The Online News Act is law: a buzzer-beater win or epic miscalculation?

January 20, 2024

Last month Canada’s Online News Act Bill C-18 came into effect. Heritage Minister Pascale St.-Onge announced that despite Meta’s blackout of news for its Canadian audiences on Facebook and Instagram she had struck a deal with Google to avoid the news throttle spreading to its Search platform. Under the agreement, Google will provide Canadian online news publishers with $100 million annually in compensation for their news content appearing on Search. Those expecting a much larger figure —at one time the Parliamentary Budget Office speculated on a combined figure of $329 million to be paid by Meta and Google— no doubt were disappointed. Although further newsworthy events may unfold in the months ahead as Meta sticks to its news throttle and the Google cash is divided among publishers, now is an appropriate point in the policy timeline to pause and take stock of the bill once touted as indispensable to saving a failing news journalism industry. As many have argued back and forth, has Bill C-18 been a success, a disappointment, or an avoidable disaster?

Canada’s ‘news compensation’ legislation had its origins in a crisp policy idea: the unchecked market power of Big Tech’s leading digital news intermediaries, Google and Meta, made them so indispensable to news publishers seeking online audiences in search and social media that the state ought to intervene and ensure the intermediary platforms paid ‘fair compensation’ for news content to the publishers.

Critics of legislating this policy idea were unpersuaded. They lampooned the policy as an opportunistic shakedown of Big Tech, motivated not by a solid theory of intermediary chokeholds on news distribution but envy; green envy over the fact that the platforms offered better advertising distribution than publishers, once lords of mass media advertising. Whatever the remedy to the platforms cornering the advertising market might be, news publishers had no special claim to their lost advertising revenue. If critics had thoughts about the platforms’ market power over publishers’ news distribution, they offered no comment.

The ‘crisp policy idea’ of remedying the platforms’ market power in news distribution made little impact on the debate over the legislation. Instead, public debate over the bill focussed on how to divide up the compensation among news publishers; the independence of a news journalism industry that is increasingly reliant on government action; and the consequences of challenging Big Tech. Could a nation as small as Canada weather the Big Tech counteroffensive, or would  the whole thing backfire on Canadians and Canadian news publishing.

“Net Value Exchange”

When my daughter was six years old, she was distressed by her parents’ parsimony in dispensing cash. “You have so much money,” she cried. “And I have none!”

In truth there existed a kernel of legitimate complaint. We may never have signed a binding contract stipulating a weekly allowance, but nonetheless she had claims to good behaviour and limited needs, things of value to her parents. She had no other parents to give her money. Where was the fair compensation?

Sorry to say, but her parents exercised their market power, and our daughter went without remedy. I like to think it was because of ‘net value exchange,’ although in intellectual condescension I didn’t offer that explanation at the time. Even now I remain unmoved in my conviction that our generous parental supply of material and emotional sustenance obviated any requirement for a better (or any) children’s allowance. 

Net value exchange was at the core of Bill C-18. The original policy idea was advanced by Rod Sims, Australia’s Competition Commissioner and chief architect of the Morrison government’s New Media Bargaining Code. The “Australian model” of fair compensation for news content was enacted in March 2021 and became the footprint for Canada’s own bill tabled by Justin Trudeau’s governing Liberals in April 2022.

Sims’ policy idea was that the news intermediaries owed compensation to news publishers because the value of their news content to the platforms exceeded the countervailing value of the platforms’ free distribution of that content. That was the “net value exchange” between platforms and publishers.

He contended that the platforms’ market power was so great that the platforms could refuse to pay out because the publishers had nowhere else to go— no alternative distributors in Search (dominated 90% by Google) or Social (controlled 60% by Meta). To fix that, the state had to rebalance bargaining power between platforms and publishers over net value exchange by, one way or another, bringing government power to bear.

While Sims’ notion of net value exchange favouring news publishers was plausible and even likely, it was difficult to prove.

There were two problems. The first was establishing a “fair” market rate in the absence of brisk competition in the distribution of news in Search and Social. Ideally, the distribution market would offer ten Googles and ten Facebooks with whom publishers might negotiate. Without that competition in distribution, setting a fair market rate demands some kind of economic modelling.

The second was the lack of content consumption data that was indispensable to running an economic model of a hypothetically competitive market. Google and Meta owned all of the confidential data, each news publisher had some of its own, and independent researchers had access to almost none of it.

