Tackling news media underfunding: from copyright reform to cutting the (platform) middleman

Since the early days of online news portals at the end of the 20th century, online content publishing was a three-sided market from an economic perspective. Content providers (mainly online newspapers) wrote the content, advertisers paid for advertising space on their website, and users got the articles for free. With the development of the major digital platforms such as Facebook and Google, the financing of online press has collapsed.

Today’s major digital platforms—such as Google and Facebook—started to grow in the middle of the last decade. Collecting more and more user data, they created more effective and sophisticated advertising solutions and drew advertising money away from publishers, who were left with the cost of content production, but not the revenue needed to finance production.

Publishers used their collective lobbying force, turned to national governments and the EU to achieve regulatory solutions, tried to solve the problem and restore the balance with national laws and EU regulation. That among other things meant trying to make Google and Facebook pay newspapers for their content, based on different legal bases.

Outside the EU, Australia for instance passed a News Media Bargaining Code in February 2021 that left a year to the platforms and the news publishers to find an economic solution to the problem, or else the state would introduce a regulation.

Europe invoked copyright law to force information society service providers, including digital platforms, to pay publishers for the online use of their press publications. The European push came on the heels of two failed attempts by Germany and Spain, the first countries in Europe that tried to make platforms pay for news snippets they displayed based on copyright. Google’s response was harsh in both cases. In Germany after the acceptance of “Ancillary copyright for press publishers” introducing a so-called “quotation tax” in December 2013, Google removed all news publishers who refused to grant free licence to Google to use their content. Many of these news publishers saw plummeting traffic to their site and decided to opt-in to Google News. Spain adopted a law in July 2014 that excluded the possibility of giving free licence to the platforms. In response, Google shut down its news service in Spain in December 2014, also leading to a huge decrease in traffic.

Following these attempts, the EU amended its copyright directive in 2019. In the new directive, Article 15 introduces a new neighbouring right, similar to copyright, for publishers. Apart from hyperlinking and the usage of individual words and very short extracts, publishers have the right to authorise or prohibit the “reproduction” and the “making available to the public” of their content. Both of these are necessary for online appearance and to receive remuneration for the reuse of their articles.

France as an experimental playground

The deadline for the implementation of the directive was June 2021. France was the first country to adopt a national law in 2019 and therefore acts as an experimental playground for future problems and solutions. At first, Google refused to pay for short snippets and decided not to show content of European publishers in France (similarly to the former German and Spanish solution). Then at the beginning of 2021, Google and Alliance de la presse d’information générale (APIG)—the French mainstream press alliance—announced entering a deal without revealing the financial terms. In the summer 2021, the French Competition Authority fined Google for €500 million for failing to negotiate “in good faith” and for withholding key information relevant to determine payments. The authority also disapproved that Google tried to force publishers to a global news licencing product called Publisher Curated News rather than negotiate local terms. In October 2021 Facebook announced that it had reached a multi year agreement with APIG to pay French publishers for resharing their contents—again, without revealing financial details. The company also announced the launch of a French news service in January 2022 in France and the launch of Facebook News in Germany with partners including Axel Springer and Frankfurter Allgemeine Zeitung.

Article 15 of the EU Copyright Directive

Hopes have been raised by Article 15 as the solution for financing the press, although neither the basis nor the fee that major platforms would pay is clear. On the one hand publishers see the future and the possible financing of their publication from advertising revenues coming from digital platforms, including the royalty from Google based on the neighbouring right—the rights of a creative work not connected to the work’s actual author—created by Article 15. On the other hand the platforms try to narrow the basis of levies and keep the costs down by either paying a one-time investment sum in an untransparent way or only paying for direct use of content possibly on a click-through basis. This is the elementary interest of the platforms because if they pay in a European country for search engine revenues or a higher share for usage, that could become a model that other countries may try to follow. This might explain the recent launch of news sites by platforms, such as Google’s Publisher Curated News and Facebook News.

Google tries to control the process of bargaining based on Article 15 by sending out draft extended news preview agreements to publishers with strict confidentiality clauses that prevent them from cooperating amongst themselves. In hope for royalty, publishers will not share information with each other due to the confidentiality clause, and neither will coordinate a common negotiation tactic. It also makes it possible for Google to differentiate between news sources and favour those that are in a better position to enforce their interest. This might mean that smaller media outlets might probably get less royalty than multinational media conglomerates. “Divide et impera” might help Google to keep the cost low.

Hungary as a particular case

Although the amended copyright directive, including Article 15, was implemented in Hungary in June 2021, there is no sign of possible future agreement between Google and Hungarian publishers or their associations yet.

Meanwhile, the politically-driven market distortion in Hungary has forced many journalists to go into a different direction instead of waiting for the platforms to finance journalism. In Hungary, formerly independent media companies have been systematically taken over by pro-government businesses. Some publications have simply been shut down, while others have, partially or wholly, been brought under the editorial control of the ruling party. The government also uses public money to finance a pro-government media empire basically through advertising. In this hostile environment, some journalists or whole editorial teams who lost their media outlets have decided to start new publications and turn to crowdfunding. The sacked editors-in-chief of the two former leading online news portals Origo and Index have founded new media outlets with some of their former teams after the teams staged a mass resignation to protest the dismissal of their editors-in-chief.

• Direkt36 is a small investigative journalism center founded by former Origo staff with the mission to expose wrongdoings and the abuse of power through fair but tough reporting.

• Telex is a one-year-old news portal with almost the whole staff of Index. It has approximately half a million unique visitors daily, which is a massive number for Hungary.

• Valaszonline is a long-form journalism outlet founded in 2018 by the journalists of a former pro-government weekly that was shut down after a dispute between the Prime minister and his childhood friend, former treasurer of the ruling party and owner of the weekly.

• Partizan is a YouTube channel with 244k subscribers, launched by a former political activist who has become an accomplished editor-in-chief and reporter. Despite its small staff, Partizan seems to fulfill the role of a public service broadcaster, offering independent and balanced interviews, election primary debates and analytical news summaries.

Since the economic crisis hit Hungary in 2008 and with the development of platforms online media outlets suffered from the substantial decrease of advertising income (as the author could witness first-hand, by working for 15 years in the industry). The status of the negotiations based on Article 15 are not expected to be accomplished in the near future. All of these media outlets managed to acquire a significant number of supporters (e.g. Parizan has more than 5K patrons while telex has more than 50K supporters) and with their donations and subscription fees their survival seems assured. In these cases the economic model returned to a two-sided market, similar to the classic printed news model where newspapers write articles and users pay for it. In the distorted Hungarian market, readers are willing to pay for independent news.

Despite the European effort to solve the problem of press financing with copyright reform, these media outlets did not wait for the long-term result of the regulatory solution. Although the Hungarian situation might not be generalisable to other contexts, the collapsed equilibrium of the three-sided news market has been resolved in Hungary by an old/new business model, where readers pay for the content. However, there is no guarantee, although it seems to work for these cases. This sends the message to news producers elsewhere: “Don’t wait for Google and Facebook to save you; save yourself!”