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Twist in Online News Act regulations could see news media owe millions to Google, Facebook

Regulations require the platforms to make a contribution to news media amounting to 4% of their Canadian revenues

Media Canadian Business

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Canadian news media could ironically owe millions to Google and Meta instead of the other way around under the Online News Act regulations proposed by Ottawa late last week. Tech news website The Logic cited an unnamed government official as confirming that the platforms could get credit for the traffic they send to news media websites in any deals made with them. The regulations require the platforms to make a contribution to news media amounting to four percent of their Canadian revenues, but they include a provision that Google could earn an exemption from compulsory bargaining with news media by voluntarily striking deals with them worth at least $172 million a year. Facebook’s annual contribution minimum, based on its 2021 revenues, would only be $62 million.

According to The Logic, the official confirmed that the agreements could include as compensation the value of web traffic provided by the platforms. “Non-monetary contributions can be included, if both sides agree on their value, and the official said the deals could put dollar figures on the eyes Google and Facebook send to Canadian sites.” Since Google claims to send $250 million worth of traffic to Canadian news websites a year and Meta is close behind at $230 million, this could absurdly result in Google being owed $78 million and Meta $188 million. The devil will be in the details, of course, including how to value the traffic and whether the platforms could collect any overage.

Also included in the four percent figure could be content licensing agreements that Google has with Canadian news media under its Google News Showcase, which has allocated $1.3 billion worldwide to license content and currently pays more than 150 publications across Canada. Its Google News Initiative has also supported Canadian media since 2018 by providing tools, training, and funding to journalists and journalism students.

Meta similarly partnered with more than a dozen Canadian media companies in its News Innovation Test, under which it paid publishers to link to news stories not already posted on Facebook. It also claims to have spent about $18 million over the past five years to help develop sustainable business models for more than 120 Canadian news outlets. It began canceling those deals soon after the Online News Act was passed in June and then began blocking news content here in August to comply with the law. Meta is getting out of news distribution worldwide, recently announcing that it plans to stop promoting news stories in the UK, France and Germany.

The Canadian Radio-television and Telecommunications Commission (CRTC) posted the proposed regulations on Friday, which began a one-month consultation period that ends on October 2. The Online News Act will then come into force by December 19, but a timeline provided by the CRTC does not foresee mandatory bargaining being required before late 2024 or early 2025. According to law professor Michael Geist, this means that with 90 days to negotiate, 120 days for mediation and then a final offer arbitration process, “it is unlikely that there will be any payments before 2026.”

The CRTC is seemingly overwhelmed at the moment by the Internet being suddenly added to its regulatory duties. It recently paused work on new radio applications and complaints for two years, citing the work it has been given to implement the Online Streaming Act, the former Bill C-11 which passed Parliament in April.

The regulations published on Friday set out the formula it used to calculate the expected contribution from each platform that chooses to continue distributing links to Canadian news under the Online News Act. Its national revenues will be estimated at about two percent of its global revenues, which is Canada’s share of global GDP, and that would then be multiplied by four percent. “A contribution rate of 4% would yield compensation figures broadly consistent with the outcomes from the Australian Bargaining Code, which is the model for the Online News Act.”

The regulations outlined some significant differences from the Australian approach, under which exemptions are granted at the discretion of the minister responsible if a platform is deemed to have contributed significantly to the news industry. “The exemption process in Canada’s proposal is novel and based on regulatory criteria.” They include whether agreements provide fair compensation, devote an “appropriate” portion to news content, uphold journalistic independence, benefit a significant portion of independent local news media, and include both for-profit and non-profit media that serve diverse populations in both official languages. Determining whether the criteria have been met, however, can require the CRTC to take a boatload on faith. If a platform simply agrees not to retaliate for any editorial decision, restrict any news business, or intervene in any editorial process, for example, the CRTC must conclude that its agreements “do not allow corporate influence to undermine the freedom of expression and journalistic independence.”

The problem of insulating our news media from influence, not just by platforms but also by government, pre-occupied a 2022 Public Policy Forum report that proposed ways to adapt the Australian law to a Canadian context. It proposed an arm’s length fund to ensure a separation of journalistic decisions from platforms and government, but Ottawa decided to instead put federal bureaucrats in charge of bargaining.

Other criteria are more measurable. To ensure that agreements include a significant portion of independent local news businesses, they must include all groups of 10 or more news outlets that wish to bargain, or five or more which qualify as Indigenous. “For small news businesses that may have limited resources to engage in negotiations, the opportunity to pool resources and bargain via a larger collective presents a greater opportunity to benefit from the proposed Regulations.” Whether the agreements provide “fair” compensation depends merely on whether they are within 20 percent of the average for a platform, relative to the size of news media businesses.

Most questionable of all is the criterion that requires news media to commit only to spending “some or all” of the money received on content. That might not prevent Postmedia Network, Canada’s largest newspaper chain, from devoting the bulk of its compensation to the $30 million in debt payments it owes annually to its US hedge fund owners. Postmedia is well under water on its loans, with an operating profit of only $13 million last year, almost $10 million of which came from the federal bailout that ends early next year. It likely needs Google to keep it alive and sending debt payments south.

The entire years-long exercise, of course, could be rendered moot if Google decides to join Meta in dropping news links in Canada, as it has threatened to do. The question will then become what Ottawa does next, especially in light of Postmedia’s perilous condition.

Marc Edge is a journalism researcher and author who lives in Ladysmith, BC. His books and articles can be found online at www.marcedge.com.

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