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The Online News Act: A threat to Canadian News?

The government wants to charge for sharing online news content. What does this mean for Canadian news?

Heritage Minister Pablo Rodriguez recently announced the government’s latest attempt at regulating Canada’s Internet; Bill C-18, the Online News Act. Bill C-18 purports to address a real crisis - the drying up of advertising funding that previously supported news organizations in the 20th century.

Unfortunately, Bill C-18 misunderstands that crisis, misdiagnosing why news advertising revenue has collapsed, and who is at fault for it. As a result, Bill C-18 ‘fixes’ the problem through a convoluted system that makes news producers increasingly dependent on and subservient to both online platforms and government, threatening their critical role in holding these powerful bodies accountable. It does nothing to bring back the local news coverage Canada has lost, and will actually encourage the spread of more low-quality news content on Canada’s Internet.

The Online News Act is the latest in a series of half-baked online regulations promised by the Liberals during their 2021 campaign, alongside Bill C-11 (Online Streaming Act), and their Harmful Content proposal.

In this blog, we’ll explore what’s going on with Bill C-18, where it goes wrong, and what the government should do instead.

What problem is Bill C-18 trying to address?

As the government describes it, news is in crisis because online platforms are ‘stealing’ news content from news producers. Heroic news companies are being denied advertising revenue that ought to be theirs when small news ‘snippets’ appear alongside links to their content on online platforms - 40-50 words, a thumbnail, and a header. 

Here’s the problem: this simply isn’t true. 

First, online platforms are not stealing news content from news companies. It is news companies themselves who post their articles on online platforms the most; they voluntarily encourage the spread of their content on social platforms, and they could easily block their articles from being shared on platforms if they wished to do so.

In reality, news snippets actually drive considerable advertising revenue to news organizations, and give little in return to platforms. News snippets themselves are not full articles, just teasers for them. Snippets are bait that drives clicks, and when users click through a link to a news article, all of the ad revenue on the news website goes to that news organization. Platforms are already liable for copyright violation if they post news articles, and when they do, they almost always pay the authors. 

Second, there’s not all that much news-associated ad revenue to begin with. News links are a very small percentage of the overall content platform users share; the real money-maker is YOU. The more users on a platform, the more platforms benefit from their users’ interactions. And most of us, most of the time, are reading and posting non-news content - jokes, interactions with our friends and family, memes, classifieds, personal updates and so on.

That’s actually not a new pattern. Even in the heyday of 20th-century news, news production itself was not lucrative - or even necessarily profitable. Before the Internet became dominant, that was fine - newspapers and broadcast stations were central community information sharing hubs with many functions, such as advice, weather, entertainment, commentary, classifieds, and more. Notice something? Today the Internet fulfills most of these functions more quickly and effectively, using the endless library of search engines, specialized online services and communities, and the personal connection functions of social media.

We can’t turn back the clock on the Internet; few people want the old centralized information system back, and trying to force advertising revenue back into a version of the old model is doomed to fail and will produce many new problems.

 

There is a real problem though!

The funding crisis for news production is real. Independent, truthful and well-funded journalism at all levels is necessary to making democracy work. And local news in particular has suffered massively as their advertising revenue has dried up. From 2008 to 2021, over 450 Canadian media outlets closed, 355 of them community papers. We’re still getting news, but most of it is from media aggregators and focused on national concerns that may or may not apply to our own community. And all of this is occurring in a Canadian media environment that was already overly concentrated compared to our democratic peers. 

The government has identified a real problem, but are confused about why it exists, and how it could be fixed. That’s a big problem because it is taking them down some very counterproductive directions in addressing it. 

 

How will Bill C-18 work? It’s a shakedown, not normal legislation.

Following a similar model adopted in 2021 in Australia, the government is attempting to threaten online platforms into ‘voluntarily’ giving news organizations money, rather than plainly laying out new obligations for them directly. Under Bill C-18, online platforms and qualified Canadian news organizations will have 6-12 months to reach private deals to pay those organizations. If no mutually accepted settlement is made, the parties will move forward through a mandatory CRTC-controlled arbitration process.

This is still a form of Link Tax - putting a financial cost on platforms every time anyone shares news. By making it costly to spread quality news, any form of link taxation disadvantages news relative to misinformation, raising real concern about the net impact of C-18. More on this below.

But C-18 does not stop there. Under C-18 the CRTC has the power to arbitrarily overrule any and all payment agreements based on actual revenue associated with ads, in view of “non-monetary benefits” to platforms and to reach its own standard of appropriate payment. 

Pay up now or pay more later, and damn any calculations about what you owe; does that sound like a policy or a shakedown? The veneer of legitimacy here is as thin as it gets.

All that said, you might be asking why we should care if some of the very largest online platforms are asked to cough up some money for Canadian news, even if the rationale is questionable. But there are other, cleaner ways to use revenue from online platforms to help support the news, that aren’t founded on a faulty model of the relationship between them and news content - such as by directing general Canadian revenue from the upcoming Digital Services Tax (DST) towards news.

