Roger’s $0.02 - Oh Canada: A Link Too Far?

In a previous column, I wrote about Europe, or rather the EU's penchant for writing legislation to regulate the tech industry. In short, the EU used invasive regulation because it found itself unable to compete in the broader tech space. With the passing of Bill C-18, Canada now finds itself in the same uncomfortable position of trying to legislate wishful thinking into a media landscape wracked by challenges.

Like the US, the Canadian media landscape has seen revenues diminish and readership dwindle. The response has been the inevitable consolidation of the industry. In a further attempt to halt and possibly reverse the trend; the country’s lawmakers have looked abroad to find a framework that could be replicated in Canada. They found it in Australia. Previous attempts to make large internet platforms like Google and Facebook pay for news snippets and links have been tried in Spain and Germany with dubious success. Australia, on the other hand, seems to have found the right buttons to push via their “News Media Bargaining Code”. The circumstances in which the law would kick in are when a service provider (Google and Facebook) makes content available in the following ways: content reproduced on the service or is otherwise placed on the service, a link to the content provided on the service, or an extract of the content is provided on the service.

Both Facebook and Google pushed back. Google resorted to blocking news access to a small percentage of the nation’s users while Facebook removed the ability to see or share news content from Australian users and blocking international news from accessing Australian news content. Ultimately the Australian government introduced amendments to the legislation. Australian lawmakers took into account deals Facebook and Google had already made with local news media before deciding that the law would NOT apply to Facebook and Google if they reached an agreement with news publishers outside of the law's framework.

Anyone who understands how the World Wide Web works understands that hypertext links are the foundation on the system operates. To charge per link would introduce an open ended liability for both services dissuading their use causing. Something that Tim Berners-Lee believed was antithetical and possibly break the world wide web in a submission to the Australian Senate during the debate over legislation that would become the News Media Bargaining Code. The issue was ultimately sidestep by the last minute amendments.

However, Canada’s Bill C-18 the rules go further. Unlike the Australian News Media Bargaining Code Bill C-18 has no clause or amendments that allow Google and Facebook to negotiate with news publishers outside of the law’s framework that would allow them to sidestep the new regulation, as was the case in Australia. Furthermore the CRTC, the Canadian regulatory body that oversees the implementation of the new law would have carte blanche over the scale and scope of what gets regulated and which companies that will fall under its purview.

With Bill C-18’s passing without a compromise, Google and Facebook have decided to follow through on their intent to remove news links to Canadian news on their platforms in Canada and cancel any existing deals they have already worked out with Canadian news publishers. Google and Facebook have decided to make their stand on paying for news links, snippets and titles in Canada for multiple reasons. Firstly, Canada is a small market. The country hit a population of 40 million earlier this year, slightly more than California but with a 40% smaller economy. Secondly, Canada is a test case. With more nations and US states looking into similar legislation the duo find themselves at an inflection point. If they give into Canada’s demands where will it end? Thirdly, news is not a big earner. Facebook and Goole have already stated that news is not a big earner for their business. Google made an estimated $4.7 billion off news publisher’s content in 2019. But the company’s total revenue for that year topped $160.74 billion. Both companies can afford the monetary hit.

Finally, the law seems specifically targeted at Google and Facebook. While one could argue that all online media companies of "prominent market position" are targeted, a majority of the conversations that have happened so far seem to only mention Google and Facebook. If the law's implementation doesn't include other platforms like Twitter, TikTok, Reddit or Bing there would be a huge element of regulatory unfairness. From the point of view of Google and Facebook, it would be bad business to engage in a process that would see them face costly and seemingly endless financial liability, while their competitors would be exempt from the same laws.

Ultimately the issues plaguing the Canadian news industry suffers from the same issue plaguing journalism across the globe. How do you make money? The biggest earner for newspapers pre-internet was the classifieds followed by advertising. The UK’s BBC funds its news and other programming via a TV license fee and sales of its programs to other markets. Others have argued that generalized digital tax on all online company’s earnings in that country would be less complicated and more fair to implement.

Together with its commonwealth sibling Australia, Canada has a high degree of media ownership. Meaning a few big players own a majority of the media outlets; online, newspapers and TV/Radio stations. Together this has has bifurcated media ownership into two groups. Incumbent media largely held by large corporations and smaller budget news outlets, like local independently run news outfits. While both groups strive to be profitable enough to be self-sustaining both are not subject to same economy forces. Larger media outlets can go through layoffs, mergers and consolidations. Small news outlets cannot.

The truth of the matter is that the ultimate losers of this back and forth between Canada and Google/Facebook are small and independent Canadian news outlets that have found a nice using Facebook and Google to drive traffic.