BIG TECH'S GAIN
Trade group warns traditional media could lose up to $600M annual revenue
The audience for online news has grown rapidly over the past few years, but it's large technology platforms such as Google and Facebook that have reaped most of the rewards while traditional newsgathering operations have suffered.
That's one of the key arguments raised in a new report released Thursday by News Media Canada, a trade group representing hundreds of print and digital titles of various sizes across the country. It calculates that the market structure for online news and advertising, left unchecked, will deprive traditional news businesses of $500 million to $600 million in revenue each year through 2023.
It is a tale of two industries, and the forces that have pushed many news outlets into a cycle of losses and cuts are causing governments and regulators in Australia, Europe and North America to take a serious look at whether and how to level the playing field.
This week, the U.S. Department of Justice launched a sweeping antitrust lawsuit against Google to stop the tech giant “from unlawfully maintaining monopolies through anticompetitive and exclusionary practices in the search and search advertising markets.” The action, joined by 11 state attorneys general, is also intended “to remedy the competitive harms” of Google's behaviour.
While internet-based advertising revenue in Canada has nearly quadrupled in less than a decade — to $8.6 billion in 2019 — Google and Facebook's share of the advertising pie grew while the share for traditional media such as newspapers shrank, according to News Media Canada's report.
Combined digital advertising revenue for Google and Facebook grew to $7.5 billion by 2019, up from $2.8 billion five years earlier, according to data included in the report. Over the same period, traditional publishers' revenues declined by 43 per cent. Newspaper revenues are expected to be $1.7 billion in 2020, with 60 per cent coming from advertising.
Traditional media companies such as Torstar Corp., owner of the Toronto Star, and Financial Post owner Postmedia Network Canada Corp. — both of which are members of News Media Canada — have responded to market trends and revenue losses over the past few years by cutting staff and other costs, including through buyouts and layoffs.
“Demand for news content from Canadians remains strong. Nonetheless, Canadian publishers have made significant reductions to their news-generating capacity by reducing the size of staff and of newsrooms,” News Media Canada says in the report, titled The Sustainability of Journalism in Canada.
The organization contends that the situation was created not by the publishing industry's failure to act as news consumption shifted online, but as the result of a duopoly established by the tech giants through their dominant positions in online search and social media.
While there are other factors at play, such as the shift of readers away from print products, the report points to Google and Facebook's dominance in the marketplace, including a monopoly over services that match advertisers with available space on web pages and the tech giants' exclusive access to consumer data.
“Publishers have few alternative choices of distribution besides Google and Facebook,” the report says, adding that the “duopoly has an overwhelming audience scale” and a network that is so ubiquitous and interconnected that it is “unsurmountable” to potential challengers.
Google and Facebook's share of the digital advertising market in Canada is estimated to be more than 75 per cent, the report says, giving the tech giants outsized power. “This asymmetry in market power results in unfair terms imposed on news publishers who develop original journalism, engendering a decrease in the quantity and quality of the same and threatening the supply … to the Canadian people,” the report contends.
News Media Canada surveyed responses to these trends around the world and is recommending that the Canadian government adopt the model undertaken by Australia, where the government and competition regulator are imposing a mandatory code of conduct to rein in the market power of the tech behemoths. This is being accomplished through beefed up copyright protection for domestic news organizations and compelled negotiations for use of their content.
The Canadian report says publishers in this country could add $620 million in annual revenue and shore up struggling operations if the government were to follow Australia's lead.
The Canadian government has recently indicated plans to study ways to support the domestic media industry over the longer term and level the playing field with the big tech platforms, but there is no concrete plan in place.
In the meantime, the tech firms have been taking steps to forge commercial agreements with publishers, at least in part to address the growing wave of government and regulatory interventions in jurisdictions including the European Union, Australia and the United States.
For example, Google has earmarked a $1-billion global fund to pay publishers for news content, but struck deals in Canada this month with only a pair of online publishers: Narcity, which targets millennials, and Village Media, a local news operation in Ontario.
John Hinds, chief executive of News Media Canada, said at the time that Canada's per-capita share of Google's global fund would be about $9 million, much less than the pool of money expected to come through compelled arrangements such as the one underway in Australia.
Sarah Ganter, an assistant professor at Simon Fraser University's School of Communication, said there are “several limitations” to one-off programs launched by Facebook and Google as compared to “regulatory frameworks” such as the ones being established and implemented by Australia and France.
“These initiatives that Facebook and Google are implementing right now … will run only for a few years and will then have to be re-established, (plus) they include only some select publishers and they are built to support very specific products that are being launched right now, such as Google Showcase,” she said.
“These initiatives can work apart but not instead of regulatory frameworks if the aim here is to support a diversity of news publishers to be sustainable and continue to exist over a long period of time.”