steve glazer – Techdirt (original) (raw)

Google’s California Hush Money Won’t Fix Journalism’s Woes

from the not-how-these-things-should-work dept

Link taxes are bad, m’kay? They harm the public. They harm the open internet. And they harm the news orgs themselves. There is no reason to support them at all. But, many (thankfully not all!) media organizations and politicians love them. Media orgs like them because they think it will bring them free money (though, often enough, it just brings them less traffic and no money).

This year, California brought back an old proposal for a link tax from state Rep. Buffy Wicks, along with a separate proposal from state Senator Steve Glazer to just tax the digital advertising business, claiming that it’s a form of pollution, and proposed using that tax to fund journalism.

While getting more funding for journalism is obviously a good idea, the plan to tax internet companies is tremendously problematic for all the reasons we discussed above. On top of everything else, it also takes away the incentive for media orgs to come up with sustainable, working business models for themselves, encouraging them, instead, to wait until the legislature deigns to force tech companies to funnel money in their direction.

As almost always happens whenever these kinds of bills get close to passing, Meta promises to stop links to news (and mostly seems to follow through). Meanwhile, Google says it will do so, but then blinks and cuts a deal to pay off everyone, such that even if the law passes, they have already paid the vig. Google did it in Australia, and it did it in Canada. Both times it agreed to cough up a bunch of money. And even though in both countries a link tax came into effect, both payments were made outside of the link tax, and basically acted as a “here, take this money, don’t try to enforce the link tax on us” move.

This time, it looks like Google made the payoff earlier, to stop the law in California. A few weeks back, Wicks announced that her office and Google had come to an agreement to fund a bunch of journalism orgs with money from both Google and the state, and that she wouldn’t continue pushing her link tax bill.

Today, Assemblymember Buffy Wicks announced the establishment of a first-in-the-nation partnership with the State, news publishers, major tech companies and philanthropy, unveiling a pair of multi-year initiatives to provide ongoing financial support to newsrooms across California and launch a National AI Accelerator.

Together, these new partnerships will provide nearly 250millioninpublicandprivatefundingoverthenextfiveyears,withthemajorityoffundinggoingtonewsrooms.Thegoalistofront−load250 million in public and private funding over the next five years, with the majority of funding going to newsrooms. The goal is to front-load 250millioninpublicandprivatefundingoverthenextfiveyears,withthemajorityoffundinggoingtonewsrooms.Thegoalistofront−load100 million in the first year to kick-start the efforts. The total investment could increase over the next several years if additional funding from private or state sources becomes available.

That link has a lot of people coming out in support of the deal, including some smaller publishers, claiming that this is “a win” for everyone. However, I doubt that very much.

But, more to the point, the whole appearance of this is ridiculous. It looks like Google paying the state of California to not pass the link tax law, with a bunch of that money then being handed off to some journalists. It’s very unclear at this point how the money will be distributed, but I’m going to take a wild guess and suggest that sites like Techdirt will likely be ineligible, because we always are.

More importantly, though, these kinds of deals never last. A few years back, you may recall that a very rich real estate developer with no understanding of privacy law pushed a very bad privacy law as a referendum across California. The companies cut a deal with him, rushing a very poorly drafted privacy bill through the California legislature in exchange for him dropping the ballot initiative. And it worked. For two years. Then he put another terrible referendum back on the ballot because he didn’t like how things were working out.

Already, Glazer (the author of the “tax all digital advertising” bill) is complaining about the deal, suggesting he’s not likely to stop pushing his additional tax bill.

Glazer in a media call said he wasn’t satisfied with the deal and faulted the agreement as too small to help independent news organizations, as well as lacking involvement from Meta or Amazon.com Inc. Meta declined to comment on the announcement, according to a spokesperson.

“These platforms, along with Google, have captured the intimate data from Californians without paying for it,” he said. “The use of that data in advertising is the harm to news outlets that this agreement should mitigate and which it does not.”

So even if Google thought it was buying off the legislature here to drop these bills, it seems highly likely that something like this will return either way, because it’s never going to be “enough.”

Again, I’m strongly in favor of figuring out more and better ways to fund journalism. But this one comes across as a cynical attempt to stop a bad law by investing in a fund with few details on how or where that fund will be deployed. It seems ripe for corruption, and even journalists who are in favor of link taxes are calling it out as an unfair backroom deal.