The lack of content consumption data could have been remedied by market studies carried out by national competition regulators in which they commanded the release of platform and publisher data, but this never happened in any jurisdiction. That left only research studies usually tied to one of the contestants that relied very much upon plausible suppositions.

A Swiss study commissioned by publishers claimed that platforms owed publishers millions based on net exchange value. An independent American study made similar findings. Google and Meta both hired consultants estimating a dollar value of the platforms’ free news distribution bestowed upon publishers. Neither of the Big Tech intermediaries suggested a net value exchange (even in their own favour) because their unwavering public position was that publisher content delivered no monetizable benefit to the platforms. None at all. 

Australia’s Sims remarked that throughout his investigation Google and Meta had “asserted, without compelling evidence, that they provided more benefit to the news media businesses than they received in return, and in their view that was the end of the matter.”

This left the proponents of net value exchange making thoughtful economic arguments based on limited information, but lacking conclusive proof and allowing the platforms to deny net value exchange favoured publishers. The lengthy analysis put forward by Australia’s Sims was that Google and Meta demonstrably drew audiences to their platforms with news content; more easily documented for the information-searching Google audience than the content-sharing public who logged on to Facebook. 

Regardless of whether you could prove Google or Meta matched their advertising placements to individual pieces of news content, it was easy to satisfy any reasonable observer that news content was drawing users to the Google and Meta platforms. During their online engagement, consumers were digitally tracked as they were exposed to advertising impressions. That data tracking sold advertising for the platforms and enriched the data profiles at the heart of their business model of matching content tastes to individual consumers.

Confident that net value exchange in a truly competitive market in news distribution would favour the publishers, Sims recommended, and the Australian government agreed to redress the imbalance of bargaining power between publishers and platforms with a mandatory bargaining code with two key measures. 

First, the publishers could combine their bargaining power into one or more collective bargaining consortia —although this was mostly aimed at getting small publishers a seat at the table. 

More importantly the bargaining for net value exchange would be backstopped by binding arbitration. In the event of a bargaining impasse, the ‘baseball-style’ arbitration empowered an independent adjudicator to choose between one of two final offers by the warring sides. This was anticipated as being effective in soliciting reasonable offers and, as a bonus, relieve the arbitrator of detailing a defensible outcome in the absence of adequate data and an agreement on the best economic model. 

Most importantly, arbitration did two other things. It gave the platforms a forum where they could show up to prove their contention that they did not monetize news, and it provided state-enforced consequences, an “or else,” if they couldn’t or wouldn’t do it. 

“Grinding resistance”

The “or else” was vital to getting the Australian code to take flight. Both Big Tech companies fought the legislation. Google threatened to shutter its Search platform to Australians and Facebook notoriously blacked out Australian news for a week during fire season. 

But the Australian government —and the Canadian government as well—must have taken note of the years-long effort of the European Union states to achieve the same ends as the Australian code.

The Europeans took the first stab at creating an expanded definition of copyright for news publishers so they could negotiate content licensing with Google and Facebook. Initial efforts failed in Germany in 2013 —attributed to a weakly drafted law and an unsympathetic competition tribunal— and Spain in 2014. The Spanish law is often cited incorrectly as neutered by Google’s ruthless delisting of news content from Search, a warning for other nations. In fact, Spanish news continued to be found on Search, it was the Google News aggregation site that banned Spanish content. 

It wasn’t until March 2019 that the European Parliament decided to settle the matter by legislating Directive 2019/270, an amendment to existing copyright law that created intellectual property rights for news publishers who made their content available on Google and Facebook platforms. Like most EU Directives, the framework was downloaded to members states for implementation.

France was the first European member state to implement the Directive in October 2019, instructing the platforms to bargain with French news publishers. The French transposition of the Directive included a joint platform-publisher dispute resolution committee, chaired with a deciding vote by a high court judge.

When Google stalled the bargaining, the French Competition Authority ordered good faith negotiations. When Google thought they had triumphed by getting French publishers to sign a deal in which compensation was based solely on news content displayed on Google’s news aggregation site in January 2021, the Authority imposed an eye-watering 500 million euro fine in July 2021 (three months after the Australian code was passed) for trying to limit the scope of compensable news content, among other tactics. Google paid the fine and negotiated a more generous deal with publishers in March 2022, a month before Bill C-18 was tabled in the Canadian House of Commons. Facebook reached its own deal with French publishers in October 2021. 

