Should Facebook and Google pay local news outlets for their content? AB 886 would require it

A bill before state lawmakers that supporters say could dramatically alter the economics of California journalism had its beginnings more than 8,000 miles away.

For years, the Australian government and media watched newsrooms hemorrhage circulation, revenue and staff. At the same time, Facebook and Google linked to or displayed their work without paying anything for it.

The response was The News Media Bargaining Code, which gives the Australian government the power to order digital platforms into arbitration with news organizations to negotiate fees for using their content.

The tech industry fought the idea. Facebook even experimented with pulling news from their sites but relented, and the Australian Parliament passed the measure in February 2021. So far, big platforms have paid an estimated $200 million to the country’s news organizations, leading to the creation of hundreds of jobs.

If supporters of Assembly Bill 886, the California Journalism Preservation Act, prevail, Google and Meta will have to do the same in the Golden State — paying potentially hundreds of millions of dollars to news outlets.

“Legislation like AB 886 that requires big tech to pay local news publishers fair market value for their quality content would be transformative for newsrooms across California,” said Danielle Coffey, president and CEO of the News/Media Alliance, an industry advocacy group.

California is on the cutting edge of a larger movement to hold social media companies financially accountable for the news that they use. A comparable bill, from Sen. Amy Klobuchar, D-Minnesota, is working its way through Congress. Canada has passed one; Brazil and Indonesia are considering similar legislation.

The measure is supported by a number of media organizations, including McClatchy, which owns The Sacramento Bee, The Fresno Bee, The Modesto Bee, the San Luis Obispo Tribune and the Merced Sun-Star. Outlets ranging from the San Francisco Chronicle to the Los Angeles Blade have signed on, as has the California News Publishers Association.

It also is backed by the two major California newsroom unions, the Media Guild of the West and the Pacific Media Workers Guild, the latter of which represents journalists at The Sacramento Bee.

AB 886 passed the Assembly with bipartisan support June 1 and is scheduled for a Senate Judiciary Committee hearing on JuIy 11.

The bill would require major online platforms to pay news outlets a percentage of their advertising revenue, with the amount to be determined through arbitration. The money would go into a pool to be divided up and shared with news organizations big and small.

AB 886 specifies that news outlets must spend at least 70% of this new revenue on newsroom jobs. It also requires publishers to report how much they received and exactly where it went.

As they did in Australia, Google and Meta are opposing the bill, saying that it would create a “slush fund” for large, out-of-state media enterprises. Meta has once again threatened to pull news content from Facebook if the proposal becomes law.

Critics argue that it conflicts with the First Amendment, creates conflicts of interest and could contribute to the spread of disinformation.

Others point to a potentially corrupting influence posed by AB 886. By making Facebook and Google a guaranteed source of income, news publishers would have a vested interest in the platforms’ profitability and could prioritize promoting more “clickbait” stories — driving greater web traffic and generating more revenue.

“I don’t know any journalist whose dream is to have to care more about Facebook and Google’s algorithms,” said Katharine Trendacosta, associate director of policy and activism for the Electronic Frontier Foundation, a digital rights group.

Matthew Pearce, a Los Angeles Times journalist and president of the Media Guild of the West, which supports AB 886, said Trendacosta made a fair point, and that it falls to journalists to organize and push back against their employers in the event that they promote such content.

“Those principles are always under debate,” he said.

Issues in Australia

The Australian bargaining code has its problems.

Critics point to the lack of transparency — the exact amount of money changing hands is secret — and that Australian news mogul Rupert Murdoch’s News Corp, a major source of misinformation, was a primary beneficiary of the law.

However, advocates say, the code has so far been an effective cudgel, pushing tech giants into paying for content.

“While no digital platforms have been designated under this legislation, the existence of the code and the threat of designation is having the appropriate and intended impact in encouraging voluntary commercial deals between platforms and Australian news media businesses,” said Alix Piatek of the Australian Competition and Consumer Commission, in an email to The Bee.