The problem in all of this is that people are rushing to see where they can extract money from to transfer it around, rather than figuring out ways to build actual long-term, sustainable business models that aren’t reliant on politicians pointing to this or that company and saying “you, hand over some money to these journalists I like.”

Filed Under: buffy wicks, california, journalism, link taxes, steve glazer
Companies: google

Taxing The Internet To Bail Out Media Won’t Solve The Fundamental Problems Of The Media Business

from the not-the-way-to-do-this dept

Hey Google, can you spare a few hundred million to keep Rupert Murdoch’s yacht afloat? That’s essentially what some legislators are demanding with their harebrained schemes to force tech companies to fund journalism.

It is no secret that the journalism business is in trouble these days. News organizations are failing and journalists are being laid off in record numbers. There have been precious few attempts at carefully thinking through this situation and exploring alternative business models. The current state of the art thinking seems to be either (1) a secretive hedge fund buying up newspapers, selling off the pieces and sucking out any remaining cash, (2) replacing competent journalists with terrible AI-written content or (3) putting all the good reporting behind a paywall so that disinformation peddlers get to spread nonsense to the vast majority of the public for free.

Then, there’s the legislative side. Some legislators have (rightly!) determined that the death of journalism isn’t great for the future of democracy. But, so far, their solutions have been incredibly problematic and dangerous. Pushed by the likes of Rupert Murdoch, whose loud and proud support for “free market capitalism” crumbled to dust the second his own news business started failing, leading him to demand government handouts for his own failures in the market. The private equity folks buying up newspapers (mainly Alden Capital) jumped into the game as well, demanding that the government force Google and Meta to subsidize their strip-mining of the journalism field.

The end result has mostly been disastrous link taxes, which were pioneered in Europe a decade ago. They failed massively before being revived more recently in Australia and Canada, where they have also failed (despite people pretending they have succeeded).

For no good reason, the US Congress and California’s legislature are still considering their own versions of this disastrous policy that has proven (1) terrible for journalism and (2) even worse for the open web.

Recently, California Senator Steve Glazer offered up an alternative approach, SB 1327 that is getting a fair bit of attention. Instead of taxing links like all those other proposals, it would directly tax the digital advertising business model and use that tax to create a fund for journalism. Specifically, it would apply a tax on what it refers to (in a dystopian Orwellian way) as a “data extraction transaction.” It refers to the tax as a “data extraction mitigation fee” and that tax would be used to provide credits for “qualified” media entities.

I’ve seen very mixed opinions on this. It’s not surprising that some folks are embracing this as a potential path to funding journalism. Casey Newton described it as a “better way for platforms to fund journalism.”

Unlike the bargaining codes, this bill starts with the right question, which is how to fund more jobs in journalism. Its answer is to use tax credits, a time-tested form of public-private partnership. It structures those credits to incentivize small publishers and even freelance journalism just as much as it helps to support large, existing media companies.

And it does all of that without breaking the principles of the open internet.

And, I mean, when compared to link taxes, it is potentially marginally better (but also, with some very scary potential side effects). The always thoughtful Brandon Silverman (who created CrowdTangle and has worked to increase transparency from tech companies) also endorses the bill as “a potential path forward.”

It’s a simple bill designed to help revive local journalism. Instead of complicated usage-based mechanisms, this approach is very straightforward. It’s an online advertising tax that funds tax credits to support education and journalism. In this case, it’s a 7.25% ad tax (matching the state’s sales and use tax rate) on companies with more than $2.5 billion in revenue.

And here’s the rub: it would raise more than $500 million.

That’s every year.

To put it in context, the single largest philanthropic commitment to local news in the U.S. was the MacArthur announcement I mentioned in the first of this post. That funding represents $100 million a year and is spread across the entire country. This would be 5x that number, would grow over time, has no end date, and is just for California. Of course, as I understand it, some of this money would have to go to the general fund and be directed towards education in the state…that’s also a great use of the funds and there would still an enormous amount left for news (we’ll know more on these exact numbers as more official analysis is completed).

But that is a staggering amount of money and a game-changing amount of potential funding for news in the state. And it’s something that could easily replicated across the country.