The lessons that Canadian policy makers could draw from the European and Australian initiatives were there to be learned, not the least of which was the grinding resistance of Google and Meta.

“A Bargaining Code or a News Fund?”

When the Canadian federal government introduced Bill C-18, the Online News Act, it was picking up where Australian legislation had left off. But first the governing Liberals had to make an important choice about policy design. Once that was done, the legislation would face the normal Parliamentary hazing from the Opposition, quite a few upstart online news outlets, and a skeptical commentariat of critics.

The mainstream of the Canadian news industry—Newsmedia Canada, the Canadian Association of Broadcasters, and the CBC—wanted Ottawa to adopt the Australian bargaining code in Canada. To make that work, Parliament had to create an intellectual property right over online news content that publishers made available on Meta and Google’s intermediary platforms. The Canadian bill would replicate the Australian ‘net exchange value’ as the measuring stick of compensation. 

Finally, the legislation would need to rebalance bargaining power. It would enable publishers to obtain compensation from platforms by allowing news companies to combine into bargaining consortia and –if negotiations with Google or Meta failed—seek binding arbitration.

In April 2021, a month after the Australian bargaining code came into effect, the federal government began the public consultation that is typically conducted before tabling novel legislation. It already had the recommendation of the government advisory panel (the same panel that recommended the Online Streaming Act Bill C-11) to rebalance platform-publisher bargaining power. In 2019 the MPs reviewing Canadian copyright legislation had recommended the government study the EU Directive.  In Parliament’s senior chamber, Conservative Senator Claude Carignan was preparing Bill S-225 modelled on the French legislation. 

With all of that policy momentum propelling him forward, Heritage Minister Steven Guilbeault asked the public for opinions on adopting the Australian code. He also asked for input on an alternative model of an independent news fund to which platforms would contribute financially and online news publishers would draw. 

Guilbeault’s solicitation of opinion on an independent fund seemed like going through the motions: Australia and Europe had blazed the path with a bargaining model which gave it instant policy credibility and was what mainstream Canadian publishers wanted anyway.

On the other hand, independent funds had a track record in Canada. The federal government relied upon an independent committee to vet applications for its 2019 journalism labour tax credits, popularly known as the ‘QCJO’ program from its tax nomenclature “Qualified Canadian Journalism Organization.”  As well, the broadcasting regulator the Canadian Radio-television and Telecommunications Commission (CRTC) had since1994 tithed cable and satellite distribution companies to contribute five per cent of annual revenues to the public-private Canada Media Fund and community cable channels. Beginning in 2016, the contributions sponsored a news fund for 20 independently owned local television stations.

As expected, industry response to Heritage’s public consultation from Newsmedia Canada and the Canadian Association of Broadcasters favoured the bargaining code over an independent fund. 

In a separate submission Bell, the country’s largest media company and owner of the biggest news network CTV, offered some revealing arguments about why it preferred a bargaining code. As a large media company, Bell liked the idea of negotiating a bespoke arrangement directly with the Big Tech platforms with the latitude to substitute distribution arrangements for cash contributions. And with its eye on how quickly Australian media companies were signing agreements with the platforms, Bell assumed the same dispatch could be achieved in Canada. 

Lastly, as Bell representatives archly observed, “the creation and operation of an independent news compensation fund is likely to be highly politicized with the concomitant risk of undermining the freedom of the press.” This without a doubt was an allusion to political heat the governing Liberals had taken over the QCJO program of direct federal subsidies, two years earlier. In contrast, legislation that focussed on bilateral negotiations between private companies might escape those politics.

While the choosing between these two policy paths —platform/publisher bargaining versus a ‘contribution and draw’ fund — offered various pros and cons, the sleeper issue was about how compensation would be divided. 

In the bargaining model, the basic premise of ‘net value exchange’ did not necessarily drive an equitable distribution of compensation based on the number of employed journalists or any other metric. A rebalanced marketplace was still a market: some news content would fetch a higher price than others. Some platform distribution was of greater or lesser value to news organizations, depending upon the circumstances. These uncertain outcomes fed the fears of smaller news outlets that Bell and the other big media companies would manipulate the bargaining model to their own advantage and drink the waterhole dry. Convinced that the fix was in, many small and independently owned news outlets opposed the legislation.

