Media v Big Tech
The prompt for this post is the disagreement between FB & Google and Australian news publishers, but I have wanted to write about this topic for a while now. There are two things I want to look at. First, the proposed law itself. Second, the role of traditional news publishers in modern society.
The Mandatory Bargaining Code
Australia is proposing forced arbitration between media companies and digital platforms. What this law amounts to is a subsidy funded by big tech, as Benedict Evans explains, a subsidy whose purpose is to ensure journalism is properly funded, as per the Guardian. Proponents of this legislation make two arguments to defend it, both of which seem arbitrary rather than stemming from some logical framework:
“The media companies have argued that Google makes money from news and analysis provided by them”
Besides the fact that this argument does not rest on principle (what principle would that be? That we need regulation to ensure companies are compensated for the positive externalities they create?), it is factually wrong.
Google makes little money directly from the news industry. This direct revenue comes from the commission Google takes when news publishers themselves use its technology to show ads on their websites, or from the money news publishers themselves pay to be advertised on Google (incidentally, and despite constant criticism of the supposedly cavalier attitude big tech adopts towards privacy, news companies use Google (and its personalised targetting technology) to show ads; moreover, most news publishers do not give users granular control over how their data is used, contrary to the spirit of GDPR). Both of these are standard commercial transactions: a client pays a provider for a service; it is absurd to suggest that because the client paid for the service, and hence the service provider benefited by receiving that money, the service provider therefore owes money back to the client who paid them in the first place!
So, big tech does not really make money directly off publishers, other than the money publishers themselves pay. Another version of the argument suggests that by featuring news on their services, FB and Google become more attractive to users. It is for this benefit that big tech ought to compensate publishers.
Though this assertion is hard to refute conclusively, there are several indications it is wrong. First, news queries account for only 1% of total queries in Australia (plus, these queries are monetised at a very low or zero rate); similarly, on FB, news account for only 4% of what people see on their feeds. It is unlikely that if these two companies did not feature news at all they’d see a significant drop in user engagement.
Second, there is past evidence that removing news does not really harm Google. A good case study is when Google blocked news content in Spain. Here’s a chart from Google trends, showing the search volume for commercial queries (the spanish words for “buy”, “ticket” and “hotel”) (commercial queries are those that indicate user intent to pay money for something; it’s on these kinds of queries that Google makes money):
Can you tell when the news ban was instituted? I can’t.
Third, if the companies really were deriving inordinate benefit from featuring news, they wouldn’t choose to go nuclear. Some think that this is either a bluff, to force publishers to back down, or a willingness to accept losses in small markets like Spain and Australia, to deter larger markets from passing similar laws. The argument on bluffing does not hold up — this is not how bluffs work: a bluff is when you make a threat hoping you will not have to carry it out — e.g. when you go all in on poker, hoping your opponent will fold. If it is your opponent who goes all in, calling them (when you have a weak hand) is not a bluff, it’s stupidity.
The deterrence argument is more reasonable, and hard to refute — I suppose we will see how big tech responds if similar legislation comes to pass in the US.
(The fact that big tech often capitulates, or proactively offers payments to traditional media companies (through, e.g., the Google News Initiative) does not invalidate this argument; such responses are not because of the potential financial cost of severing ties with news publishers, but because of reputational risk.)
On a related note, I find it astounding that legislators and journalists alike are outraged when Google and FB threaten to stop featuring news on their platforms. A common critique of Ayn Rand is that her characters are caricatures, so it is hilarious to see that the critics of big tech here are behaving exactly like these caricatures: first they try to tax big tech, then are outraged when big tech stops providing a service in response, and finally try to force big tech to continue providing the service. Pause for a minute to think how absurd this is: politicians and the media not only feel they are entitled to the service of a private institution, to the extent that the private institution has to offer the service despite its own wishes, but they demand to be paid for the privilege of being offered the service!
Fourth, as both companies have argued, even if it were true that big tech benefits from news, news outlets benefit even more by being featured on tech platforms; after all, this is free advertising for them. If the logic of the law is that we need regulation to ensure companies are compensated for the positive externalities they create elsewhere in the economy, then news companies themselves should be made to compensate Google and FB, not the other way around.
