Paying for News: Google and Meta Owe US Publishers $11.9-$13.9 Billion each year

2023-11-17. $11.9 to $13.9 Billion each year is the amount that a recent working paper estimates Google and Meta would owe US publishers if the proposed Journalism Competition and Preservation Act were to be passed in the US.

by Elena Perotti | November 17, 2023

A recent working paper estimates what  Google and Meta would owe US publishers if the proposed Journalism Competition and Preservation Act were to be passed in the US.

Governments around the world are pressing Google and Meta, Facebook’s parent company, to pay for the news they disseminate. The JCPA, and the 2021 Australian News Media Bargaining Code are two such laws.

News content generates income for Google and Facebook, yet existing deals made between these platforms and news publishers do not capture the full value the content generates. This is because platforms and news publishers provide “complementary services” – the economic value generated by the two used together is greater than they would produce in isolation. Platforms have been signing payment agreements directly with publishers, yet exact amounts and the way these amounts were calculated are veiled behind non-disclosure agreements. Greater transparency about the methodology underlying these calculations is needed to broaden the discussion and devise a standard that is fair and equally applicable to big and, critically, smaller media outlets.

In Paying for News, the authors argue that under current deals around the world, Google and Facebook are making payments to publishers that are vastly below research estimates of a “fair payment”.  Using existing platform-publisher agreements as a benchmark, and insights from game theory into cooperative bargaining, we estimate that Facebook owes some US$1.9 billion, and Google US$10-12 billion, to news publishers annually. These figures represent a 50-50 split of revenue generated from news content on the platforms.

News Media Bargaining Codes

In 2021, Australia broke new ground with a News Media Bargaining Code that used competition law to require Google and Facebook to pay news publishers for the use of news content on their platforms. If the two parties cannot reach a revenue-sharing agreement, the government can step in and force binding arbitration between them. Canada followed with an Online News Act (also known as C-18) in 2023, and other countries globally (such as Brazil, Indonesia, and Switzerland) are considering or attempting similar legislation. In the US, the Journalism Competition and Preservation Act (JCPA), which would allow collective bargaining by news publishers, was introduced in March 2023.

Critics of the Australia Code argued that it favored Murdoch-owned outlets and neglected smaller independent ones. Google and Facebook responded aggressively to the legislation, with Facebook blocking Australian news for two days in 2021. Nevertheless, the law is now deemed a success, with the platforms paying some US$140 million a year to both small and large outlets, leading to a marked increase in journalist employment. As a result of these successes, many outlets are now negotiating with Google for revenue-sharing payments. Google and Facebook, however, now argue that news is not central to their business, and can be de-emphasized.

Calculating the share

The platforms have not released the micro-level internal platform usage data that might provide a way of calculating share of advertising revenues derived from use of news content.

Instead, the study drew on existing research and a data base of licensing agreements to calculate what the authors think is owed. The approach involves a series of steps.  They start by estimating the platforms’ revenue from news content sourced from US news publishers. This content provides value to platforms by contributing to user impressions, a primary source of revenue for online platforms.

By focusing on impressions, they emphasize the importance of news to users of the platforms, irrespective of whether the user chooses to click-through a link to the news content on the publisher’s website when using the platform. The decision to click-through a link in order to view a full news article is typically made after the user has already viewed the headline, and (very often) a short summary or a preview of the content of the full article. If the user merely wants to search for a simple fact or news headline, they can read it from the search results page directly rather than clicking-through on an individual search result link.

How the value of news content should be split between the platform and publisher is calculated using insights from the economics of bargaining together with historical benchmarks and private market analyst reports. This leads to the proposal of a 50-50 revenue split.

Data points in blue represent revenue share due to publishers from historical content distribution agreements listed. The licensor/content provider and licensee/distributor names are listed in the parentheses, together with the year of the agreement (e.g., Reuters – Internet Century refers to an agreement where Reuters was the licensor/content provider and Internet Century the licensee/distributor). Data points in orange represent share of relevant revenue due to publishers from both existing, documented deals that Google and Facebook have signed with news publishers in specified countries, and other economic reports and/or analyses reviewed. Percentages indicate the share of relevant revenue due to content providers.

Facebook – the importance of impressions

Facebook is the biggest social media platform in the world, with close to three billion active users monthly.  According to eMarketer, the company generated US$50 billion in digital display advertising revenues in the US in 2022 alone. Multiple surveys indicate that news – as headlines, snippets, or in discussions – is an integral part of Facebook’s content. So, the share of “user impressions” that come from news is a first step in calculating what such a fair payment would be.

The study’s calculations reveal that Facebook users spend 13.2 percent of their time on the platform consuming or interacting with the news content. According to Meta [Facebook’s parent company], in 2022 Facebook generated close to US$114 billion in advertising revenues globally (some US$53 billion due to activity of users located in the US and Canada). After apportioning revenues generated by Facebook in the US, and following the industry norm of a 50-50 split, this implies that approximately US$1.9 billion of advertising revenues should be allocated to news publishers.

Google – a third of all users demand news

Google is an advertising behemoth that commands over 90 percent of the US search engine market, and around two thirds of the total US search advertising market. Furthermore, Google searches often return results that include news snippets.

Google’s search advertising revenues in the US were estimated to be around US$56 billion in 2022. Employing a similar methodology as they did with Facebook, the authors (conservatively) estimate the share of information searches to be around 50 percent of all searches, with searches using news publishers’ content accounting for 70 percent of this number. Thus, the total advertising revenue Google generates from information searches using media publishers’ content is around US$20 billion, which (assuming a 50-50 split) would place the publishers’ revenue share in the US$10–12 billion range.

Benchmarking for comparison

The study then compared out estimates with current real-world examples of deals between platforms and news publishers, and with historical benchmarks of revenue-sharing in the media industry. They found that the amounts currently being paid are far below their estimate of an equitable revenue split.

In addition, Google has given publishers the opportunity to commit to Google News Showcase, which would allow publishers to curate content and provide Google users with limited access to paywalled stories for free.  However, it is important to note that Google News Showcase typically pays publishers for content appearing within the Showcase platform, but not stories appearing in search results, so such deals do not capture the full value of a publisher’s content to Google.

Decades of underpayment from platforms to news publishers have helped boost profits for Google and Facebook and increase their respective market (and monopoly) power. According to this analysis, the payments to publishers have been well below accepted industry norms thus far, and there is considerable room for improvement in this regard. Whether this will happen directly as a result of new legislation or because of equitable bargaining outcomes between publishers and platforms remains to be seen.  

Paying for News: What Google and Meta Owe US Publishers was written by Patrick Holder (Brattle Group) Haaris Mateen (Assistant Professor of Finance, University of Houston) Anya Schiffrin, direct of the Technology and Media program at Columbia University’s School of International and Public Affairs and Haaris Tabakovich (Brattle Group).

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