On the other hand, an independent fund was almost certain to adopt a policy of equitable or proportional distribution of compensation, just as the government’s QCJO program had subsidized news outlets on the basis of payment per employed journalist. 

One of the few proponents of an independent fund was Unifor, the largest Canadian media trade union (I was Unifor’s Media Director at the time). An independent fund was better, according to Unifor, because “the public interest is squarely at the beginning, middle, and end of this process, as the government sets the levy rate and the distribution formula.”  Nevertheless, Unifor ranked the bargaining model as an expedient second choice.

Unifor’s submission to the public consultation also warned that Google or Facebook would look for a way to derail the government’s efforts:

We support the Australian model with the added caveat that the federal government must retain default power to impose a news fund as a remedy to shortcomings of the Australian model. We believe there are any number of ways that digital platforms might sabotage the government’s efforts in this exercise, as Facebook did in its week long capital strike in Australia earlier this year. We would be naïve to think that Facebook would never try that again, from the safety of their American corporate nationality and their billions of dollars in cash reserves. This is, after all, a warm up for the American political battle over the same issues, and the platforms will make every effort to win that battle. Unfortunately, Canada could easily be collateral damage. Accordingly, the power to impose a news fund model should remain within the discretion of the government, allowing them to impose a levy arrangement on a platform.

The recommended fail-safe option of a fund levy did not make it into Bill C-18.

the bill is tabled

Before the Trudeau government could table a bill, the October 2021 election intervened. In their election platform, the Liberals promised to implement a bargaining code modelled on Australian legislation. The Conservatives matched this with a detailed proposal to “adopt a made in Canada approach that incorporates the best practices of jurisdictions like Australia and France,” including binding arbitration and a proviso against government “picking and choosing who has access to the royalty framework.”

Re-elected to minority government, the Liberals tabled Bill C-18 six months later on April 5, 2022. Without explaining, Heritage chose its promised bargaining code over an independent fund.

Like the Australian code, the foundational element of the Canadian bill was the creation of a property right in the news content that publishers linked to Google and Meta’s sites with or without being able to secure a licence agreement. The legislation described this property right as “making content available” while opponents labelled it a “link tax.”

With the foundational property right established for publishers, the legislation replicated the Australian architecture with a bargaining regime between the platforms —dubbed Digital News Intermediaries (DNIs)— and “eligible news businesses” who were permitted to form collective bargaining coalitions. If bargaining did not produce a voluntary agreement, the publishers could seek “final offer” (baseball-style) arbitration. An arbitrator would apply the criterion of net value exchange. 

The Canadian bill differed from the Australian code in at least two important ways.

Like the Australian code, section 11(1) of the Canadian bill also offered Google and Meta—the only platforms big enough to qualify as DNIs—a pathway to a CRTC-dispensed exemption from arbitration if it negotiated “fair compensation” with “a significant portion” of Canadian news outlets from a wide diversity of news organizations. The diversity requirement was a Canadian innovation on the Australian approach.

The CRTC had a mandate to review a thorough checklist of policy goals reflected in the voluntary agreements between platforms and publishers. It would ensure that the deals reflected “fair compensation” for all news content made available by publishers and the Big Tech platform and that an “appropriate portion” of the compensation be used by online publishers for news production. The regulator would also ensure that the distribution benefits a diversity of the news industry—covering non-profit newsrooms, official minority language communities, local news, racialized and Indigenous communities, and so on.

There was another important difference between the Canadian “exemption” and the Australian “non-designation”  in their respective bargaining codes. Both codes allowed the DNIs to sign only a “sufficient” number of news outlets to voluntary agreements. But the key difference between the Canadian and Australian approach to exempting the DNIs from further regulation was that the gatekeeper of Australian non-designation was the Finance Minister acting by fiat (having taken the advice of the Competition Commissioner). By contrast, in Canada the CRTC ruled on exemption based on legislative criteria and subject to appeals.

The exemption provision in section 11(1) of the Online News Act baked into law the public policy goal of distributing compensation to a wide diversity of news organizations. The importance of that feature of the Canadian bill became more pronounced in 2022 when the Australian Finance Minister granted non-designation to Meta despite it refusing to negotiate with two prominent Australian news outlets.