But I tend to agree much more with journalism professor Jeff Jarvis who highlights the fundamental problems of the bill and the framework it creates. As I’ve pointed out with link taxes, the oft-ignored point of a tax on something is to get less of it. You tax something bad because that tax decreases how much of it is out there. And, as Jarvis points out here, this is basically a tax on information:

Data are information and information is knowledge. To demonize and tax the collection of information should be abhorrent in an enlightened society. His rhetoric at moral-panic pitch sets a perilous precedent.

Furthermore, Jarvis rightly points out that Glazer’s bill is positioned as something unique when users give their attention to internet companies, but explicitly carves out when users give their attention to other types of media companies. This sets up a problematically tiered system for when attention gets taxed and when it doesn’t:

He argues that he is taxing a barter exchange users make when they give data to internet platforms and receive free content in return. Well then, shouldn’t that tax apply to the exchange we all make when we give our valuable attention to TV and radio and much of the web in exchange for free content? But the bill exempts news media.

Indeed, the entire framing of the bill seems to suggest that data and advertising is a sort of “pollution,” that needs to be taxed in order to minimize it. And that seems particularly troublesome.

As Jarvis also notes, the true beneficiaries of a law like this would still be those rapacious hedge funds that have bought up a bunch of news orgs:

The hedge funds that now own 18 of the state’s top 25 newspapers — the hedge funds that are ruining journalism in California and across America — will benefit. They should not receive a penny. If anyone’s cash flow should be taxed, if anyone should be punished for the state of news today, it is them. Though the money is intended to go to supporting reporters, money is fungible and it will doubtless support hedge funds’ bottom lines more than journalists.

Indeed, the structure of the bill is one that will continue to benefit the failed news organizations, rather than incentivizing newer, better news organizations. That is the problem with all of these approaches, which assume that the answer must be to prop up the businesses that failed to innovate, rather than creating better incentives for more innovative approaches.

Google has warned that, if the bill passed, it would likely stop funding a bunch of other news initiatives that it has funded for years. This shouldn’t be surprising. If Google has already been funneling a ton of money into news initiatives, and then the California government is forcing them to direct hundreds of millions of dollars to its preferred news initiative, it would make sense that the company would drop its other programs and redirect the money to this one.

And, again, that highlights the problematic nature of this whole setup. It’s based on having the government decide who should be taxed and who gets funded. And when it comes to journalism, we should be pretty worried about the government picking and choosing winners and losers. Because that raises serious First Amendment issues and is very prone to just supporting news organizations that treat the deciding politicians nicely, rather than those that do deep investigative reporting and expose corruption and malfeasance.

Not surprisingly, Glazer did not take Google’s announcement well. He obnoxiously declared, “When people asks [sic] who is in charge of protecting our democracy and independent news— now you know.”

But, if the alternative is that the California legislature gets to pick and choose who “protects independent news,” I’m not sure that’s any better.

Honestly, if Glazer didn’t think that his plan would lead Google (and Meta) to pull the money they already put into funding journalists as duplicative, what was he even thinking?

And I say this as someone who could conceivably benefit from this bill. But I don’t trust the California legislature not to play favorites.

A few years back, I visited some elected California legislators to talk about a bunch of policy-related issues. My first meeting with a California state senator set the tone. He asked me if I had heard about a new committee he had set up, and I told him I had. He then said he noticed that I had not reported on that committee. I pointed out that the mere creation of a committee didn’t seem all that newsworthy, but when the committee did something that I thought was worth covering, I would then write about it.

His response was kind of chilling and has stuck with me for years: “well, if you’re not willing to write about what I’m doing, why should I even listen to you?”

It was a demand for political quid pro quo, which is not something we do here at Techdirt.

But I fear that a bill like Glazer’s effectively makes this mandatory. Journalism orgs will need to scratch the California government’s back to get access to these funds.

There are all sorts of reasons why tech companies should consider funding journalism. I think their desire for high-quality data for training AI is a good one, for example. But having the state step in and set the rules seems prone to all sorts of corruption.

Journalism needs new business models. We’re all experimenting all the time with different ideas (and if you’d like to help, there are lots of ways to support us). But we should be pretty wary of governments stepping in with half-baked solutions that could distort the overall world of journalism and the open internet.

Filed Under: business models, california, data extraction tax, data tax, innovation, journalism, sb 1327, steve glazer
Companies: google, meta, news corp