But with Bill C-18, a rotten, factually incorrect foundation is leading to badly designed, self-sabotaging legislation– legislation that could do far more harm than help Canadian journalism. 

 

A system that undermines itself from the start.

In Bill C-18, platforms and news organizations are repeatedly warned against attempting to manipulate or game the system. Platforms are warned they must not suppress news content, and news organizations are forbidden from gaming the system to produce more links to their content and consequent compensation (Section 39). Platforms are further forbidden from discriminating against or disadvantaging any news outlets, or preference their own content over news outlet content (Section 51). Violations can be penalized by $10-15 million fines.

When legislation includes a long list of forbidden practices, that’s a tell— a sign the government realizes they’re creating a system where the incentives for both sides are overwhelmingly to cheat and distort outcomes. In a system that relies on a broad instruction for businesses to avoid a complex behaviour that’s clearly in their interest, the result is predictable; a constant struggle to get them to barely toe the letter of the law, while they fundamentally violate its spirit. 

Making it cost money to link to quality journalism will lead to less of that journalism appearing on social media, in one way or another. There are a thousand ways that online platforms can fail to encourage quality news sharing under a system that makes it expensive for them to host it, from subtly nudging existing users away from the type of substantive conversations that feature news sharing, to failing to develop new features and products that would facilitate news sharing.

Bill C-18 also surprisingly blocks platforms from doing basic due diligence to prioritize getting quality journalism to Canadians. If platforms must carry the content of all government-approved Canadian news organizations, and cannot modify their ranking in their feeds and algorithms, they will have no capacity to prioritize news stories from more authoritative and trusted sources over others in their search results. 

The fundamental sell of Bill C-18 is that it is supposed to improve Canadians’ access to quality journalism. But if platforms cannot apply their community guidelines and judgement of organizational reputation when deciding to host, showcase and amplify articles, the result will be feeds and search results that indiscriminately mingle poorly sourced yellow journalism amongst or ahead of reputable sources. 

 

Who’s a news organization? The government secretly decides.

Under Bill C-18, any newsgroups who want to use the mandatory settlement system must either be certified as a Qualified Canadian Journalism Organization (QCJO), or receive special authorization from the CRTC. But who or what is a QCJO?

QCJO certification was launched in 2019 as part of a $600 million media bailout to keep select media outlets afloat and expand jobs in the news industry. The Minister of National Revenue is responsible for granting QCJO status to news organizations. Yet as recentreporting by Canadaland has documented, over the last three years QCJO has developed into a ramshackle system far from up to the important task of deciding who’s producing quality news. 

Obtaining QCJO status is a deeply secretive journey that lacks basic public accountability and due process; there is no public transparency into how the deliberative decision is made, no reporting of who has applied and been accepted or rejected, no report of who receives funds, and no appeal process for organizations that gain or lose status. A small panel of academics currently decides QCJO applications, and the minister can at will overrule their decisions and grant or exempt QCJO.

This would never be an easy system to run. It is difficult - maybe even impossible - to fairly decide who is producing quality news. Too high a standard and the system can be misused by the ruling government to favour news that aligns with it politically. Too low a standard and bad-faith organizations masquerading as credible news sources will be able to access subsidies to share their content with a wider network of people. 

You can’t build a functional system on a broken one - but that’s exactly what Bill C-18 proposes to do. Deciding who produces quality news, with all the associated financial and search benefits, is far too important to build on the shaky and secretive QCJO system.

 

What should the future of Canadian journalism look like? Big Tech decides.

What’s an innovative business model for researching and writing the news? What does diverse local news actually look like in the digital world? These are difficult questions without easy answers - and in an ideal world, the public and journalists themselves would debate and decide the answers. 

But that’s not what we get with Bill C-18. While trying to get a long list of arguably admirable government objectives done, Bill C-18 delegates deciding these questions directly to online platforms. 

Under C-18, platforms must think about and implement a long list of conditions to secure exemption from further regulation. Their agreements with news organizations must:

  1. Provide ‘fair’ compensation for news content, including ‘non-monetary benefits’ that the CRTC believes platforms are gaining from news content, not just advertising-associated revenue (section 38);
  2. Invest an ‘appropriate’ amount in local and regional news and ‘innovative’ news business models;
  3. Contribute to diverse news coverage in language and racialized representation;
  4. Contribute to ‘sustainable’ news production;
  5. Not allow “corporate influence’ to undermine freedom of expression and journalistic independence;
  6. And anything else the government sees fit (really - that’s in there).

Here’s the issue: platforms will be the first and primary judges of how these objectives should be implemented. Platforms will judge what kinds of innovation to fund in news production. Platforms will decide what counts as local and linguistically diverse news content to support. While the CRTC may be the final judge of how well they’ve done, C-18 ironically gives tremendous purse-string power TO platforms to decide how the news should be told in Canada. And unless the CRTC rules otherwise, all their deals will be private - known only to them, the news organizations in question, and the CRTC.

