April 30, 2020

The press publishers right will fail - to support the media we should tax information aggregators instead.

To anyone following the debate, it is becoming increasingly clear that the hard-fought new press publishers' right, that the EU adopted last year as part of the copyright reform package, is a paper tiger that is not worth the paper it is printed on. Granting new rights to press publishers was never going to fix the economic problems faced by press publishers.

Instead of continuing to bet on the failed idea that all the publishers need is a right that they can leverage against the information aggregators that dominate the information ecosystem, it is time to shift gears and make information aggregators  pay up for the loss of advertising revenue that their emergence has l brought for professional news media producers. Payments, not in the form of charitable giving or under the guise of supporting innovation in the sector, but based on the realisation that information  aggregators  must be held accountable for negative externalities caused by their dominant role in the online environment.

So how did we get here?

Of the two most controversial elements of last year's Copyright Directive the new press publishers right has always been the ugly duckling. While not really interesting enough to gather as much attention as the infamous Article 13, the idea of granting press publishers a new - made up - right intended to provide them with leverage to get paid by news aggregators has been just as misguided as the ideas underpinning Article 13. Met with near unanimous rejection by academics and continuing a legislative lineage that consisted of two abject failures (in Germany and Spain), this new right has been pushed through against repeated warnings that it would be at the minimum ineffective and at worst dangerous to free access of information.

If we are interested in preserving and nourishing a healthy and diverse media landscape, that is crucial for democratic societies, the intention of the press publishers right (to make platforms pay publishers for the "use" of their content by information aggregators) makes sense. However, the rights-based approach to achieve this objective, that is underpinning the new publishers right and its legislative predecessors has been flawed from the start. As previous attempts in Spain and Germany have shown, granting rights to publishers does not really work as long as the intended targets of these rights are at the same time the main drivers of traffic (and thus online revenue) for the publishers. As long as press publishers cannot afford to lose the traffic that is brought to them by a few dominant information aggregators, any new right is essentially worthless as a bargaining chip.

Over the past few months it has been possible to observe this dynamic play out once more in France. After the French legislator eagerly transposed Article 15 of the DSM directive, Google, the main target of the new legislation, did what everybody could expected them to do: Instead of engaging in licensing negotiations with French press publishers, it offered them a simple choice: give us a license for free, or we will not feature your content in our products anymore. Predictably the majority of press publishers reacted to this cornelian dilemma by granting Google licenses for free.

This is where the similarities with the situation in Germany and Spain end for now. In response to complaints by press publishers, the French competition authority has recently issued a ruling that orders Google to "engage in good faith negotiations" with any press publishers making a request to do so. Given that this ruling does not change the underlying negotiation positions it seems unlikely that the outcome of such a negotiation will be much different from the status quo. For Google it still does not make sense to pay publishers for providing a service that is objectively valuable  to them. And while the ruling of the competition authority may validate the sense of entitlement on the publishers side it does not alter the fact that the new right does not provide them with any meaningful economic leverage over Google or other dominant information aggregators such as Facebook. The systemic change in the advertising market that the emergence of information aggregators has caused is not something that can be negotiated away. And while additional traffic obtained thanks to the aggregators has some benefit for individual publishers, it does not compensate for the systemic shift of advertising from media producers to information aggregators.

Interestingly the ruling of the French competition authority seems to have inspired a more drastic intervention by the Australian Government. At the end of April, the Australian government ordered its competition authority to draw up a mandatory code of conduct to govern the relationship between digital platforms and media businesses. This mandatory code of conduct is expected to require digital platforms to pay media companies for the use of "news content". While the details of the code of conduct are yet unknown it is interesting to see the Australian government come to the same conclusion as the French competition authority (that the dominant position of major information aggregators is harming the producers of news media, and that the former compensate the latter) without first going through the motions of inventing a new right.

There is a refreshing honesty in the Australian approach: Instead of assuming that the complex relationship between media producers and information aggregators can be solved via negotiations between the two sides, the Australian approach simply attests that the business models of the information aggregators are causing harm to the producers of news media, and calls for an intervention to remedy this harm. This position clearly acknowledges that news media producers are more than mere market participants and that a strong, independent and diverse media sector is an essential element of democratic societies.

The business model of online information aggregators has undermined the economic viability of traditional press publishing (mainly by attracting advertising revenue away from the news media publishers) and as a result the diversity and nature of the press is under immense pressure across the globe. While there can be discussion on how far the information aggregators’ business is dependent on content produced by traditional press publishers, the fact that they are aggregating their output as part of their business model cannot be disputed.

Given that a strong independent press is an essential part of democratic societies there is an urgent need to find ways to support news media creators of all sorts (including but not limited to traditional press publishers). The most straightforward way to achieve this is to make information aggregators pay up for the negative externalities they cause: Just as most modern societies tax other products and services with negative externalities to cover their societal costs, we should also tax advertising revenues derived from aggregating media products and use the resulting revenues to support the continued creation of news media and journalistic content.

Protecting and nourishing a healthy and diverse media landscape should not depend on the outcome of "good faith negotiations" that take place on the orders of competition authorities, but must be part of a societal contract aimed at subsidising the news media sector because it is an essential element of our democracies. This is not something that the market will take care of, no matter how much we try to prop up the negotiation position of specific classes of media publishers via newly invented rights.

As a matter of principle we should support news media producers based on the value that they provide for society. Under the current conditions this would entail taxing information aggregators whose business models rely on the availability of information, and directing these resources back to those who are producing it. This approach is long overdue, but there are signs that the current crisis might actually make this happen for real.