Both Google and Meta — parent company of Facebook and Instagram — have voluntarily entered into agreements with Australian news organizations. Google has formed commercial arrangements with virtually all qualifying media outlets, while Meta has completed deals with outlets employing some 85% of Australian journalists, according to Rod Sims, professor of public policy at Australian National University, Canberra.

Sims led the fight for the bargaining code while he was chair of the Australian Competition and Consumer Commission.

“Anecdotally, there have been several journalists saying that post the (News Media Bargaining Code) is the best time they can remember to be a journalist given the number of jobs now available,” Sims wrote in a report analyzing the law’s effect.

AB 886 would ‘fundamentally alter’ the economics of journalism

While AB 886 is up for debate, there is little question that the newspaper industry in California has been devastated over the last couple of decades, beset by shrinking newsrooms and “news deserts” where there simply is no trustworthy local reporting.

Between 2004 and 2019, a quarter of California news publications closed their doors, according to the University of North Carolina Hussman School of Journalism and Media. Nationwide, more than two newspapers are shutting down every week, according to Northwestern University’s Medill School of Journalism.

In 2020, when the pandemic hit, California publications saw ad revenues plummet up to 78%, even as they made content available for free to subscribers and non-subscribers alike, according to a survey of California News Publishers Association members. That same survey found that 66% of CNPA members said digital revenue was not enough to offset the loss of print advertising.

“As news consumption has moved online, community news outlets have been downsizing and closing at alarming rates,” AB 886 author Assemblywoman Buffy Wicks, D-Oakland, wrote in a statement supporting the bill.

It’s not that people aren’t still reading or watching the news. A Pew research study found that 68% of Americans still rely on news websites.

But platforms such as Facebook and Google “have coerced newsrooms to share the content they produce, which the platforms sell advertising against, while providing little to no compensation in return,” Wicks said.

It’s not clear exactly how much of a revenue boost California news organizations would be looking at under AB 886.

Economist Hal Singer, adjunct professor at Georgetown’s McDonough School of Business and managing director of the consulting firm Econ One, was reluctant to go into specifics because of his likely role in any eventual arbitration. But he said that given the advertising revenue collected by Google and Facebook ($49 billion and $22 billion respectively in 2020), the sums could be considerable.

“It’s going to be a very big number,” Singer said.

If the bill passes and California Gov. Gavin Newsom signs it into law, the news industry would enter into “baseball-style arbitration” with Facebook and Google, presenting “final offers” to an arbitrator, who will select one.

“We will shout out a number, and then we will present a bunch of methodologies that will support that number,” he said. “...I do think it would be a massive infusion.”

Such a proposal would lead to the creation of hundreds of journalism jobs and “would fundamentally alter the economics of being in the publishing industry,” Singer said.

Opposition to AB 886

The Chamber of Progress, a tech-funded center-left advocacy group, has argued that AB 886 would primarily benefit conservative media outlets such as Fox News and Newsmax.

The group is circulating a petition calling for lawmakers to carve Fox News “and other national disinformation giants” out of the bill. However, it would remain opposed to AB 886 even if that were to happen, according to the San Francisco Chronicle.

Singer disagreed with the Chamber of Progress’ argument.

“The allocation of the pot will be determined by the group that represents news,” he said. “The idea is that we want to reward people internally for employing and spending a lot of money on journalists.”

While that would mean the big media outlets would get a bigger cut of the cash, “smalls will get their ... shares based on how big of a labor footprint they have and how big of a traffic contribution they have,” he said.

Facebook says that AB 886 represents a debate over a dwindling pool of revenue.

“A lot has changed since Australia enacted its News Bargaining Code,” said Amber Moon, spokeswoman for parent company Meta. “Fewer people access news on Facebook, our user preferences have shifted to short-form video content, and our users say they want to see less news — not more — on the platform,” she wrote in an email.