“the digital behemoths took the lion’s share of advertising revenue away from traditional media”: I don’t see why companies that disrupt incumbents are obliged to sustain the latter. Yes, Google and FB do capture the majority of online ads, but that’s because they offer a better product — certainly better for advertisers, and arguably also for users. Should Ford have been levied a tax to sustain carriage makers? Should Apple compensate Nokia or BlackBerry?
Linked to this argument is the proposition that there is a bargaining power imbalance between big tech and news publishers, which prevents the latter from claiming their due. Two things here: a) whence this imbalance? If the imbalance is due to the fact that Google and FB do not actually benefit from featuring news as much as news sites benefit from appearing on digital platforms, then the first argument outlined above is completely invalidated. b) If the imbalance is a result of size and concentration, so that no single publisher can negotiate on their own (which is at least a logically consistent proposition), then why wouldn’t publishers band together and negotiate as one? If the issue is one of coordination, then rather than forcing arbitration, the government could simply mandate joint negotiations. (The argument that even when banded together, publishers are too small compared to big tech doesn’t hold up: what it suggests is that even collectively, the benefit news publishers deliver to Google is less important to Google than the benefit Google delivers to the news industry — i.e. point (a) applies.)
The role of media
As mentioned earlier, proponents of the law assert that such regulation is necessary to ensure journalism is properly funded. But this begs a few questions: first, why is journalism that essential? What are the functions of journalism that are vital and therefore need to be funded? And why is there a need for funding — i.e. why can’t news publishers be profitable on their own?
My thesis is that news publishers have become more or less obsolete when it comes to providing those functions that are important in a democratic society — news provision and analysis— and have therefore shifted more to less important (and even undesirable) functions — entertainment and confirmation bias. This shift, together with the fact that news publishers have done a very poor job experimenting with innovative revenue models (why on earth does no-one use a pay-per-view model? I’d be very happy to pay a few cents to read an article or two on Bloomberg, though I’m unwilling to pay for a subscription), has caused a decline in profitability.
In the old days, the primary function of news publishers was, well, to publish news; I recall reading somewhere that the British Foreign Office used to rely on the Times, rather than on its on network, to collect intelligence from foreign countries. But today you can get the news from the horse’s mouth — governments can publish legislation online (speaking of which, annoyingly, none of the articles I read on the Australian legislation even bothered to link to it), politicians can tweet or blog, and anyone with a smartphone can publish breaking news. This, coupled with the fact that people (Americans at least) have little faith in news publishers (less, in fact, than they do in big tech) means that we have little use for traditional media companies for this purpose.
(You could argue that we need traditional media companies to act as gatekeepers / fact-checkers, but a) see point above on trust, and b) other institutions could provide this service far more efficiently — e.g. governments could set up independent bodies to fact-check statements made by politicians or stories that have gone viral.)
Newspapers have never been very good at providing insightful analysis, because insightful analysis is both hard to produce, and not very popular. If you want to read a genuinely interesting take on things, you’re better off reading blogs such as Astral Codex Ten (née Slate Star Codex) or Marginal Revolution, than even the FT — though the FT is an excellent paper with good columnists, which is why it is not struggling like many of its peers (part of the issue: elite traditional publishers think they are highbrow when they’re not).
(The one important function news publishers still provide that I did not mention in my thesis outline is investigative reporting. Though it’s true investigative reporters provide a valuable service, it is not the case that they are essential for the functioning of society, since what they do simply complements the work law enforcement officials are meant to be doing anyway. If the argument is that we need to subsidise media companies so they can do more investigations, I’d counter that we should just increase the budget for police departments. In addition, the newspapers that produce outstanding work in this field — FT with Wirecard, WSJ with Theranos, Enron etc — are profitable, exactly because readers are willing to pay for quality. In other words, quality journalism does not really need the subsidy in the first place.)
So newspapers are not really needed to transmit news, nor are they the best providers for detailed analysis. Yes, many of us go to news sites instead of looking at sources ourselves (e.g. going to the BBC or the Guardian to read about the latest lockdown rules, rather than referring to gov.uk), but that’s just inertia, and will slowly change. So what most of us really go to news sites for is not to get those things that journalists proclaim are essential for the functioning of society; what journalists know in their heart of hearts but don’t want to admit is that their primary reason d’etre is entertainment, and their secondary — and most harmful — is confirmation bias.