At a time when criticism of platforms is rising and their influence is growing, that should be tremendously concerning to everyone in Canada. We need more funded journalism - but we need that journalism fully independent, not tailored by subtle suggestions from online platforms that fund them. 

 

Which platforms must pay up? Almost all of them (that don’t flee Canada.)

Online platforms will be required to make deals with news organizations if they meet any combination of three vaguely defined criteria: 

  • The scale of their operation, ie, their revenue in Canada; 
  • Whether they have a ‘strategic existing advantage’ over the news industry in collecting advertising revenue; 
  • If they have a ‘prominent market position’, ie, their market share. 

Much of the Internet could fall under these criteria. We can’t be sure how the CRTC will interpret guidance this vague, but by these terms, major social platforms like Facebook and Twitter, search engines like Yahoo and Google, to Reddit, Pinterest, and new startup platforms could soon be forced to enter these agreements. Only private messaging services are explicitly excluded from C-18. 

The only way platforms can definitively opt out of the squeeze is pulling themselves from the Canadian market altogether; some may choose to do just that. C-18 isn’t the first of its kind. When similar legislation was introduced in Spain, Google News pulled out from the country, leading directly to a 14% decline in traffic to smaller news sites, and €10 million in lost revenue for local news.

It may seem paradoxical, but attempting to squeeze unearned revenue from platforms may actually hurt many Canadian news organizations, reduce the diversity of platform services available to Canadian consumers, and discourage innovative platforms from starting in or entering Canada.

Big news gets bigger, but local news doesn’t come back

After years of small local outlets disappearing, Bill C-18 does little to level the playing field for local news. As we mentioned above, from 2008-to 2021, over 450 media outlets closed, 355 of those being community papers. Bill C-18 will not bring any of that local coverage back. Under Bill C-18, deals made between platforms and news organizations will vary depending on the current size of their operation. This means that the biggest newsgroups that have survived the last decade, like Bell, Postmedia, and the CBC, will easily benefit the most. Small and local news will be disadvantaged twice over - first, by being forced to form cartels amongst themselves to negotiate at all, and second, by having no dedicated compensation to reawaken the local news that has already been extinguished.

While large legacy media gets bigger and bigger under C-18, the payments they receive will function as a subsidy that directly disadvantages small and startup challengers– particularly those trying to enter the market who cannot yet demonstrate the years of work QCJO status requires.

 

A burdened and industry captured CRTC to rule it all.

From Bill C-18 to Bill C-11, the government is making the CRTC a one-stop-shop for a breathtaking volume of Internet regulation. The CRTC is becoming the Canadian Internet’s judge, jury, and executioner; given enormous power to establish this regulatory system, implement it, and penalize those who don't comply by issuing monetary penalties of up to $15 million. Yet there are serious questions about the body’s competency to make these decisions, and whose interests will come out on top when they act.

Just days after announcing Bill C-18, the government has already promised to invest $8.5 million toward the CRTC for putting the bill into action. Yet in recent years the CRTC has been sharply criticized for both the industry-leaning decisions they’ve reached, and their glacial pace in implementing them. Critical decisions like making high-speed fibre internet accessible to Canadians served by all Internet providers have languished for years and years without meaningful implementation, despite 2013 (!) CRTC decision in favour of its rollout.

Meanwhile, current CRTC Chair Ian Scott has made decision after decision that favours Canada’s Big Telecom 3 - Bell, Telus and Rogers - over the affordability needs of ordinary Canadians, while freely admitting to being longtime pals with telecom and media execs.

Putting our faith in a body with this checkered and pro-monopoly history is questionable; asking it to manage an issue as sensitive as supporting a diverse and locally focused news system is courting disaster. 

 

What can the government do?

Stabilizing funding for news is an admirable goal. But C-18’s approach to doing so is dishonest, and dangerously threatens the future independence of Canadian journalism.

Is there another way? We believe that any legislation proposed to help support the news industry must:

  • Encourage and reward the sharing of quality journalism online, not discourage its spread through any form of the Link Tax;
  • Clearly prioritize rebuilding small and local news over subsidizing Canada’s largest media conglomerates;
  • Clean up or replace the QCJO system, so that decisions about who qualifies are made transparently in full view of the public, with no veto power from government ministers OR online platforms;
  • Remove all must-carry obligations, clarifying that platforms may continue to apply their community standards and prioritize high-quality news;
  • Tightly describe any new regulatory powers granted to the CRTC, not assign broad powers today to be sorted out later.

The version of Bill C-18 we have today misses the mark on all these fronts, taking Canada’s media ecosystem in precisely the wrong direction. Its weak factual foundation has fundamentally compromised the Bill, leading to a proposal that puts media under the thumb of government and platforms, encourages the spread of poor quality journalism, and does nothing to rejuvenate local media. 


This is no way to regulate. If Canada is to achieve the government’s objective of providing Canadians access to diverse and high-quality journalism, our government must go back to the drawing board and reject Bill C-18.

 

Image Credit: Charles Deluvio licensed under Unsplash


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