According to data provided by Meta, the proportion of adults using Facebook for news fell by roughly a third between 2016 and 2022, from 45% to 30%. In the U.S., just 13% of adults use social media for news, while 22% of Americans think there is “too much” news on Facebook.

Google, too, is opposed. In response to similar legislation being passed in Canada, Google President of Global Affairs Kent Walker said that the fee system amounts to a “a link tax” that “creates an untenable level of product and financial uncertainty that no business could accept.”

“So, we’ve made the difficult decision that we’ll be removing links to Canadian news from our Search, News, and Discover products in Canada when the law takes effect,” Walker said in a statement.

But it’s not just Facebook and Google, and their front groups, lobbying against the bill.

Trendacosta, of the Electronic Frontier Foundation, said that AB 886 runs afoul of the First Amendment because it bars social media companies from taking down news content in retaliation for news producers demanding payment. The First Amendment bars the government from compelling speech.

“It’s the same reason that newspapers don’t have to publish every letter to the editor that they get,” she said.

An Assembly floor analysis of AB 886 raised that argument as well, but added that the retaliation provision “only prohibits a platform from denying access for the purpose of retaliation.”

“The bill does not stop the platform from exercising its First Amendment ... rights to refuse to post certain views; it simply says that, if they do display the content, then they may be required to pay a usage fee and will not be able to remove someone solely because a fee was requested,” according to the analysis.

Trendacosta added that even if AB 886 becomes law, and if it survives a legal challenge and makes it through arbitration, it won’t lead to more journalists being employed in California.

“Even if 70% of this money goes to the newsrooms, companies aren’t going to add 70% to their newsrooms,” she said.

Pearce, who has championed AB 886 as president of the Media Guild of the West, acknowledged that “money is fungible” and that news publishers could choose to simply replace the existing funding source with the new one.

But an essential provision of the law, he said, is that publishers will be required to own up to that. AB 886 includes language that forces executives to publicly divulge just how much they are getting from social media companies and what they are spending that money on.

“We’ve got really strong transparency language in there,” Pearce said.

‘A fairly benign model’

Would it be healthy for newspapers to enter into a business partnership with Facebook and Google, two global corporations of immense power and influence that are often the subjects of critical coverage?

The newspaper industry, which has historically derived the majority of its revenue from advertisers, has often grappled with the ethical challenges of covering those companies in its news columns. Industries from tobacco to automobiles to alcohol to airlines have spent billions advertising with media outlets that must at times cover them critically.

“It’s a legitimate concern, but it’s no different than the concerns that the news media have faced forever,” said Edward Wasserman, a UC Berkeley Graduate School of Journalism professor who specializes in media ethics.

Nonprofit news exists at the forbearance of donors and underwriters. Subscription-based news models must satisfy their subscribers.

“Even the cleanest revenue model has serious ethical drawbacks to it,” Wasserman said.

Pearce, whose paper, the Los Angeles Times, is owned by billionaire Patrick Soon-Shiong, agreed with that assessment.

“Whether it’s advertisers, whether it’s rich billionaire owners like mine, whether it’s philanthropists more generally, grant foundations, whether it’s the First Amendment, we only exist with the sponsorship of the institutions around us, and we only exist with the sufferance of the public,” Pearce said.

Despite that, Wasserman called AB 886 “a fairly benign model.”

“People are making use of this content,” he said. “In that respect, you might look at revenue that might revert to the publishers as essentially royalties for the reuse of content they created.”

Wasserman said that AB 886 isn’t largesse or charity.

“This is hard numbers. The views of news content on social media actually create revenue for the social media,” Wasserman said. “And the question is, why shouldn’t the people who created that content get a piece of that revenue? It’s just another distribution channel.”

For Pearce, this is a matter of great urgency.

“Our house is on fire. It’s burning down. We have to sprint out the door even if it means leaving the place where we’ve been comfortable for the last 80 years,” he said.