Canadian government exempts Google from Online News Act, signaling a potential end to the link tax debate in North America.
The contentious issue of the link tax has taken center stage in the news industry, with governments and tech giants grappling over the future of online news. In a surprising turn of events, the Canadian government has reached an agreement with Google, exempting the tech giant from the controversial Online News Act. This development raises questions about the viability of the link tax and its impact on the struggling local news landscape. As California prepares to discuss its own proposed link tax legislation, the fate of the link tax in North America hangs in the balance.
The Unintended Consequences of Legislation
The Canadian government’s decision to exempt Google from the Online News Act comes as a relief to many news publishers who have opposed the legislation. The link tax, which aimed to transfer money from tech giants to news organizations based on the number of news links displayed on their platforms, has been criticized for its flawed payment allocation formulas. The legislation favored larger publishers over smaller ones and failed to differentiate between different types of content, such as national vs. local news and human-created vs. AI-generated articles.
One such publisher, Jeff Elgie, the founder of a network of 21 local news sites in Canada, highlights the unintended consequences of the link tax. Elgie, who employs 90 journalists across his network, initially stood to benefit from the legislation. However, he now decries the law, as the loss of Google links poses a significant threat to his business. Many publishers across Canada share Elgie’s concerns, emphasizing the critical role that Google and Facebook play in driving traffic and revenue to their websites.
The Impact on Local News and the Need for Google
The exemption granted to Google by the Canadian government reflects the recognition that the loss of Google links would have a devastating effect on the entire news industry. Local news publishers heavily rely on Google and Facebook for traffic, with some publishers reporting that up to 80% of their revenue potential comes from these platforms. The removal of Google and Facebook links would not only result in a loss of audience but also hinder the ability of publishers to attract new subscribers or members.
The fate of the link tax in California is now under scrutiny, with the proposed California Journalism Preservation Act (CPJA) set to be discussed in a hearing led by State Senate judiciary chair Tom Umberg. The outcome of this hearing will be critical in shaping the local news landscape across the United States. If the CPJA passes unchanged, it could potentially revive the federal Journalism Competition and Preservation Act (JCPA) and encourage other states to follow suit.
A New Model for Supporting Local News
As the link tax debate continues, the focus should shift towards finding solutions that genuinely support local news and journalism. Rather than favoring large publishers or specific types of content, any legislation or agreement should prioritize increasing the production of original local news reporting. A recent agreement between Google and the Canadian government provides a starting point, with $100 million allocated annually to support news organizations and an increase in the payroll tax credit for employing journalists.
To ensure that the funds benefit local news publishers and journalists, it is crucial to establish fair allocation formulas. Instead of rewarding out-of-state publishers or AI-generated news, the money should be directed towards increasing local newsroom headcount or budgets. Approaches such as payroll tax credits for hiring and retaining local journalists, small business advertising tax credits for advertising in the local press, and government advertising set-asides for ethnic and community media outlets have shown promise in supporting local news.
Conclusion:
The exemption granted to Google in Canada and the ongoing discussions in California highlight the complex nature of the link tax debate. While the fate of the link tax in North America remains uncertain, the focus should shift towards finding effective ways to support local news and journalism. By prioritizing the production of original local news reporting and implementing fair allocation formulas, it is possible to rebuild and strengthen the struggling local news landscape. The lessons learned from Canada and California can serve as a guide in shaping a sustainable future for the news industry.
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