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Despite widespread acceptance that newspapers are a crucial element of democratic societies, they’re under severe threat as revenues flow to internet platforms. Global Insight reports on legislative efforts to save the ‘Fourth Estate’.

How many people hurriedly skimming a few stories before rushing to work pause to wonder how so much reporting can be produced and distributed for the price of a cup of coffee?

The answer has long lain in advertising. The New York Sun, one of the most successful 19th century American newspapers known as the ‘penny press’, had printed at the top of every edition: ‘The object of this paper is to lay before the public, at a price within the means of every one, all the news of the day, and at the same time offer an advantageous medium for advertisements’.

Benjamin Day, who founded the New York Sun in 1833, came up with the idea of broadening newspaper content to include human interest, gossip and local stories. With wider appeal, and costing just a penny, customers eventually accepted the idea of buying a newspaper every day, even during periods of economic depression. This combination of extended readership and low cover price, made possible by funding from advertising, created the model for today’s newspapers and enhanced the role of a free press in keeping the public informed.

The importance of the press

One of the earliest specific references in a founding document to the importance of a free press is contained in the 1791 First Amendment to the US Constitution, where it says that ‘Congress shall make no law […] abridging the freedom of speech, or of the press’. The significance of this emphasis has been affirmed by later interpreters of the Constitution. In a 1978 US Supreme Court case, Houchins v KQED, Justice Potter Stewart stated: ‘That the First Amendment speaks separately of freedom of speech and freedom of the press is no constitutional accident, but an acknowledgment of the critical role played by the press in American society. The Constitution requires sensitivity to that role, and to the special needs of the press in performing it effectively’.

One of the ‘special needs of the press’ is to be financially viable. Yet, despite the acceptance of newspapers as a crucial element in a democracy, they are in major decline. Increasingly, advertising revenue generated by news is not going to journalism, but to two internet titans: Google and Meta. This diversion of revenue is contributing to the creation of ‘news deserts’ across the US. According to a study by the University of North Carolina’s Hussman School of Journalism and Media, nearly two-thirds of the 3,243 US counties no longer have a local daily newspaper.

If the survival of a diverse press is under threat, then so is a core principle of liberal democracy, and not just in the US. When Australia looked to address this problem, the relevant regulatory body stated that ‘quality news content is required in a healthy democracy. It is needed so that citizens are informed and engage in civic debate’.

Newspaper incomes have been slashed drastically by digital platforms publishing news content produced by others and taking the attendant advertising revenue without compensating the original news producers. The Pew Research Center identified a significant long-term reduction in advertising revenue for American newspapers from $49.4bn in 2005 to $8.8bn by 2020, a loss of more than 80 per cent. And the problem is not limited to the US; PricewaterhouseCoopers’ Media Outlook Report 2020–2024 shows that the trend is likely to increase internationally. It predicts that global newspaper advertising, both print and online, will decrease from $49.2bn in 2019 to $36bn in 2024, a drop of more than a quarter over five years.

Aussies out in front

Proposed solutions to this growing international problem have varied from country to country. Australia quickly emerged as an effective trailblazer with the introduction of its News Media Bargaining Code (NMBC) in 2021. The NMBC resulted from an inquiry by the Australian Competition and Consumer Commission (ACCC), which established that ‘Facebook and Google were the digital platforms currently benefitting from a significant imbalance in bargaining power in their commercial negotiations with Australian news media businesses’.

The resulting Code had, at its heart, a very clear aim to rectify a glaring problem. ‘The platforms did not use any of the advertising revenue that they received to create quality news content’, explains Angela Flannery, Vice-Chair of the IBA Communications Law Committee and a partner at Holding Redlich in Sydney. ‘So, that meant that there was less of such content – it was this specific market failure the government wanted to resolve. The perceived negative impact on the creation of quality news content was the only reason why the government intervened here.’

The NMBC’s success is partly due to this clarity of purpose. It was drafted to encourage voluntary action by leaving the negotiation of deals in the hands of the platforms and the news providers, initially free of government intervention. But the NMBC also recognised that the digital platforms were unlikely to rectify the problem without a credible threat of enforcement hanging over their heads. So, platforms were pressured to make deals with news providers, knowing that if they did not, they may be ‘designated’, which under the legislation could lead to compulsory arbitration.

Another key aspect of the NMBC was aimed at transferring bargaining power to smaller news businesses, and so it authorised news providers to band together to negotiate deals with the digital platforms. This provision, seen by some as a possible violation of antitrust rules, led to protests from free marketeers. Vociferous objections were made against a similar provision in the draft US Journalism Competition and Preservation Act (JCPA), which was revived in the US Senate in late March, having originally been proposed in late 2022. The JCPA would allow collective bargaining like that permitted in Australia. Some argue that this amounts to creating cartels.

