Legislation could force Google, Facebook to pay for online news

The newspaper industry, which has struggled with the steep decline in ad revenue in the digital age, supports the bill that would force Big Tech to pay publishers to aggregate their news online.

The Journalism Competition and Preservation Act seeks to level the playing field by allowing newspapers, broadcasters and other local online publishers to collectively negotiate an annual fee for content from Google and Meta / Facebook, which dominate the digital advertising market.

The full text of the Senate bill, released Monday, cites an imbalance of power that benefited Big Tech at the expense of the shrinking newspaper industry, which lost thousands of publications and tens of thousands of journalists during the new millennium. creating deserted “local news” in the United States

The bill would recoup digital revenue and encourage local news publishers to hire more reporters.

“There is a lot of revenue that platforms receive from our content that is not returned to news publishers,” said Danielle Coffey, executive vice president and general counsel of News Media Alliance, a Washington-based newspaper trade organization. A.D. “Once we move forward, we will be able to enforce payment from platforms, which would be transformative for our entire industry.”

A spokesperson for Meta declined to comment, while a Google spokesperson did not respond to a request for comment on the bill.

The bipartisan legislation would affect thousands of local and regional newspapers, including the Chicago Tribune and other Tribune Publishing newspapers, which were acquired by the hedge fund Alden Global Capital for $ 633 million in May 2021. It excludes national publications such as The New York Times, The Washington Post and The Wall Street Journal, which have navigated the digital transition more successfully thanks to increased subscription revenue.

The bill also includes local TV and radio broadcasters that publish original digital news content and meet other eligibility requirements.

Introduced in the House and Senate last year, the Journalism Competition and Preservation Act provides a temporary refuge to antitrust laws, allowing news organizations to join together to demand payments from the largest online platforms that aggregate or distribute content from local publishers.

“Our bipartisan legislation ensures that the media will be able to engage in good faith negotiations to receive fair compensation from Big Tech companies that profit from their news content, enabling reporters to continue their critical work of keeping news stories informed. community, “Senator Amy Klobuchar, D-Minn., a key co-sponsor of the bill, said in a news release.

Online platforms must have at least 50 million US-based users and annual net revenue or market capitalization greater than $ 550 billion to be included in the account. The current threshold would include only Google and Meta / Facebook, which account for about half of the nearly $ 250 billion of the US digital advertising market, according to Insider Intelligence.

Eligible news publishers must update their content at least weekly, have fewer than 1,500 full-time employees, and dedicate at least 25% of their content to current public interest issues. For-profit publications must generate at least $ 100,000 in annual revenue from editorial content, while nonprofits do not need to meet these criteria.

The bill includes a nondiscrimination provision designed to preserve different viewpoints, meaning publications like Breitbart or Newsmax cannot be ruled out based on their conservative views, according to News Media Alliance.

The annual fee would be distributed to all local publishers participating in collective bargaining, with 65% of the budget based on how much they spend on journalists in proportion to their overall budget.

“Not only does it reward you for the reporters you have, but it also incentivizes newspapers to hire reporters,” Coffey said.

The legislation also allows news editors to request baseball-style arbitration – an all-or-nothing process that chooses one party’s offer to resolve disputes – as negotiating support if a broader agreement is not reached.

As lawmakers consider forcing social media giants to pay to aggregate local news content, Facebook, which changed its name to Meta in October to reflect its ambition to expand its social media platform into the metaverse of reality. virtual, it is moving in the opposite direction.

In 2019, Facebook agreed to pay licensing fees to the Wall Street Journal, New York Times, Washington Post, and Chicago Tribune, among others, to manage their content. But after posting its first year-over-year revenue decline in the second quarter due to weak advertising demand, the company announced last month that it would no longer pay news publishers to aggregate curated stories.

“A lot has changed since we signed deals three years ago to test the introduction of additional Facebook news links in the US,” a spokesperson for Meta said. “Most people don’t come to Facebook for the news, and as a company, there’s no point in investing excessively in areas that don’t align with user preferences.”

As Google and Facebook expand online audiences for local publishers, two-thirds of viewers on social media platforms “stay inside the walled garden” and never click on the true source of the stories, leaving newspapers looking for crumbs of digital advertising, Coffey said.

According to the most recent data from the Pew Research Center, newspaper advertising revenue has fallen by more than 80 percent from its peak of $ 49.4 billion in 2005, to $ 9.6 billion in 2020. subscriptions have not compensated for the decline in ongoing advertising as the industry moves from print to digital platforms.

