, for example, is implementing a new mandate requiring tech companies to pay news outlets when they link to their stories. This will usher in a host of new regulations, “including those related to value exchange and revenue sharing; transparency of ranking algorithms; access to user data; presentation of news content; and the penalties and sanctions for non-compliance.” Rather than addressing any specific consumer harm, the new rules are predicated exclusively on propping up a dying model of journalism while failing to address the underlying structural challenges in media markets.

The recent announcement is the result of a Digital Platform Inquiry initiated in December of 2017 and completed last summer. Highlighting the market power of digital platforms and the quickly collapsing market for traditional journalism, the Inquiry originally recommended that media stakeholders and digital platforms develop their own code of conduct for a more balanced distribution of revenue in the lucrative online advertising market. Dismayed at the lack of progress, Australia’s Treasurer, Josh Frydenberg, MP, recently declared the government is taking the lead in writing the new rules, with a targeted deadline of July.

That journalism has struggled to adapt to the digital marketplace is well known. As noted by the Pew Research Center, between 2008 and 2019, U.S. newspapers shed 51 percent of their employees, a drop from 71,000 down to 35,000 jobs. Globally, prospects are just as bleak, and more often than not, big tech is perceived to be the perpetrator.

Australia is not the only country to tackle this issue, although its attempt may be the most heavy-handed. Here in the United States, the News Media Alliance is seeking an antitrust exemption to allow publishers to negotiate collectively with the digital platforms. Both Germany and Spain tried charging internet platforms for links to news articles. But the results have been less than stellar for everyone involved. In Spain, as a result of the new fees, Google News simply dropped out of the market, leaving internet users less access to information.  In Germany, the law provided a loophole that allowed publishers to grant free licenses to Google News and other aggregators, which allowed access to the larger readership provided by digital platforms.

Google is also in an ongoing dispute with France over the nation’s implementation of the new EU copyright directive, which includes ancillary or neighboring rights that grant publishers copyrights to any snippets of information used in a web link. France is requiring news aggregators like Google to pay a “snippet tax” for using the publisher’s copyrighted material. In response, Google News dropped the snippet and truncated its results to include only the headline and URL—not the best outcome for consumers or publishers. The French government fired back that this was an unfair abuse of market power and gave Google three months to negotiate with French publishers over proper remuneration.

Yet these efforts to manipulate markets and mandate payments ignore the more fundamental and disruptive changes in media markets. The internet had two significant impacts on newspapers. First, it delinked advertising from the supply of news. The typical newspaper generated 80 percent of its revenues from ads (with the other 20 percent coming from subscribers). The likes of Craig’s List, eBay,, and others proved to be far superior to want ads for everything from selling used furniture to searching for jobs. At the same time, retailers began the transition from print ads to much more targeted and effective digital ads that continues to this day, with digital ads now exceeding traditional media spending in many countries (including the United States).

The second major change generated by the internet was a substantial increase in the supply of news and information. While there may be concerns about the quality of some news sources, publishers find themselves competing more directly with other publishers as well as a host of online experts, many of whom happily deliver content free of charge. Lawyers, academics, sports fanatics, and others provide a constant stream of information for consumers who can customize their own newsfeed. While this has been a challenge for traditional journalism, consumers enjoy access to far more information today than any other time in history.

The traditional newspaper model is not viable in a digital world, and publishers continue to struggle when trying to monetize their work. Some have adopted paywalls; others launched their own digital ad strategies. Whatever their strategy, it must be remembered that publishers have the tools to control what Google can index and display from their websites. In fact, a publisher could opt to have nothing indexed—perhaps unwisely, given that Google drives billions of hits to news outlets throughout the world. (A benefit often ignored in a publisher’s demands for a share of ad revenues.) Once someone does land on a publisher’s site, access to that information is at the discretion of the publisher, via paywall or otherwise.

Simply demanding large platforms like Google to establish what is essentially a profit-sharing scheme with publishers has little impact on consumer welfare, the standard by which anticompetitive behavior is judged in the United States. But industrial policy in other nations is far more interventionist, as regulators are free to shape markets to their liking, whether or not it produces the best results for consumers. In this instance, publishers proved to be effective in their demand for government intervention, which should not be surprising given a politician’s need for media coverage.

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