But Hal Singer, Managing Director of economic research company Econ One and an antitrust specialist, told the US Senate Committee examining the proposed US legislation that accusations of creating news cartels are a fundamental misrepresentation. ‘The newspapers would not be getting coordination rights in their dealings with consumers […] if they got together and tried to set prices for end users they would go to jail’, said Singer. ‘The coordination rights that are being delivered here are narrowly tailored to pertain only to news [publishers’] dealings with the dominant platforms […] so the notion of a cartel being created is fanciful.’

This argument had also been strenuously advanced in Australia when the NMBC was being developed, but as Flannery explains, the antitrust legislation was framed to correct a clear market failure. ‘This was that, over a fairly short period of time, the advertising revenues of traditional media companies were reducing as advertising spend was transferred to online platforms – largely Google and Facebook’, she says. ‘Online platforms did not, and still do not, produce news content. This resulted in declining quality news production for Australian audiences.’

Big Tech fights back

The response of Big Tech to this kind of legislation has not been surprising. During the drafting of the NMBC in Australia, both Google and Meta threatened to drop news coverage completely from their platforms, with the latter blocking the sharing of news on its Australian site. The resulting outcry from the Australian public, coupled with some last-minute amendments to the legislation, caused this strategy to be reversed in less than a week. Google and Meta have continued to use similar tactics in other countries whenever similar regulation is threatened or impending.

In November 2022, Taylor Owen, Associate Professor and Director of the Center for Media Technology and Democracy at McGill University, attacked Meta’s recent warnings during parliamentary hearings on Canada’s proposed legislation to deal with the issue, known as the Online News Act. Casting doubt on the sincerity of Big Tech’s proclaimed support for an independent and diverse media, Owen told the country’s House of Commons’ Standing Committee on Canadian Heritage that ‘Facebook’s threat to turn off access to reliable information is, to me, revealing about their place in our democratic society’.

Meta, in making its own submission to the Canadian Standing Committee, reiterated the argument that news publishers benefited from the free publicity provided by digital platforms. Kevin Chan, Meta’s Global Policy Campaign Strategies Director, said that ‘the Online News Act would force Meta to pay news organisations for content that publishers voluntarily place on Facebook. In blunt terms, we would be forced to pay publishers for giving them free marketing on Facebook’. However, this publicity is not worth nearly as much as the profits Meta and Google take from digital advertisements viewed by consumers looking at news created by others.

Big Tech companies also say in their defence that they have voluntarily channeled millions of dollars into creating programmes to support journalism. This is true, although the aim of the support is open to question. For example, the Google Transparency Project, a watchdog group set up in 2016 – now known as the Tech Transparency Project, with a mission to ‘hold large technology companies accountable’ – looked at 16 different Google programmes and related organisations over more than a decade. The resulting report concluded that there was a clear correlation between the amount of expenditure by Google on media support to geographical areas where increased government regulation was being considered. As the report explained: ‘Google’s media spending has largely tracked the legal and regulatory threats faced by the company’.

One small local publication in Saskatchewan, Canada, the Sask Dispatch, having initially accepted Google funding to employ a desperately needed part-time reporter, reversed their decision, citing the findings of the 2019 Tech Transparency Report. In an article published in 2023 entitled ‘The dangers of Big Tech funding’ the Dispatch’s sibling publication Briarpatch concluded that ‘tech platforms aren’t offering these programs because they’re generous and kind corporate global citizens or because they believe in the importance of the Fourth Estate. They caused the problem, and to avoid accountability, they’re branding themselves as part of the solution’.

Meta and Google did not respond to Global Insight’s request for comment

Regardless of purpose, such financial support from Big Tech is not necessarily durable even if accepted. Meta’s recently declining revenues have led them to pull funding from some news projects, demonstrating the precarious nature of this support. Perhaps a more important question is whether it is a good policy for some businesses to be reliant on this, supposedly altruistic, approach by BigTech platforms if they want to survive as independent publishers. 

Europe and the copyright route

Meanwhile European countries have also been trying to find a solution to this problem by using copyright law, via the EU Copyright Directive 2019, to create an ancillary intellectual property right known as the ‘press publishers’ right’. Daniela De Pasquale, Chair of the User Generated Content Subcommittee of the IBA Technology Law Committee and a partner at Ughi e Nunziante in Milan, considers this to be a much-needed initiative. ‘The introduction of a newspaper publishers’ right should be welcomed’, she says. ‘Online exploitation of journalistic publications has become [a significant part of] the business model of publishers, who can no longer sustain themselves with traditional distribution, to the detriment of information plurality. Therefore, a better redistribution of revenues from the exploitation of journalistic publications assumes a fundamental role in the plurality and fairness of information.’