One thing the Canadian legislation didn’t provide was a bottom line on compensation outcomes. But in light of the fact that Bill C-18 was replicating Australia’s bargaining code, there was a widespread assumption in public commentary and Parliamentary debate that Canadian news publishers would obtain similar results through bargaining or arbitration. The Australian dollar figures were shrouded in confidential agreements and the only information on the public record was Australian Competition Commissioner Rod Sims’ statement that the aggregate value of the various agreements was approximately $200M AUS ($190M CDN) and an assurance from small Australian news organizations that they had been treated fairly. 

Commentators assumed the value of the undisclosed Australian deals to compensate 30 per cent of publishers’ editorial salaries and costs (with Google and Meta dividing the payments, 20% and 10%). Perhaps based on this 30 per cent figure, Canada’s non-partisan Parliamentary Budget Office estimated that the DNIs would end up paying $329M CDN to Canadian publishers.

“A lie, a shakedown”

When the bill hit the Parliamentary order table the Conservative opposition abandoned its election promise and opposed the bill as “censorship.” 

An army of commentators also opposed C-18. They criticized the legislation as favouring big Canadian media companies over small news outlets, undermining the independence of the press, fueling public distrust of media, leading an unconstitutional federal foray into provincial jurisdiction, interfering with the free linking of content on the internet, and provoking the ire and news throttling power of the Big Tech platforms. Very few of these critics touted an independent news fund as an alternative.

Not one of these critics bought into Rod Sims’ formulation of net value exchange between platforms and publishers. Jen Gerson of The Line called it “a lie.” Several others suggested the entire scheme was simply a “shakedown” of Big Tech by politically connected Canadian media companies, driven by an illegitimate conviction that the platforms had stolen “their” advertising revenue. 

The argument in favour of net value exchange, while difficult to prove to the satisfaction of critics and skeptics, had one thing going for it: facts on the ground. For example, Google had long split advertising revenues with content providers on its YouTube platform (55% going to creators). Both Google and Facebook had made rich deals with the Australian publishers in 2021 and were in the process of settling accounts with French and Spanish publishers too. And perhaps in hopes of defusing the Liberals’ push for Bill C-18 in Canada, in 2021 and 2022 Google and Facebook reached voluntary compensation agreements with many Canadian print publishers.

All of these precedent setting licensing agreements strengthened policy arguments that net value exchange favoured publishers: otherwise, why would Google and Facebook pay so much? 

The bill’s opponents needed a less esoteric issue to rally around. Just as the Liberal MPs were hammering “Big Tech” in their public messaging, the Conservatives beat a familiar tattoo: attack “Big Media.” The criticism that got the most political traction during the public debate was that the bill, like it or hate it, would favour large Canadian publishers at the expense of small publishers. 

The “big” publishers included the large television companies owned by major telecommunications conglomerates Bell Media CTV, Rogers City TV and Québecor TVA; the incessantly pilloried public broadcaster CBC Radio-Canada; and (depending on who was doing the skewering) the right-wing Postmedia. Because the television companies and the public broadcaster provided the lion’s share of online news, the Parliamentary Budget Office estimated that on a pro rata basis they would win 75% of the final compensation paid out by the platforms. 

As we know, the Liberals’ bill was approved by the House of Commons anyway in December 2022 with the support of the NDP and the Bloc Québecois. A number of Parliamentary amendments were made without changing its basic policy design.

But what occurred the same month may have been the most influential event of all in the journey of Bill C-18; and it didn’t happen in Canada. In Washington D.C., a milder version of a news bargaining code almost made its way into law in December 2022 during the waning moments of the 117^th congress—and remained to be retabled in the future. Google had finally settled its compensation dispute with French and Spanish publishers but others were queued up to implement the EU Directive, and legislators were planning a similar law for the United Kingdom. In July 2023 Google published a cheerful corporate blog in which it celebrated licensing arrangements with “1500 publications across 15 countries” from which one might infer that its strategy in the face of a transnational battle to discourage legislative action was to voluntarily sign licensing agreements at an agreeable price and threaten news throttles where necessary.

The global platforms faced the same challenge on numerous fronts and, to use a baseball analogy, they needed to strike out the side. Canada was in the batter’s box.

the news throttles

Early Canadian opinion polls suggested strong public support for greater regulation of the Internet, including Bill C-18, when Nanos released a survey in May 2022, shortly after the bill was tabled. Two weeks later, Newsmedia Canada released a Pollara poll finding that 79 per cent of Canadians (including 71 per cent of Conservative voters) agreed with the principle that “web giants should have to share revenue with Canadian media outlets.”