I don’t need to work very hard to make the case that the primary function of news outlets is entertainment. The top newspapers in the UK are the Metro, the Sun, and the Daily Mail. Here are the Metro’s top stories at the time of writing:
And here’s what the Daily Mail thinks I must not miss:
As for the ‘serious’ Guardian, its most shared story is ‘ Keep it down! Why sales of silent sex toys are surging’. You don’t need insider knowledge to guess it’s these clickbaits that receive the most traffic on social media, and it is therefore these kinds of publishers / articles that will receive payments from big tech, should laws similar to the one in Australia be enforced. Funding for ground-breaking journalism it ain’t.
This leaves the last function of news publishers. If we’re honest with ourselves we will admit that we read the news not because we seek the truth, but because we like to confirm our beliefs, because they tell us what we want to hear. What do we want to hear? We want narratives that help us make sense of the world, but that also help us feel good about ourselves. If we are rich, or entrepeneurs, or shareholders, we want a narrative that tells us capitalism is good for the world, and that western society is by and large meritocratic — thus confirming that we not only deserve our wealth and status, but that the system that helped us generate it is beneficial for those less privileged also. Conversely, if we are not well-off, we want to hear that this is because the system is crooked, and that we are entitled to take wealth from those who have it, because firstly they don’t deserve it, and secondly because by doing so, we will also help those even less privileged than ourselves.
The truth of course is that there aren’t any grand narratives that make perfect sense of the world, because the world is too complicated to be reduced to some simple model— we are not even sure how elemental particles work, much less the complex systems they comprise. But newspapers are in the business of telling stories, and this is where they yield immense power despite their financial difficulties: they still hold a monopoly on shaping narratives. News publishers, through their editorials, the facts they choose to report, and the way they position their articles (what goes into the front page? where are retractions published, if at all?) tell stories, and stories are powerful.
As there are no credible competitors in this space, people, despite their low trust in media, read(or watch) the news to make sense of the world’s complexity. This includes politicians: so, when politicians read in the news that the public distrusts big tech, or that big tech is anti-competitive, or that people are concerned about the way FB and Google treat their private data, they take that to be the truth — despite the fact that users, through their actions, suggest otherwise: they use Amazon, instead of visiting quaint bookshops; they download apps from companies with ties to the Chinese government (which has no qualms harvesting private data); they accept cookie tracking when pop ups ask them for their preferences; etc. (It’s true that if asked, people may say they are concerned about their private data — but this is where the real world becomes complex: what should we pay more attention to, what people say, or what they do? News publishers will just assume an answer depending on their political leaning, without discussing the nuances). This is why FB and Google are trying to avoid battles with news publishers, and tend to capitulate to demands and make concessions.
(Some readers may object that claiming news publishers have a monopoly is disingenuous, because while they may have a monopoly as an industry, they compete with each other, and given they have different worldviews, people are exposed to different narratives. But, first, most people only read/watch the news that support ‘their side’, and if it’s hard for individuals to change their worldview, it’s much harder for institutions to do so, which means the news people absorb become more and more entretched in their positions, and they only look for facts that support the narrative they have already been crafting.
Second, there are instances where news publishers more or less band together regardless of their politics, especially when their industry is threatened to be disrupted — as is the case with the near-universal hostility to big tech.)
There are promising signs for change: more writers are breaking away from traditional publishers and going solo (thanks, Substack); politicians are becoming better at connecting directly with voters (though it’s a shame that the most successful one at that is Trump; while it’s true that one reason he was so good at this is that, like traditional news publishers, he stripped all nuance out of his worldview, I hope others will try to emulate him in his ability (and desire) to talk to people directly, without his populism); and governments are becoming better at publishing data in formats people can understand (some governments have always been good at this — look at the Swiss with their referenda).
So there’s hope that news publishers will start seeing more competition in their traditional product — narrative. I wouldn’t want to see venerable publishers go under — we need the FT, the NYT, and even the Guardian, but we don’t need them to have monopolies, nor do we need readers trained to absorb well-crafted stories stripped of nuance.
[Disclaimer: I used to work for Google, but everything I say here is my own, personal opinion. Nothing I write here is based on insider knowledge, nor do they reflect Google’s official or unofficial position.]
