How to War Between Big Tech and News Is Coming to the U.S.

How to War Between Big Tech and News Is Coming to the U.S.

After a showdown with the Australian government over an effort to pay publishers their due, it looks like Google and Facebook might have to gear up for the same battle in the United States. Lawmakers are moving forward on a piece of dormant legislation that would enable news organizations to negotiate with Big Tech over how much they get paid for content—and how much reader data they’re entitled to.

A quick recap: Last year, the Australian government whipped out an ad sales sharing plan that would’ve forced Google and Facebook to directly pay publishers. Neither company was particularly happy with the development, to say the least. In February, Facebook banned users from posting news content, a move that led Australian Treasurer Josh Frydenberg to accuse Facebook of endangering public safety during a pandemic by blocking news sources. Facebook later reversed course, after negotiating with the government. As for Google, the search giant experimented with removing certain news sites from Australian search results, before seven publications managed to reach a deal. The whole affair came to an end when Australia passed legislation last month that forces Big Tech to pay some local publishers for news content, though the tech giants did get some concessions, such as the ability to decide which commercial deals to pursue.

Now, both the House and Senate are looking to start a similar fight on U.S. soil. The proposed legislation that was reintroduced on Wednesday would enable media companies to collectively bargain with Big Tech platforms—something that is currently not allowed under U.S. antitrust laws. The law would effectively carve out an exception for media, but doesn’t include a forced arbitration provision like the one Big Tech fought tooth and nail against in Australia.

Somewhat surprisingly, the initiative has bipartisan support, according to Bloomberg. Democratic Senator Amy Klobuchar is leading the charge in the Senate, and Senate Minority Leader Mitch McConnell is also expected to co-sponsor the bill. In the House, the bill is co-sponsored by David Cicilline, a Democratic representative from Rhode Island, and Ken Buck, a Republican representative from Colorado. Both Cicilline and Buck are high-ranking members of the House antitrust subcommittee. That bipartisan support also means the bill has a better chance of making it through both houses, especially since Big Tech is undergoing a flurry of antitrust investigations.

It appears that Big Tech’s antics in Australia may have backfired. In response to Facebook banning news in Australia, Cicilline tweeted that Facebook is “not compatible with democracy” and that its attempt to force Australia into submission was “the ultimate admission of monopoly power.”

The proposed legislation might level the playing field for all publishers, but it would be particularly good for small and local publishers. Currently, Google controls 90% of search and nearly 70% of online ad tech. Together, both Facebook and Google made an estimated $65 billion in revenue from online ads in 2019. That’s massive, especially compared to the paltry $7.7 million that the average publisher in 2017 took home from content placed on third-party platforms like Google and Facebook.

It might seem like publishers benefit from being on Facebook and Google in terms of traffic and “free” publicity. However, the reality is both are taking a larger and larger cut from advertising while also controlling the platforms ads are hosted on. They also get to participate in the market that they control, and can compete with everyone else on unfair terms. According to the News Media Alliance, Google and Facebook take home 60% of all digital ad revenue. Publishers, however, do not take home the remaining 40%. That’s split between publishers, social media companies like Twitter, Amazon (which also takes a huge cut from publishers), and every other news site. And to top it all off, according to a Wall Street Journal report, Google and Facebook have a price-fixing deal dubbed Jedi Blue that gives Facebook special terms and access to Google’s ad server so it won’t set up a competing ad network.

The result is that publishers receive less and less from ads that have already been extremely devalued, with limited options to go elsewhere. In a striking example, Boston’s local NPR reported that several years ago, a full-page weekday ad in the Los Angeles Times would’ve brought in $50,000. Now, Google ads that reach the same number of readers bring in less than $20. It’s under this environment that local and independent publishers have languished and effectively been cannibalized by private equity.

This is a huge milestone for U.S. news publishers. As we have seen over the last several weeks in Australia and Europe, the world is moving toward new compensation systems for publishers. The cost of inaction, in terms of the spread of misinformation we are all experiencing, is simply too great to ignore any longer.

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