Government Won’t Save Local Newsrooms

SACRAMENTO, Calif. — During a visit last week to British Columbia, I was scanning Facebook and tried to link to a news article. Instead of accessing the story, I received an advisory informing me that Facebook no longer allowed access to any content from a news source. It was the result of Canadian legislation, the Online News Act, which forced tech companies to pay news publishers for the use of their content. Instead of paying, Meta has simply limited readers’ access to such content.

I can’t blame the company, despite the pearl-clutching from Canadian officials. “The fact that these internet giants would rather cut off Canadians’ access to local news than pay their fair share is a real problem, and now they’re resorting to bullying tactics to try and get their way. It’s not going to work,” said Prime Minister Justin Trudeau after Facebook announced its decision last year.

But even though our northern neighbors already are experiencing the predictable results of this misguided law, California officials have tried to follow suit. Two similar Democratic measures had been moving their way through the Legislature this year. Senate Bill 1327 would have imposed a tax of 7.25 percent on the gross receipts of online advertising revenue to fund journalism fellowships and grants for nonprofit local news operations.

Assembly Bill 886, fancifully referred to as the California Journalism Preservation Act, “would create a journalism usage fee from digital advertising giants like Google/Alphabet and Meta/Facebook to ensure news outlets can pay fair, livable wages to journalists in California,” as explained by the News Guild, a union representing media workers. With the writing on the wall, Google agreed to a settlement that avoids the type of tax proposed by those bills, but which voluntarily earmarks money toward local journalism.

As CalMatters reported, “Instead of Google and Meta being forced to negotiate usage fees with news outlets directly, Google would deposit $55 million over five years into a new fund administered by UC Berkeley to be distributed to local newsrooms – and the state would provide $70 million over five years. Google would also continue paying $10 million each year in existing grants to newsrooms.”  The overall deal would direct $250 million to local journalism.

The deal also would have Google spend $62.5 million over five years “to provide organizations across industries and communities — from journalism, to the environment, to racial equity and beyond — with financial resources and other support to experiment with AI to assist them in their work,” according to a statement from AB 886’s author, Assemblymember Buffy Wicks, D-Oakland.

Gov. Gavin Newsom celebrated the deal as something that will save the state’s newsrooms, although some Democratic critics called it disastrous — arguing that the AI portion will undermine journalism jobs and that the fund isn’t sufficient to save local reporting. Google’s press statements were positive. It’s hard to see this as a serious win for journalism, but the company certainly dodged a bullet. The deal certainly is better than imposing a tax and further regulations on the company.

“Every news organization chooses whether they want to be in Google Search and Google News,” explains Google on its blog. “Most do because it results in valuable free traffic. Each month, Google Search and Google news link people to publishers’ websites more than 24 billion times. The traffic we send to news sites helps publishers increase their readership, build trust with readers and earn money.” That’s correct — and the Canadian situation shows the futility of punishing tech companies for providing such a service.

Despite the deal, we can certainly expect continuing efforts to push for even more money and more restrictions on the social media firms, with AI regulatory efforts coming into the forefront as journalism groups fear it will replace reporting. Reason’s Elizabeth Nolan Brown reported in June on a letter from the News/Media Alliance to the U.S. Department of Justice calling on it and the Federal Trade Commission “to stop the existential threat Google poses to original content creators.” 

In particular, the trade group wants the feds to use antitrust laws to quash the expansion of AI-generated summaries known as AI Overviews. Says Brown: “It’s always amazing to me how an industry so supportive of civil liberties that benefit them (such as freedom of the press) can be so indifferent to freedom in other realms. Here we have a journalism industry trade group asking the federal government simply to shut down a tech tool that might make publishing less profitable.” Exactly.

I’m dismayed by all of these attempts by my industry (journalism) to try to clamp down on new technologies or shake down technology companies simply because the latest innovations pose a threat to the old way of doing business. I’m a fan of the economic concept known as creative destruction — “a theory that describes how new innovations replace existing ones that have become obsolete over time.” (Yes, that quotation comes from AI Overview!)

New ideas necessarily muscle out older business models, just as automobiles pushed out horse-drawn carriages and electricity replaced coal-fired stoves. Efforts by the government to protect industries as they currently exist will not ensure the continuation of those industries. It might slow the change, but not by very long. Tech companies have, as Google explained, helped spread the reach of local journalism — but newspapers and other local reporting entities need to find a way to fund a voluntary, market-based means to gain revenue.

That’s the problem. Newspapers have yet to figure out how to replace ad revenues that were lost by the internet, which changed the platform (online rather than news print) and obliterated classified advertising. Local journalism is indeed vital to a democracy. Some new models are working, such as nonprofit-funded news sites — but the media should have adapted to the changing environment 20 years ago rather than expecting tech firms or the government to bail them out today.

And there’s always a danger when government is the guiding force for funding journalism operations. Will journalists be willing to investigate a government that ultimately funds it? Can we expect UC Berkeley professors to direct grants to news organizations that hold the California government to account? Doubtful. If journalists want to earn a living wage, they need to provide a product that consumers are willing to pay for. These deals and legislation only delay that realization. As I learned in British Columbia, they also usually backfire.

Steven Greenhut is Western region director for the R Street Institute. Write to him at sgreenhut@rtreet.org.

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