Canada should follow Australia's lead

Every year I receive a federal cheque for the use of my published books by Canadian libraries. The amount, after payment of hefty income taxes, is no more than several months' supply of Tim Hortons coffee. But I do appreciate recognition of the principle that I should be compensated for my copyright.

As a “content-provider,” I think of this cheque every time I read about the tussle now taking place between Australia and the massive technology companies, Google and Facebook. Australia is bringing in legislation requiring digital technology companies to compensate news outlets for the use of their content. The legislation is in response to the shift of advertising revenue from broadcasters and publishers to internet platforms that so far have not had to pay the costs of creating content. In response, Facebook has clumsily cut off news information to Australians, raising significant concerns about the big tech firms' economic power, not just in Australia but around the world.

Before I jump on the bandwagon accusing Facebook and Google of predatory practices, it must be remembered that the media creating the content can protect its copyright by putting up walls to control access. Broadcasting programs and newspapers can be made available only to those buying a subscription. Although cutting off access in this way does compensate creators for their investments, it also both limits the availability of valuable information and reduces media advertising revenues, since fewer readers means fewer ad dollars. Without ad revenues, some new outlets might not survive, leading to industry consolidation and, eventually, less content.

A critical issue is how to square two competing goals: providing monetary incentives for content creation while ensuring broad access to that content. This problem was addressed 60 years ago by the late Kenneth Arrow, 1972 Nobelist in economics, in a seminal paper on the economics of invention that still has relevance today.

Information producers, from pharma companies to book publishers, make returns on their investments through patent or copyright protection. This puts them in a “monopoly” position: able to charge a royalty to those wanting to use their unique information and, as monopolists do, potentially limiting use of their product. Like a monopoly, the provider can charge prices above its production costs, restricting the use of information by the public.

Two benefits have to be balanced. On the one hand, once created, the information in question could in principle be used by anyone at little, if any cost. As Jefferson wrote: “He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me.” Universal exploitation of a good that everyone could consume at once would obviously be a good thing. On the other hand, if there are no patents or copyrights, creators have less incentive to generate or discover the information in the first place. This could lead to a worse outcome.

So far, the internet has tilted the balance toward widespread distribution of information, good and bad. While content-providers invest in processes to ensure quality (peer-reviewed refereed academic journals being the strictest), the role of the internet has been to promote communication, not supervise quality.

What do we do?

Content providers should be compensated for the information they generate while platforms continue their useful role in widespread dissemination. From this perspective, the Australians' attempt to implement mandatory bargaining to protect copyright is in the right direction. Once legislation is in place, the internet platforms and content-creators can negotiate terms around the use of content.

For example, if Google and Facebook want to maximize use of their platforms for advertising revenues, they could pay content-providers to make information openly accessible to all their users rather than putting up subscription walls.

It might cost the technology companies more, but it makes information widely available and also maximizes their advertising revenues.

None of this is simple, though. One issue is determining who is a content-provider. Is it every author, organization, publication or broadcaster? For now, the Australian legislation is mainly concerned with the sustainability and competitiveness of news media. Yet it could easily be broadened as other entities lobby for inclusion.

Although Google and Facebook currently have dominant market positions they are not true monopolists. Should other companies, like Twitter, LinkedIn and Microsoft, with its Bing search engine, also be required to negotiate contracts?

Perhaps there is an alternative to mandatory bargaining.

As under Canada's program to compensate authors for books used in public libraries, a government could impose a tax on digital advertising, with the revenues transferred to content-creators according to some formula. This would give a government the power to disqualify some content-creators for essentially political reasons, however, which would be deeply concerning for free speech and democracy.

On balance, Australia seems to be choosing the best approach to protecting the copyright of content-providers. Some voluntary deals are already being made in Australia and France. But copyright needs to be enforced. Heritage Minister Steven Guilbeault has argued we should follow Australia's approach. He is right.

WITHOUT AD REVENUES, SOME NEW OUTLETS MIGHT NOT SURVIVE.