Digital advertising accounted for 39% of newspaper advertising revenue in 2020, up from 17% in 2011, according to Pew, but newspapers are still getting a fraction of the global digital ads market.

According to data from Insider Intelligence, digital ad spend in the United States has grown from $ 23.6 billion in 2008 to an expected $ 248.8 billion this year. Digital ad spend accounts for nearly 72% of total advertising in the United States, surpassing TV, radio, newspapers and other traditional media combined.

According to Insider Intelligence, Google will generate nearly $ 70.1 billion and Meta / Facebook $ 55.5 billion, or more than 50% of the total US digital ad spend.

“The reason digital has become so gigantic is because it happened largely at the expense of traditional formats,” said Max Willens, senior analyst at Insider Intelligence. “The print keeps scrolling and scrolling and scrolling. The declines have ceased to be double-digit year after year, but that’s because there is so little left. “

As advertising revenue continues to decline, newspapers have shrunk and disappeared, creating a gap in local coverage.

A study published in June by Northwestern University’s Medill School of Journalism found that newspapers are closing at an average of more than two per week and that the country has lost more than a quarter of its newspapers – around 2,500 in total – since 2005. This has created so-called news deserts, where 1 in 5 people in the United States have limited access to local news.

The study cited “Big Tech’s grip on digital advertising” as a significant factor in the continuing decline of the local news ecosystem, which consists of 150 large metropolitan or regional newspapers and 6,227 small community newspapers or weeklies.

Local news editors “lack the market power” to negotiate with Big Tech for ad dollars, “leaving newsrooms with fewer resources to do their critical work,” co-sponsor Senator Dick Durbin said in the press release. , D-Ill ..

According to the Medill study, newspaper consolidation accelerated the closure of underperforming publications, while many surviving newspapers reduced staffing and circulation due to declining advertising revenue.

According to the study, local newspapers employ about 31,000 journalists in the United States, down 60% from 2005.

Last week, Gannett, the nation’s largest newspaper chain, began firing an unknown number of employees after reporting a 6.9% larger-than-expected drop in revenue and a $ 53.7 million loss in revenue. second quarter. McLean, based in Virginia, Gannett publishes USA Today and over 230 other newspapers.

“We have been transparent about the need to evolve our operations and cost structure in line with our growth strategy, while we also need to act quickly given the challenging economic environment,” a spokesperson for Gannett Lark said in a statement. -Marie Anton.

Anton did not disclose the extent of the layoffs and declined further comment.

In 2016, Gannett made a series of unsolicited offers to purchase Tribune Publishing, then known as Tronc, before withdrawing his final offer.

A New York-based hedge fund with a reputation as one of the industry’s most aggressive cost cutters, Alden became the second largest newspaper owner in the United States behind Gannett after completing the acquisition of Chicago-based Tribune Publishing in May. 2021. Coverage The fund immediately saddled previously debt-free Tribune Publishing with two loans totaling $ 278 million and implemented editorial acquisitions at the Chicago Tribune and other newspapers.

Tribune Publishing’s portfolio includes The Baltimore Sun; the Hartford Courant; the Sentinel of Orlando (Florida); the South Florida sun sentinel; the New York Daily News; the Capital Gazette in Annapolis, Maryland; The Morning Call in Allentown, Pennsylvania; the Daily Press in Newport News, Virginia; and The Virginian-Pilot in Norfolk, Virginia.

Alden also owns MediaNews Group, whose newspapers include Denver Post, San Jose (California) Mercury News, and St. Paul (Minnesota) Pioneer Press.

The US journalism bill follows groundbreaking legislation in Australia, which last year passed the News Media Bargaining Code to address the “power imbalance” and ensure that media companies are “fairly remunerated” for the content they create.

The Australian law generated $ 200 million in payments from Facebook and Google to local news outlets in its first year, according to research conducted by Bill Grueskin, a professor at Columbia University’s Graduate School of Journalism in New York.

Without similar government intervention in the US, the balance of power will remain exactly with Big Tech, Coffey said.

Formerly known as the Newspaper Association of America, the News Media Alliance launched an advertising campaign in local and regional newspapers in the United States last month with the message “Don’t let big tech take away local news”, seeking to create a media of basis for the bill.

“The time is urgent,” said co-sponsor Rep. David Cicilline, DR.I. “At a time when journalism is more important than ever, the press is facing an event at the level of extinction. Congress must act “.

The other co-sponsors of the bill are Senator John Kennedy, R-La., And representatives Ken Buck, R-Colo., And Jerrold Nadler, DN.Y.

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