Opinion polls on detailed legislation invariably capture public sentiment at a general level, in principle perhaps, but subsequent events —more information, debate and criticism— can change results. When the bill got into prolonged debate at the Heritage Committee in the fall of 2022 the Conservatives pivoted to oppose the legislation and critics vied to influence the public narrative in media coverage. 

But the most impactful events were Google and Meta’s ominous threats to reprise news throttle tactics. Meta was more explicit in its threats (subsequently acted upon as we know now) to evade Bill C-18 by banning news on its Canadian Facebook and Instagram platforms. Google hired Canadian pollster Abacus to publish in mid-October a contentiously framed opinion survey suggesting a sudden drop in public support for the bill. On the other hand, a broadcaster-commissioned Nanos survey published at the end of the month and asking about “fair payment” suggested that public support for C-18 had hardly budged since earlier Nanos poll from May. 

The duelling polls settled nothing –-tellingly, the Abacus poll found that only eight per cent of respondents were familiar with details of the legislation—and the broader public only got engaged when Google and Meta acted on their threats of news throttles. Google fired a shot across the government’s bow when it ran a covert six-week news throttle test in February 2023 (while C-18 was before the Canadian Senate) that affected four per cent of its audience. 

When the bill received Royal Assent in June, Meta announced and then implemented its indefinite news throttle in August, still in effect in 2024. Once the platforms’ news throttles became a reality various opinion polls in July suggested public support for the goals of the bill slumped to 60% and more significantly half of respondents supported the government backing down in response to the news throttles. The results were skewed regionally and by voter preference, suggesting Conservative-leaning respondents were cloving to their Party’s messaging that the bill was “censorship.”

Canadians’ memories are still fresh about what happened next. Google threatened to join Meta in a permanent boycott of news in Canada when the Online News Act came into force in December 2023. The previous September, the new Heritage Minister Pascale St.-Onge had floated a draft regulation implementing C-18 that offered the platforms a tithe of compensation payments set at four per cent of revenue should they seek the bill’s exemption from bargaining and arbitration.  Fixing the levy at figures much lower than the Parliamentary Budget Office estimate from a year earlier (which made the assumption that compensation would be based on 30% of editorial costs), St.-Onge’s four per cent was equivalent to a $172 million annual payment from Google and $62 million from Meta. 

Google and Meta both rejected the Minister’s offer and the clock ticked down to the December 17^th date when the Online News Act would take effect and Google had promised to begin its news throttle. 

But in a buzzer-beater moment on the last day of November, St.-Onge announced she had evaded the looming deadline by negotiating a $100 million annual compensation payment from Google to Canadian news publishers in compliance with Bill C-18. 

Hard numbers are difficult to come by when evaluating the bottom-line outcome. But a news-less Meta is paying no compensation under the bill to Canadian publishers and is set to claw back what its spokesperson described as $20 million in its voluntary licensing payments. In addition, Canadian publishers can no longer reach their audiences through Facebook or Instagram distribution, affecting their viewership and advertising reach. As for Google, its $100 million in compensation payments to publishers is far less than its projected $172 million share of the initial Heritage target of $234 million for Google and Meta combined. 

“unfinished business“

The Online News Act came into effect in December 2023 and rang in the new year 2024 with some unfinished business.

The Meta news throttle continues. The company’s public messaging is that it would restore Canadian publishers’ access to its platforms if the federal government exempted Facebook and Instagram from the Actwith no obligation to pay compensation. Meta’s previous $20 million worth of voluntary compensation payments—in the form of local journalism bursaries—are gone. A number of commentators have said that the loss of online distribution privileges will impair Canadian news publications, especially start-ups.

Another loose-end is the impact that C-18 may have in other jurisdictions that are showing halting progress towards a bargaining code—the United Kingdom, the United States, California, Brazil, and others. If the European, Australian and Canadian legislation tips political momentum for a similar law in the United States, that might have implications for Meta’s ongoing news throttle in Canada or even the amount of compensation paid.

