The underlying economics of the Fair Digital News Bargaining Bill rests on intellectual property rights.
I have written elsewhere about the tension between information as a public good which economic efficiency requires to be freely available and yet, because it is costly to produce, may require payment to those who create the information. Any practical resolution of the tension will be imperfect.
A common resolution is to give the producer of the information an intellectual property right. Examples include patents and copyright. They are essentially human constructs. The details of the laws which define these rights vary from country and through time. A major factor in the evolution of intellectual property rights has been changing delivery platforms.
Thus arises the need for the Fair Digital News Bargaining Bill currently before Parliament. The rise of social media and its use of news poses issues which we may, or may not, want to resolve. News can be costly to produce – a comprehensive news service certainly is. Under what circumstances are the social media platforms such as Google and Meta – the two examples I use here, but there are many others – entitled to use news generated by newspapers (and broadcasters)?
In standard market terms, newspapers are very odd institutions. Purchasers do not pay for the full cost of the news they read. Historically, perhaps two-thirds of the media’s funding has come from advertisers who, in effect, pay the newspaper for access to the readership. The revenue coming from advertising meant that subscribers were getting a heavily subsidised product.
It was not an ideal solution to the provision of news but, especially in a democracy which depends on a vigorous independent news service, it was the best arrangement that it has been able to devise. (There may be a role for a government-subsidised news service. As valuable as RNZ, is, the existence of private sector media reduces the possibility of the government interfering with its public news service.)
The model which was successful for over a hundred years broke down with the arrival of the worldwide web. Many people shifted across to it for their news sources and so have the news providers. But their advertisers shifted to a different part of the web, especially social media, because it enabled them to better target the audiences they were seeking.
As a result the traditional news media has lost much of its advertising revenue. It tried to recover the loss by raising the price of its subscription to its papers, by charging for use of its websites and by donations and sponsorship. These additional sources have not covered all the lost advertising revenue and the news media has had to cut back on its news coverage – in practice that means fewer journalists chasing the news.
But the new social media also needs access to the news. Google would provide a limited service if the search engine did not include news stories; Meta uses news stories to attract the audience which its revenue-producing advertisers seek.
The Fair Digital News Bargaining Bill attempts to address this muddle by giving news media, in effect, an intellectual property right to their stories. Or rather, to extend existing their property rights. After all, both NZME and Stuff pay overseas news providers for the stories they republish.
Social media does not always republish the full story. Sometimes it is just the headlines which also cites the news site where the story sits. The effect of the proposed legislation is to make it clear that this infringes a property right of the news provider who is entitled to charge for that use. (The bill covers only particular sites; essentially news providers but not blogs. I suppose that others, in principle, could be covered by the proposed provisions – such as when this column cites a news site – but this is not the intention of the bill.)
How to enforce the new property rights? I suppose it could have been left to the courts but New Zealand has followed other jurisdictions, such as Australia, Britain, Canada and France, which have an arbitration process. Yes, it is clumsy and expensive – but it is likely to be less clumsy and less expensive than litigation. (Providing an alternative to expensive litigation is not new; small claims courts are another example.)
How has social media responded in these other jurisdictions? Google seems to have decided to accept the arrangement, paying large sums to the news providers. Canadian ones receive CD $100m annually (about NZ$15m on a per capital basis), perhaps t percent to the news providers’ advertising revenue. Presumably, the commercial judgement is that without the news sites the search engine would be crippled and people would go to others. The additional revenue will, one assumes, go into more news coverage; Google’s customers will be among the beneficiaries.
On the other hand, Canadian Meta has abandoned providing news from Canadian news sites so it pays nothing. Presumably its commercial judgement is that it will not lose a lot of custom as a result. Presumably too, the Canadian news providers have judged that it makes little difference to them if they don’t get referrals from Meta. On the other hand French Meta – it was Facebook then – not only agreed to pay up but agreed to provide news in French.
The Fair Digital News Bargaining Bill is at the select committee stage. It was introduced by the Hipkins Labour Government, but the Coalition Government has decided to proceed with it. (Despite, to my surprise, objections from some neoliberals who, I would have thought, would have welcomed improved enforcement of intellectual property rights.) When Parliament passes the bill, a step will be taken to making our news media more financially secure. Even so, its prospects remain fragile.