It’s time to stop the saber-rattling between local media and giant tech platforms regarding who owes who what. It’s time to form an independent, nonpartisan Commission to do for digital media what the Carnegie Commission did for television.
The latest salvo: Australia’s government will force Facebook and Google to share advertising revenue with local media firms.
The Australian government has asked the Australian Competition and Consumer Commission to frame mandatory code of conduct between media outlets and digital platforms.
First, let’s acknowledge that Australia’s entire digital advertising market is a rounding error in Google’s overall income. Australia’s digital advertising market is almost $9 billion, and Google/Facebook get a third of that. The US digital advertising market is more than $100 billion, and Google/Facebook/Amazon get two thirds of that, or 70 percent.
But this news again raises the question: Should the platforms - and I’ll go with the GAFA acronym to include Google, Apple, Facebook, Amazon - be required to give a percentage of digital revenue to local news providers? After more than 20 years working in digital media - in local news operations and closely with the major platforms - I can argue both opinions. Here’s the ping-pong:
No: Capitalism almost never favors forced tithing to incumbents from disruptors. The usual argument goes that Henry Ford owed no special tax for buggy whip makers or horse farms. But then, his cars weren’t using horses as raw materials. A better analogy for the “you used our raw materials” would be whether radio and TV news stations that rewrite or flatly read newspaper stories should pay the newspapers. (In the news industry, we call this time-worn practice “Rip and Read.”) But that’s been going on for a hundred years, and so far, iHeartMedia hasn’t sent any checks to newspapers.
Yes: Google and Facebook use local news - and ALL content - as raw materials. Google monetizes the search results page and in most cases the local news sites you land on, because local news site ad platforms come from Google. Google’s programmatic ads (nationally purchased digital ads) run on these news sites, and Google gets a cut. The local news sites get a far bigger piece from those ads, but Google still gets paid - and wouldn’t have been paid on their own search results page if those stories weren’t there to turn into little blue links.
No: A cudgel - especially one wielded by the government for an industry it (from all hearings I’ve watched) clearly doesn’t understand - smashes everyone equally. GAFA now would have an economic incentive NOT to work directly with news providers, which has proven very successful in the U.S. The Local Media Consortium, of which I was the founding Executive Director and CEO for seven years, did exactly that with the platforms bringing - over that time - nearly $1 billion U.S. dollars to local media.
A sub note on this No: Asking the government to force GAFA to behave this way weakens the posture of journalism in significant ways. Asking to be cast as a victim is not a good look.
Yes: Each member of GAFA has been built on our backs, and none pay the kind of taxes it should. Yes, I favor sales taxes on Amazon in every state its products are ordered and shipped, and those funds should be earmarked to support local and state infrastructure. Yes, Google should pay state tax on digital revenues earned in the states of its users. (What complicates this is not parsing the data of where a user came from - it’s the labyrinths of state tax laws.) Simply, anything done digitally did not happen on the Internet, it happened in a home, and that home is in a state. The real discussion is how states will distribute to counties, cities and communities.
And more. There are more pro/con arguments in this discussion as arguments over the use of the Oxford comma. So here is what I propose: a compromise.
Compromise: We need to take a very thoughtful and measured pause in this shoulda/woulda/coulda hissy fit - on both sides - based on something all local news organizations are doing right now because of COVID-19:
They are creating strategies and budgets based on today’s reality and not last year’s results.
Realizing this is Step One of the Compromise.
The pandemic is unprecedented and all former bets - and business practices - are off. News companies have, in a matter of days, changed publishing cycles, air time for news, scrapped time-worn revenue practices such as events and pledge drives or, more drastically, shut down hundreds of alternative weekly papers because there is zero advertising for events during a shelter-in-place age. These companies are basing strategies on today’s reality - and what will come afterward - and not on how they were doing last April, because last year was another planet compared to this.
(And please don’t call what they’re doing “transformation.” The support beams will in no way change: media companies create content, which engages audience, which is monetized. The Media Transformation conferences and seminars I’ve attended only paint new colors on those beams. They don’t substitute those three beams with “Media companies collect meteors, which create mutants, which are delicious.”)
So, the pandemic is causing unprecedented and innovative thinking. The game-changer that hit local media is 25 years old. It’s called digital, and our response has not been to base budgets and strategies on today and tomorrow. They all smack of YOY madness. Media companies need to treat their entire business models with the same urgency and flexibility they are employing in drawing up their Q2 and Q3 operating plans right now.
Step Two of the Compromise is creating a commission on the scale of the Carnegie Commission on Educational Television. I’m not a marketer, nor its naming-rights funder, so I’ll just call it The Commission.
Established in 1965 by the Carnegie Corporation of New York, it was created to research the role that noncommercial television played in the U.S. Its goals were to distinguish the role of public television. That is, anything that was instructional, educational, informed public affairs and wasn’t supported by advertising. It’s why public radio and public television exist.
For local media to continue to exist, The Commission would study and create recommendations for a fair and sustainable digital news ecosystem that looks at:
What is the total value of local news content to GAFA? This data is available but has not been reviewed, in total, by an independent, nonpartisan commission.
This addresses the size of the interdependency.
Humbling sub note: Local news is percent of a percent of all content utilized by GAFA - but even those small numbers are in the billions.
What percent of GAFA’s digital revenue comes from that interdependency?
What percent of that percent should GAFA distribute back to the creators of that content?
What value do local communities, governments and community foundations place on being informed? What is a recommended model for funding local journalism through those mechanisms?
What is the recommended business model for this intake and distribution? (A large, nonpartisan nonprofit - think The Nature Conservancy - is one I’d explore.)
And all the fun stuff: charter, governance, member qualifications, appropriation process, middleware.
In this Compromise approach, The Commission would be made up of members not directly working for local media or the major platforms. But they can’t come to it with no knowledge of the dynamics - see earlier comment on digital hearings on Capitol Hill - and should have the gravitas of people who are trusted and get shit done.
The Carnegie Commission’s work culminated in the Public Broadcasting Act of 1967. I think The Commission can work faster than that but would not rush. The politics, business dynamics and economics make sabermetrics in baseball look as complicated as counting your toes.
But it’s necessary. We have to be thoughtful - at long last - about this ecosystem and how it will be sustained. Google’s business model is dependent on quality content being behind those blue links. (And, to be fair, discussions about this topic are not new inside Google.) Facebook’s business model is dependent on social shares of news. There is no Apple News without it. And there is no Amazon without local merchants and resellers.
Let’s have this conversation. Let’s form The Commission. Let’s stop trying to do this with one foot planted in the past. Let’s build today’s business model today for tomorrow.
Let’s go.