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Nov. 30, 2023, 12:11 p.m.
Business Models

Forget the link tax. Focus on one key metric to “save local news”

“You need Google to stay in this. Otherwise, it devastates the entire industry.”

Is the link tax dead?

The Canadian government, faced by heavy opposition from many news publishers, blinked Wednesday when regulators and Google agreed to an “exemption” from the controversial Online News Act, set to take effect Dec. 18. Google will continue to link to Canadian news online, and will pay about $100 million a year into a new fund to support “news.”

With that move — and with Meta having pulled news out of Canada earlier this year — the link tax idea may be ending its life in politics in North America.

That would be good news for all who care about rebuilding local news. And it should help us refocus on the key question underlying all such legislation: How does this actually help pay more local journalists to report on and for their communities?

We’ll see the first indication of the impact of Canada’s decision next Tuesday when California State Senate judiciary chair Tom Umberg leads a hearing on the state’s local press woes. California’s own proposed link tax, embodied in AB 886, the California Journalism Preservation Act (CPJA), will be discussed in that hearing. The fate of that bill — opposed by many independent and ethnic news organizations in California — may be key to the local news landscape across the U.S. If CJPA were to pass unchanged, it could, unfortunately, give new strength to the once-defeated and now reappearing federal JCPA, a national link tax, and/or encourage other states to follow suit.

This is a lot of acronyms; if you need a brief refresher, CJPA was the surviving daughter of JCPA (the federal Journalism Competition and Preservation Act), a bill that died in the last weeks of the 2022 Congress. It favored the largest publishers, aiming to provide a lifeline to the financially driven companies that have rolled up half of the U.S. daily newspaper industry.

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I won’t get too deeply here into the arguments of why CPJA is deeply flawed as a piece of legislation (my column from this summer still stands). But I’ll stress that the allocation of payment formulas laid out in both the Canadian law and the CJPA bill favors big publishers over smaller ones and broadcasters over print and digital media and fails to sufficiently differentiate kinds of “content”: National vs. local, human-created vs. AI, clickbait-spinning vs useful reporting, and so on.. (In “Crumbs for California,” Free Press takes its best shot at following the money in CJPA.)

The bills’ writers tried to figure how to justify transferring money from Google and Meta and, taking a bad idea from Australia, came up with the unwieldy notion of a link tax, figuring that the number of news links displayed on those platforms could somehow serve as a proxy for deciding how much and to whom those platforms would pay news organizations. That approach is the original sin of the legislation, causing all kinds of confusion and opening new doors to the kinds of unintended consequences now before Canadian local news publishers. Those caused the Canadian government to blink and should push California legislators to draw a deep breath.

“You need Google to stay in this”

Over 10 years, Canadian news entrepreneur Jeff Elgie hasn’t just protested vulture capitalists capturing and eviscerating much of his country’s local press. Instead he’s responded to that devastation by building a network of 21 local sites, the smallest in Elliot Lake and the largest in Sault St. Marie, employing 90 journalists among a total staff of 150. The sites are mostly small and some are more robust with local news than others, but all of them do something for their communities: they originate local news and information that nobody is offering.

Elgie stood to receive some money under Canada’s Online News Act. But he, like many of his fellow digital and print local publishers, now decries the legislation. His story — one I’ve now heard repeated by numerous mission-driven Canadian publishers, old transitioning media, and new media — is an object lesson in unintended consequences.

With most of 2023 consumed by waiting, Elgie stopped expanding his company, meaning fewer communities devastated by still-increasing local news shutdowns are getting new injections of local news. “We’re not doing anything else, we’re not hiring new people, we’re not launching new markets until we figure out how this all shakes out,” he told me.

When Meta pulled Facebook news out of Canada earlier this year, Elgie lost that audience, but it’s the loss of Google links that terrify him and other publishers.

“Google and Facebook combined represent almost exactly 50% of our traffic,” he said. (Of that 50%, around 17% was coming from Facebook and 34% comes from Google products — search, Discover, News, and so on.) “For some publishers, it’s 70 or 80%. And no business that I know of that can lose 50% to 80% of their revenue potential. You’re talking reach and ad impressions. I don’t care if you’re subscriber-based, either — maybe you hang in there a little longer, but you’ve lost your entire audience funnel to find new members or subscribers in any reasonable way.

“You need Google to stay in this,” Elgie continued. “Otherwise, it devastates the entire industry. You cannot lose Google and Facebook and have some reasonable publishing industry left online. It doesn’t work.”

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That sentiment, increasingly voiced by publishers across Canada, is what drove the new government exemption.

With the revised agreement, Google, which had threatened to remove news links in Canada as Facebook had done (to great consternation during the summer British Columbia fires), will keep its links up and maintain its other publisher-aiding programs, including the recently launched Google Showcase.

The only metric that counts

If Canada can swerve at the last minute, then California has plenty of time to take a detour. There’s good reason to think it will do that now, starting with next Tuesday’s hearing. We can applaud the well-meaning intentions of lawmakers and ask that any legislation focus on one key metric, the one that everyone says they care most about: How much original local news reporting can be added? Any legislation or agreement must provably increase trustworthy local news.

Is such a brokered deal, as has just happened in Canada, a possibility in California as well? Is it one that could set a new model of fund allocation that would actually benefit local news publishers, local journalists, and local news–reading citizens? What kind of deal could satisfy lawmakers, platforms, and local publishers?

It’s a money in/money out question. Canada’s new Google agreement provides $100 million a year, staking a fund. In addition, the government increased its payroll tax credit for employing journalists.

Platform payments, tax credits, and programs like the new state-funded California Local News Fellowship, are all “money-in” solutions. They make a big difference to how much new original journalism can be done.

“Money out” is just as big an issue. However much money is raised annually, who will get it?

In Canada, 75% of the link tax was allocated to big broadcasters. I’ll be interested to see whether Canada adjusts its allocation formulas given the new Google agreement.

In California and the U.S., we have a chance to put the money where it belongs.

First, we can reward local news newsroom headcount — not company headcount or national news company headcount, but local news newsroom headcount. We should get rid of formulas that may reward out-of-state publishers, national activist sites, and the next generation of AI news. Put the money where it’s needed: paying a new generation of professional journalists to do the work of local democracies.

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The best idea, even if the current CJPA moves forward, is to set a minimum payout based on local news newsroom count or budget for the allocation of the funds.

It’s not that we don’t know how to get more journalists doing journalism. We do. Here are some approaches that are working so far:

  • Payroll tax credits for hiring and retaining local journalists. These work in Canada, and in several states. They’ve been cataloged by and advocated for by Rebuild Local News, which has been a stalwart fair broker in these swirling controversies.
  • Small business advertising tax credits for local businesses advertising in the local press. (Another Rebuild solution.)
  • State (and other government) advertising set-asides. States spend millions of dollars on all kinds of advertising. In California, AB 1511, proposed by assembly member Miguel Santiago, “would require a state agency or department that expends funds on paid advertising, communications, or outreach to direct 45% of its total expenditures to ethnic media outlets and community media outlets.” Separate from the CJPA hubbub, this bill would meet that goal of paying more local journalists.

We all await 2024 anxiously. Can we learn from our neighbors up north, avoid unnecessary drama, and get the local news that our communities need?

POSTED     Nov. 30, 2023, 12:11 p.m.
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