Addressing the Power Imbalance: A Legislative Proposal for Effectuating Competitive Payments from Platforms to Newspapers

Abstract

The purpose of this study is to explore the underpayment to newspapers from Facebook and Google attributable to the power imbalance between individual news publishers and the dominant platforms, and to describe how a pending bill in Congress—the Journalism Competition and Preservation Act (JCPA)—could effectuate competitive payments to news publishers, effectively simulating a world in which the power imbalance is removed. Facebook and Google (the “dominant platforms”) appropriate the value added of news publishers generally—and newspapers specifically—by reframing articles in rich previews containing headlines, summaries, and photos; and by curating the content alongside advertisements. This reframing and curation decrease the likelihood of a user clicking into the article, thereby depriving news publishers of clicks while enriching the dominant tech platforms. By exploiting their monopsony power over newspapers, Facebook and Google effectively pay a price of zero for accessing and “crawling” the newspapers’ content.

This study finds that allowing current market forces to dictate the newspapers’ “pay shares”—that is, the portion of platform revenues that redounds to newspaper publishers—ensures that newspapers are compensated at rates significantly below competitive levels. This underpayment results in underemployment of journalists and other news employees, as well as host of social ills associated with local news deserts, including less competent local governments, greater spread of partisanship and misinformation, removal of economic stimulus to local economies, and a reduction in the diversity of viewpoints, particularly among minority populations. The best way to correct this market failure is for the government to permit the news publishers (either newspapers alone, or all news publishers) to coordinate in their dealings with the digital platforms over payment terms and conditions, as contemplated in the JCPA.