Perhaps the biggest success story in Europe comes from France where, after a complaint by a consortium of publishers, the country’s competition authority mandated that Google must negotiate with the group. This led to an agreement in February 2021, whereby Google will pay $76m over three years to 121 publishers. Such a sum may sound impressive, but it’s a relatively insignificant amount compared with the payments made in Australia. The former chair of Australia’s regulator the ACCC, Rod Sims, estimates that the country’s Code injected over AUD200m annually into journalism. And the deals done in its wake have, according to Sims, benefited publishers employing 90 per cent of all Australian journalists, including smaller businesses. One example is the agreement that Country Press Australia struck with Google on behalf of more than 160 smaller regional publications.

But will the introduction in Europe of a press publishers’ right, which bolsters the position of news providers, act as a sufficient incentive for Big Tech to do deals such as those in Australia? Certainly, it has been helpful so far. Since the ruling in the initial French case in 2021, more voluntary agreements have been forthcoming, such as a five-year agreement between Google and Agence France-Presse for an undisclosed sum. Andrea Gabrielli, an associate at Ughi e Nunziata, describes the French case as forming an important precedent for European authorities to observe. ‘It certainly demonstrates that the press publishers’ right is for all intents and purposes enforceable and that there is an effective and widespread obligation for platforms to negotiate’, he says.

But in Europe the onus for enforcing the right, along with the legal risk and cost, remains squarely with the publisher, which means that large digital platforms retain more discretion over when and whether to act. It’s a more passive approach than in Australia, where targeting the problem directly with the threat of ‘designation’ and the imposition of a deal via arbitration, has facilitated the speedy reversal of a situation where local news businesses were disappearing at an alarming rate.

No perfect solutions

Views on how to tackle the underlying problem are diverse even among experts in the field. Sue Gardner, formerly McConnell Professor of Practice at McGill University’s Max Bell School of Public Policy, told the Canadian Standing Committee categorically that ‘Google and Facebook out-innovated the business side of the news industry. That is not a fairness issue. It’s not a moral issue. It doesn’t make them villains’.

On the other hand, Ben Scott, Executive Director of Reset, a non-governmental organisation supporting sustainable digital innovation, believes there is a moral issue. ‘This legislation must not be about publishers; it must be about the public’, he says. ‘Too much of this debate plays out as if the government were simply refereeing a contest between Big Tech and big publishers. That’s wrong […] these aren’t just failures among industries; this has hastened the destruction of public service journalism, in ways that really undermine democratic integrity.’

One area of agreement between both supporters and opponents of legislation is that something will have to be done to reverse the current trend if the media is to continue to effectively fulfil its democratic role as the disseminator of reliable information to the public. But arguments as to what that might be, particularly in Big Tech’s home country, the US, seem to depend to some extent on which of the earlier views one holds. Hal Singer of Econ One believes it makes economic and practical sense to place responsibility on the platforms. Speaking to the Canadian Standing Committee in early November, he said: ‘To me, if you find the culprit, if you find the person who’s sucking out the value and taking it off the backs of the newspapers, it just makes sense that they ought to write a cheque back for the value they’re appropriating. Why involve taxpayers? When it is clearly an appropriation of value from one big buyer away from a small supplier, it doesn’t make sense to bring taxpayers into that equation’.

Others suggest that the answer lies with the news providers themselves, who must adapt to the changing environment. Several newspapers have adopted subscription models or used online ‘paywalls’ to permit access to specific content. The New York Times is a success story for the subscription model, garnering over 8.8 million subscriptions in 2021 with eight million of those being subscribers to the online edition. However, this is not a viable option for most publications, which lack the vast resources dedicated by The New York Times to achieving this success, and which don’t have the same large readership to draw upon. The situation is not helped by the fact that a significant proportion of the public has become used to accessing online news content for free and is thus reluctant to pay.

No system to address the current problem between Big Tech and news producers is likely to be perfect and will doubtless need adjusting over time. As Ben Scott of Reset says of the draft Canadian law, ‘this bill is not a perfect solution. It’s not a permanent solution, but it matters. This is real money for real journalism that restores fairness and transparency in this market’.

And the Australian example suggests that many of the objections raised in the US could potentially be dealt with by adopting a different model or mechanism. It certainly seems to have worked as an effective spur to action, and a potential international precedent, which is perhaps also why Big Tech is fighting back so hard elsewhere. ‘There can be no dispute that, while no digital platforms have been designated under the Code – meaning in effect that the Code, while enacted in legislation, has not been implemented – the threat of designation resulted in both Google and Meta agreeing to make payments to certain Australian media businesses for their news content’, says Flannery.

In Australia a solution was found, at least for the moment. How long will it take for the same to happen in other countries – and what if it doesn’t? How many more news outlets will go under? And what will be the ramifications for a democratic society to which a free and flourishing press is fundamental? As the Anglo-Irish politician and philosopher Edmund Burke reportedly reminded the British parliament in the 18th century, ‘there were three Estates […] but in the Reporters Gallery yonder, there sat a fourth Estate more important far than they all’.

Anne McMillan is a freelance journalist. She can be contacted at basestation2011@gmail.com