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Legislation could force Google, Facebook to pay for online news


The newspaper industry, which has been struggling with deep ad revenue declines in the digital age, is backing proposed legislation that would force Big Tech to pay publishers for aggregating their news stories online.

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

The full text of the Senate bill, released Monday, cites a power imbalance that has benefited Big Tech at the expense of the shrinking newspaper industry, which has lost thousands of publications and tens of thousands of journalists during the new millennium, creating local “news deserts” across the U.S.

The proposed legislation would both recapture digital revenue and incentivize local news publishers to hire more journalists.

“There is a ton of revenue that the platforms receive from our content that is not paid back to news publishers,” said Danielle Coffey, executive vice president and general counsel of the News Media Alliance, a Washington, D.C.-based newspaper trade organization. “Once we move forward, we’ll be able to compel payment from the platforms, which would be transformative for our entire industry.”

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

The bipartisan legislation would cover thousands of local and regional newspapers, including the Chicago Tribune and other Tribune Publishing newspapers, which were acquired by 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 more successfully navigated the digital transition through 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 the Senate last year, the Journalism Competition and Preservation Act provides temporary safe harbor from antitrust laws, enabling news outlets to join together to seek payments from the largest online platforms that aggregate or distribute local publisher content.

“Our bipartisan legislation ensures media outlets will be able to engage in good faith negotiations to receive fair compensation from the Big Tech companies that profit from their news content, allowing journalists to continue their critical work of keeping communities informed,” Sen. Amy Klobuchar, D-Minn., one of the bill’s lead co-sponsors, said in a news release.

Online platforms must have at least 50 million U.S.-based users and net annual sales or market capitalization greater than $550 billion to be included in the bill. The current threshold would include only Google and Meta/Facebook, which account for about half of the nearly $250 billion U.S. 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 devote at least 25% of their content to matters of current public interest. For-profit publications must generate at least $100,000 in annual revenue from editorial content, while nonprofits do not have to meet that criteria.

The bill includes a nondiscrimination provision designed to preserve diverse points of view, meaning publications such as Breitbart or Newsmax cannot be excluded based on their conservative viewpoints, according to News Media Alliance.

The annual fee would be distributed to all local publishers that participate in the collective negotiations, with 65% of the allocation based on how much they spend on journalists as a proportion of their overall budget.

“It doesn’t just reward you for the journalists you have, it also incentivizes newspapers to hire journalists,” Coffey said.

The legislation also allows news publishers to demand baseball-style arbitration — an all-or-nothing process that chooses one side’s offer to settle disputes — as a negotiation backstop if a broader agreement is not reached.

As legislators weigh forcing social media giants to pay for aggregating local news content, Facebook, which changed its name to Meta in October to reflect ambitions to expand its social media platform into the virtual reality metaverse, 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 the Chicago Tribune, among others, to run their content. But after posting its first year-over-year revenue decline in the second quarter amid weak advertising demand, the company announced last month it would no longer pay news publishers to aggregate curated stories.

“A lot has changed since we signed deals three years ago to test bringing additional news links to Facebook News in the U.S.,” a Meta spokesperson said. “Most people do not come to Facebook for news, and as a business it doesn’t make sense to overinvest in areas that don’t align with user preferences.”

While Google and Facebook expand the online audience for local publishers, two-thirds of news viewers on the social media platforms “stay within the walled garden” and never click through to the actual source of the stories, leaving newspapers scrounging for digital advertising crumbs, Coffey said.

Newspaper ad revenue has fallen by more than 80% since peaking at $49.4 billion in 2005, dropping to $9.6 billion in 2020, according to the most recent data from the Pew Research Center. Modest subscription revenue gains have not offset the ongoing advertising declines as the industry transitions 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 overall digital ad market.

U.S. digital ad spending has grown from $23.6 billion in 2008 to a projected $248.8 billion this year, according to data from Insider Intelligence. Digital ad spending represents nearly 72% of total advertising in the U.S., surpassing TV, radio, newspaper and other traditional media combined.

Google is projected to generate nearly $70.1 billion and Meta/Facebook $55.5 billion, or more than 50% of the total U.S. digital ad spend, according to Insider Intelligence.

“The reason that digital has grown so gargantuan is because it has happened at the expense largely of traditional formats,” said Max Willens, a senior analyst with Insider Intelligence. “Print continues to slide and slide and slide. The declines stopped being in the double digits year over year, but that’s because there’s just so little left.”

As ad revenue continues to decline, newspapers have been downsizing and disappearing, creating a void in local coverage.

A study released in June by Northwestern University’s Medill School of Journalism found newspapers are folding at an average of more than two per week, and that the country has lost more than a fourth of its newspapers — about 2,500 overall — since 2005. That has created so-called news deserts, where 1 out of 5 people in the U.S. have limited access to local news.

The study cited the “vise-like grip on digital advertising by Big Tech” as a significant factor in the ongoing decline of the local news ecosystem, which consists of 150 large metro or regional daily newspapers and 6,227 small community dailies or weeklies.

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

The consolidation of newspapers has accelerated the shuttering of underperforming publications, while many surviving newspapers have cut staff and circulation amid declining ad revenue, according to the Medill study.

Local newspapers employ about 31,000 journalists across the U.S., down 60% from 2005, according to the study.

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

“We’ve been transparent about the need to evolve our operations and cost structure in line with our growth strategy while also needing to take swift action given the challenging economic environment,” Gannett spokeswoman Lark-Marie Anton said in a statement.

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

In 2016, Gannett made a series of unsolicited bids to buy Tribune Publishing, then known as Tronc, before pulling its 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 U.S. behind Gannett after completing its acquisition of Chicago-based Tribune Publishing in May 2021. The hedge fund immediately saddled the formerly debt-free Tribune Publishing with two loans totaling $278 million and implemented newsroom buyouts at the Chicago Tribune and other papers.

Tribune Publishing’s portfolio includes The Baltimore Sun; the Hartford Courant; the Orlando (Florida) Sentinel; 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 the Denver Post, San Jose (California) Mercury News and the St. Paul (Minnesota) Pioneer Press.

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The proposed U.S. journalism act follows groundbreaking legislation in Australia, which passed the News Media Bargaining Code last year to address the “power imbalance” and ensure news media businesses are “fairly remunerated” for the content they create.

The Australian law generated $200 million in payments from Facebook and Google to local news organizations 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 U.S., the balance of power will remain squarely with Big Tech, Coffey said.

Formerly known as the Newspaper Association of America, the News Media Alliance launched an ad campaign last month in local and regional newspapers across the U.S. with the message “Don’t Let Big Tech Cancel Local News,” seeking to build grassroots support for the bill.

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

The bill’s other co-sponsors are Sen. John Kennedy, R-La., and Reps. Ken Buck, R-Colo., and Jerrold Nadler, D-N.Y.

rchannick@chicagotribune.com



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