Dear Ottawa, Google is Not the Enemy

We have seen drastic changes in the media industry over the last two decades. Between 2008 and 2021, more than 450 news outlets closed across Canada and at least one-third of journalism jobs disappeared. 

Digital platform giants—notably Google and Facebook—are very much part of this media ecosystem. But are they a force for good? After all, by reproducing or linking to articles they don’t create and then earning ad revenue from the content (they claimed 80 per cent of online ad revenues, or almost $10 billion, in 2020), these big tech companies seem to deprive news publishers of their rightful due. Should they compensate publishers for the use of their content? 

Many countries have debated this question; few have acted. In 2019, the European Union instituted a so-called “link tax”—essentially a licencing fee that search engines and news aggregator platforms must pay publishers for using their content. In 2021, Australia brought in a law that compels Google and Facebook to negotiate deals with the country’s news publishers. 

Now Canada is weighing in. In April, the federal government tabled legislation that channels Australia’s approach. Bill C-18, the Online News Act, is a sharp-elbowed nudge to get the dominant digital platforms to negotiate mutually-acceptable agreements with Canada’s online newspapers, magazines and TV and radio broadcasters. If they cannot come to terms, the parties will enter a binding arbitration overseen by the Canadian Radio-television and Telecommunications Commission (CRTC), the arms-length regulator. 

Canadian Heritage Minister Pablo Rodriguez has stressed that “an appropriate portion” of the compensation from Google and Facebook will go to the production of local, regional and national news content. 

Charging a fee for links 

If enacted, would Bill C-18 “contribute to the sustainability of the news market”, as the government promises? 

It’s true that news businesses have struggled to make money ever since the Internet upended their gravy train—classified ads and print subscriptions. But it’s also true, as Google maintains, that search engines and aggregators have expanded the online news market. They direct substantial traffic to the publishers’ websites, particularly traffic from casual readers that otherwise would not take place. 

Indeed, there is no evidence that news outlets are worse off because of Google, Facebook and other aggregators. If anything, evidence (and lots of it) shows that, overall, news outlets would be in worse shape without these digital platforms. 

That’s what we found in our study of the “link tax” imposed by Spain (before the EU-wide directive was instituted in 2019). In 2014, Spain began forcing aggregators such as Google News to pay a link fee to original publishers. Google responded by shutting down its Spanish edition.

We found that after the shutdown, Spanish news outlets experienced a reduction in the number of daily visits of between eight and 14 per cent. To add insult to injury, advertisers stopped placing ads on their sites, causing a collapse in ad revenues. Particularly hard hit were smaller news publishers—lower-ranked sites with a larger share of casual readers. 

During the same period, Germany instituted a link fee as well. In this case, Google News required German publishers to waive the linking fee. A study from the University of Munich found that publishers deciding to opt out of Google indexing faced disastrous consequences: daily visits to their sites significantly dropped and traffic was diverted to competing sites that opted in to indexing. 

Debating a false premise

These and other studies show news publishers benefit from the Googles of the world. So would Bill C-18, as it currently stands, really change anything for the better? 

The current debate is based on a false premise, that news outlets are not already being compensated, instead of focusing on the rightful split of joint revenues between the platform and the content creator. For example, in cases where ad revenues at a news outlet are higher due to platform traffic, should the outlet compensate Google and Facebook accordingly? If the platforms pay for content, should they have a legal right to complain if news quality and coverage drops?

If Bill C-18 passes, we can expect big publishers to receive most of the funds, as experience in Europe and Australia shows. Smaller media outlets with low brand awareness will suffer unless they band together and bargain collectively with the digital giants. 

And we can expect Google, Facebook and their ilk to adjust their market behaviour. It would not be surprising for them to provide customized recommendations that would ultimately generate a substantial flow of traffic for some news outlets but not others. 

More darkly, what would stop them from tweaking their algorithms to benefit news publishers offering the most favourable arrangements? Recent evidence shows Google Australia started recommending less “expensive” content after the law was passed in Australia. So much for the naive concept of neutrality still harboured by some regulators. 

Look for alternatives

Alternative policy responses must be considered. In the past, when Google faced legal trouble of the same nature that is inspiring Bill C-18, France and Belgium, for example, set up lump sum funds shared by news publishers based on a predetermined formula. This approach ensures a fair distribution of funds across content creators and doesn’t distort market behaviour of the platforms involved. 

Bill C-18 is just one of three pieces of legislation now being considered by the House of Commons. There is also a proposed bill that addresses hate speech, terrorist content, child pornography and other online abuses and another that brings online streaming services under the Broadcasting Act. It’s clear the government is on the right side of public opinion. Polling shows a majority of Canadians support greater government regulation on the Internet. 

Unfortunately, regulating the Internet can be fiendishly challenging, and there always seem to be unintended consequences that undermine the best of intentions. It’s good to be on the right side of public opinion. It’s better to be on the right side of policy.

Ricard Gil is an associate professor and Distinguished Faculty Fellow of Business Economics at Smith School of Business. A version of this article first appeared in The Conversation.