The government released its draft Bill C-18 regulations on Friday ahead of the Labour Day weekend, but ironically those regulations do very little to ensure that new funding will be allocated toward employing journalists. While the regulations establish what amounts to a minimum 4% link tax on Google and Meta if they link to news content, they set no minimum requirements to spend the resulting revenues on journalists or news content. In fact, the government specifically dictates to the CRTC that the legislative requirement that an “appropriate portion of the compensation will be used for the production of local, regional and national news content” will involve no minimum amount and the agreements need only reference that “some” of the compensation will be used for that purpose. As a result, in the best case scenario for the government in which the Internet platforms pay for links by reaching commercial agreements with news outlets, the big beneficiaries such as Bell, Rogers, the CBC, and Postmedia would be free to spend the vast majority of the money generated by those deals on executive salaries, debt repayment, or any other purpose.
As readers of this blog will know, I think that this best case scenario is very unlikely. The new draft regulations further increase the likelihood that at least Meta will continue to comply with the law by blocking news links in Canada. The company will therefore fall outside the definition of a digital news intermediary by no longer facilitating access to news and will not be required to enter into any new agreements. Moreover, recently cancelled deals will not be revived and the value of free referral traffic will be lost. The result will be lost revenues for many outlets, particularly smaller and digital publications.
Further, the draft regulations may have increased the likelihood that Google will follow suit given the Canadian government’s approach of requiring the company to pay 4% of the Canadian portion of its global search revenues for linking to news content. After insisting that Bill C-18 was grounded in compensating news outlets for the value of their news content, the Canadian model has now completely disconnected applicable payments from the actual costs or value of news creation and delivery. It is simply a shakedown with a percentage of revenue that was never discussed during the Bill C-18 legislative process and was picked out of thin air. Moreover, the 4% will no doubt be used by other countries as a global minimum for similar payments. Even if Google was willing to meet the government’s minimum demand of $172M annually on Canadian news links, the bigger question for the company will be whether it is content to hand over 4% of its search revenues in countries worldwide to subsidize the media sector.
That assessment may mean that Google follows the Meta approach and that Bill C-18 generates no new revenues since it does not apply to any digital news intermediaries. But even if Google is persuaded to pay up, the government’s regulations do not require that much of that money be spent on journalists or news content. The low bar in the regulations that an undefined “some” compensation be spent on the production of local, regional and national news content is likely to mean that the vast majority of the money goes elsewhere. Further, the CRTC has been given no flexibility on the issue, as the government says that merely including the word “some” in the agreements means that the Commission “must interpret the agreements as providing that an ‘appropriate portion of the compensation will be used for the production of local, regional and national news content’.” The government could have pursued a fund model that would have guaranteed that most of the money from Internet platforms would be spent on journalism. Instead, Canadian Heritage Minister Pascale St-Onge has introduced draft regulations that virtually guarantee that it won’t.