What Google and Meta owe publishers … and democracy
Google and Facebook have become vital sources of information. But our study finds that what they pay publishers is far less than the revenues created by the value, to both sides, that comes from disseminating quality journalism.
Around Africa news publishers are desperate for cash. They’ve seen what little advertising revenue they once had migrate to social media. They serve audiences that can’t or won’t pay what it costs to produce quality news. Journalists doing important work are fighting for survival in a world crowded with content. Foundations and international aid organisations have stepped into the breach and fund much of the nonprofit news across the continent.
Quality information and journalism are vital for democracy and accountability. Everyone has a responsibility to make sure it not only survives, but thrives.
That’s why in many countries, governments are taking a closer look at the role of Google and Facebook to see whether they are paying their fair share to news publishers for the news disseminated on social media.
South Africa’s Competition Commission has opened a market inquiry into media and digital platforms and the terms of reference include the adtech stack which relates to how news-related advertising is sold online. South Africa is slowly following in the steps of Australia which in 2021 passed the Australian News Media Bargaining Code that successfully pushed Google and Facebook to make payments of about $140-million a year to news publishers.
We’re hoping our new study will be a useful analysis as the government of South Africa considers new regulation. We found that in the US, Google and Meta owe US news publishers around $11-14-billion a year – much, much more than the sums now being paid out.
This is why competition authorities are getting involved in so many countries. Google and Meta are so big that they set the terms of the deals. Publishers are too small to negotiate with the tech giants. Nor can they walk away because Google and Meta are the only game in town.
Google and Meta know this so they pay far less than what we think is fair. For example, Spotify gives a much higher percentage of revenues to musicians than the percentage Google and Meta give to publishers.
Google and Facebook have become vital sources of information and they’ve made our lives more convenient and connected, too. But our new study finds that what they’ve paid publishers is far less than the revenues created by the value, to both sides, that comes from disseminating quality journalism.
Google and Meta say that audiences don’t want a lot of news and that publishers should be grateful for the traffic that Google and Meta send their way. If publishers can’t sell subscriptions or memberships then it’s their fault.
We look at it somewhat differently. Since the 1950s, economists have understood that value is created when two sides come together in a “complementary transaction” where both parties need each other. The original work on this idea was done by Nobel laureate John Nash and he used game theory to explain the idea of the value created by the collaboration.
In our new study of what Google and Meta owe publishers, we first estimate the size of the “additional value” jointly created by tech platforms and news publishers working together, and then calculate what a fair division of this value would be across the two complementary services, absent market power.
We argue that economic theory has found equitable divisions of value (ie, a 50-50 split in a two-party negotiation) to be one of the likely outcomes of models based on both equilibrium notions and fairness norms. It’s not just theory – in reality, many licensing agreements have included a 50/50 split.
Unfortunately, publishers in many countries are so desperate for cash that they are making deals with Google and taking less than what a fair payment would be. It’s not a fair negotiation which is why regulation is needed – to protect the less powerful party in the negotiation.
South Africa could regulate in a way similar to Australia, but the tech giants are pushing hard everywhere to make sure it won’t happen. In Brazil, attempts to introduce similar legislation were scuppered in May 2023, but are being revived. Indonesia, New Zealand and Switzerland have all considered similar laws.
A group of organisations’ representatives met in Johannesburg in July 2023 at GIBS Business School to discuss what the laws should look like. The result was a call, signed by more than 50 organisations, calling for future agreements to be transparent, include smaller publishers, and that funds will be used to support news gathering and publication. DM
Anya Schiffrin is director of the Technology and Media programme at Columbia University’s School of International and Public Affairs.
Paying for News: What Google and Meta Owe US Publishers was written by Patrick Holder (Brattle Group), Haaris Mateen (PHD Columbia University, economics), Anya Schiffrin and Haris Tabakovic (Bratte Group).