Yet another long-term question mark is the future impact of artificial intelligence large language models (AI-LLM) on news organizations. All of the Big Tech companies are pursuing this market where they will directly compete with news organizations for information-seeking audiences. In competing with news outlets, the AI-LLM applications will be ingesting their online news content, with or without licences or compensation. The current version of the Online News Act does not address this scenario.

But the business immediately at hand is how Google’s $100 million is to be divided among Canadian news organizations. The September 2023 draft regulation contemplated the value of an individual news outlet’s compensation varying up to 20 per cent above or below the median compensation of all agreements.

“The intent of the criterion,” said the government’s summary, “is to promote equity across news agreements while preserving a degree of flexibility.”  The very flexible 20 per cent tolerance for unequal but “equitable” outcomes offered deference to how platforms and publishers might value news content and its distribution differently for some news publishers than others; in other words a rebalanced market for news. 

However, the Minister cancelled the 20% rule in the final regulation in December 2023 because the government went in an entirely different direction once it had to work with a smaller pool of money than anticipated. The regulation offered Google the choice of making a series of deals with different publisher groups —in which case the new regulation required “like for like” compensation outcomes— or one agreement with a single consortium of publishers in which case the compensation would be meted out on a headcount of employed journalists. 

So far, so equal. Except that the government made a bold move to severely limit the amount of compensation payable out of the $100 million to the public broadcaster CBC ($7 million) and private broadcasting companies ($30 million), leaving $63 million for online print publishers. That means that the final distribution of the $100 million will look approximately like $20,000 per journalist for print publishers, $7,300 for broadcasting companies, and $2,900 for the CBC and Radio-Canada. 

Heritage Minister St.-Onge characterized this outcome as “accounting for the dynamics of the news industry.” In briefing the press on the regulation, a Heritage spokesperson elaborated that the dependency of print publishers on the intermediary platforms is “more pronounced.”

Not done yet, in a calibrated policy move the government increased the direct federal subsidies to print publishers under the QCJO program (broadcasting companies are ineligible) by raising the subsidy from 25% to 35% of journalist salaries and raising the cap from $55,000 to $85,000 in annual salary. Combining Google money and QCJO subsidies, print publishers would be reimbursed up to $50,000 per journalist salary. In Québec, an additional provincial subsidy raises it further.

By juicing the QCJO program, the federal government was making weight for the disappointed expectations of the print publishers of up to $81 million from the flush Google-Meta payout previously projected by the Parliamentary Budget Office and the loss of the existing $20 million in Meta licensing payments, plus the lost value of the Facebook traffic referrals to news websites. It is impossible to measure how 570 different print publishers might have gained or lost from the final regulation. As a baseline, the existing voluntary compensation from Google and Facebook is believed to have been unequally distributed among print publishers. The numbers are confidential anyway. 

In this kind of information vacuum it becomes difficult to pass judgment on how print publishers fared under Bill C-18, but it is hyperbole for some critics to call it “an epic miscalculation” by the government.

The broadcasting companies, on the other hand, were aggrieved at getting the short end of the stick. The CBC’s claims to compensation for their news content fell easily to the pragmatism of the day, given the financial security of its Parliamentary funding. As for the broadcasting companies, it’s reasonable to assume that the Heritage Minister thought that Bell, Rogers and Québecor could afford to keep producing its many local news casts at a loss (as they had for the previous twelve years running).  That was of little solace to the other 35 independently owned local television stations.

For television stations this was the second occasion in which they suffered their free content being monetized without compensation by wealthy news distributors. The advertising-funded broadcasters had fought for years to get cable and satellite companies to pay “retransmission fees” for the broadcasters’ transmissions of programming pulled off their television signal towers. The cable companies meanwhile billed their customers every month for that programming and shared none of it with local broadcasters. 

Unlike in the United States, Canadian copyright law denies broadcasters any property rights in their “local signals.” Broadcasters pushed hard for US-style retransmission fees that might have been worth $1 billion in annual payments from Canadian cable companies, but in 2012 a narrowly split Supreme Court denied the CRTC the authority to levy such payments due to copyright rules. 

The Canadian Association of Broadcasters was no more thrilled with St.-Onge’s division of the Google spoils, pointing out that “television” news available on broadcasting and online platforms is by far the biggest source of Canadian local news. Yet Google is gatekeeper to 40 per cent of web traffic to CTV News, the country’s most popular news website (next to CBC-Radio Canada). 

The television companies nevertheless have one last shot—as the CRTC implements the Liberals’ other Internet bill—Bill C-11, the Online Streaming Act—it is considering proposals to create a news subsidy for television and radio stations with contributions levied from Netflix and a host of foreign video and audio streamers now entering the orbit of Canadian regulation. 

We can say one thing about the outcome of Bill C-18—with the government’s deliberate intervention in the distribution of the $100 million of Google compensation to news organizations and its boost to the QCJO financial aid to journalism, we have travelled a very long way from Rod Sims’ crisp policy idea of creating a rebalanced marketplace in which to capture the net value exchange between platforms and publishers. 

“a post mortem”

A proper post-mortem of legislating the Online News Act would have more information at its disposal. What we can say is that if the results of the bill are benchmarked against the Australian outcomes, there is far less money for news publishers in Google’s $100 million and Meta’s exit. 

The aggregate Australian figure of $190 million (CDN) was scaled up to $329 million by Canada’s Parliamentary Budget Office. Whether that was inflated or not, the $329 million for a Canadian population of 40 million is only slightly richer, on a proportional basis, than $190 million for an Australian population of 26 million. The bottom-line outcomes of the Google and Meta deals with French publishers remain undisclosed and unavailable as benchmarks.

It might have been different if not for Google and Meta deciding that the Canadian bill provided too much momentum for legislative efforts in the US and the UK. It might have been different if the platforms did not make the assessment that Canada was a small enough country —having failed to arm itself with an “or else” fail-safe mechanism in its legislation— to defy. It might have been different if the Conservative Opposition had stuck to its previous support for a bargaining code.

The public debate over the bill, and rescue planning for an impoverished news industry, is far from over. What will not change is the profound risk of a collapse in news reporting that is essential to democracy and, on the other hand, an indefinite stream of state-directed sponsorship of an independent press that is unrecognizable from the world in which advertising revenue once comfortably supported journalism. It may seem clinical to reduce such matters of deep principle to the calculus of “risk,” especially risks that are difficult to measure and only darkly predict. But risks they are.

It would not be fair to say the federal government has no plan to manage these risks, no strategy for news. But as is typical in public policy, the current situation is at best a palimpsest of overlapping regulatory initiatives and at worst a triaged scramble to sustain journalism. 

In December 2023, Members of Parliament sitting in the House of Commons Heritage Committee agreed to hold hearings in the new year to study the crisis in news media. The carefully drafted language of the resolution reflects MPs’ determination to manage the public policy risk of saving journalism without managing news journalism itself.

“Someone else should pay”

Finally, a postscript to this lengthy evaluation of the public policy goals and their execution in the Online News Act.

It’s the public polling I want to point out. Initially, polls ran strongly in favour of the government forcing Big Tech platforms to share revenue with Canadian news publishers. But that support took a hit when the platforms put their own price to the enterprise in the form of Meta’s blackout of news and Google’s threat to do the same. 

I’m extrapolating from that sequence of events in concluding that the public generally favours state action to aid news journalism provided it doesn’t cost us more. This is not unlike previous polling showing public support for sensible policy goals like supporting Canadian content but paired with strong opposition to the notion that consumers foot the bill for that. Even a public policy as conventional as charging sales tax on Netflix subscriptions barely garnered majority support in polling.

News journalism is a public good—both in the sense that Canadians value its importance, but also in the sense that Canadians prefer to consume it without paying. Mass media’s iron grip on the advertising market allowed us to enjoy free or nearly free news content for decades until disrupted by waves of market fragmentation beginning in the 1990s. Today, only 15% of Canadians pay for online news. If local news weren’t included by CRTC fiat in the basic cable TV subscription, we might discover something equally discouraging. 

The biggest obstacle, then, to a successful public policy in news journalism might be our stubborn desire that someone else pay for it.

How we devise a national news strategy while conceding that reality is our task. I was pleased to read a valiant attempt at this by Peter Menzies and Konrad von Finckenstein who, in And Now the News, come down decidedly against direct subsidies (except for CBC with a refreshed mandate) and in favour of tax incentives supporting reader subscriptions and enterprise innovation. Responding to their report, Ivor Shapiro and myself didn’t endorse phasing out subsidies, but we did offer support for creating new policy tools and putting them to the work.

If federal MPs really desire a national discussion of a news strategy, let’s give it to them.

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