California lawmakers had a chance to pass first-in-the-nation legislation that would have forced Google, Meta, and other tech firms to pay ongoing fees for earning billions from using news outlets’ content while journalism operations have struggled and closed.
But amid the tech industry’s strong-arm tactics, millions of dollars spent lobbying, and allegations of currying favors from power brokers ranging from the California governor to the CEO of a nonprofit news organization, Big Tech scored a backroom deal last month that killed the journalism bills.
Instead of forcing Google, Meta, and other tech companies to cough up potentially billions of dollars in ad revenue, California is moving forward with a smaller, limited-time program whose costs will be split between taxpayers and tech companies — and some of the funding will go toward the development of artificial intelligence tools, a technology that some observers say is an existential threat to the news industry.
In short, instead of forcing Google and its tech brethren to pay for its stranglehold on California-based news outlets, a California lawmaker ceded to pressure and settled for a slap on the wrist that critics say will do nothing to lessen Big Tech’s grip — and may even strengthen it.
The development comes as the major tech companies report hundreds of billions in 2023 ad revenue, and as Google faces multiple antitrust lawsuits stemming from monopolizing ad sales and online search options.
“We have this backroom deal where taxpayer dollars have been introduced as a consolation prize because California couldn’t execute antimonopoly policy,” said Matt Pearce, president of the Media Guild of the West, a union representing employees from the Los Angeles Times, Texas Tribune, and other newspapers in the Western United States.
The two California bills, Assembly Bill 886 and Senate Bill 1327, would have forced certain tech companies to pay news outlets millions of dollars for using or linking to news content, as well as implemented a tax on user data extracted for advertising purposes, with proceeds going to a newsroom fund.
California is home to more than 10 percent of the U.S. population and hosts the fifth-largest economy in the world. Legislation passed in the Golden State often sets the standard for legislation nationwide and helps influence federal policy.
The death of the two bills could be a harbinger for how tech companies will fight similar legislation elsewhere. Other countries have demanded tech firms share ad revenues with news outlets, and earlier this year, Illinois lawmakers introduced a bill similar to California’s revenue-sharing proposal. In response, Meta, owner of Facebook and Instagram, has threatened to “end the availability of news in Illinois” on its platforms if the bill passes.
The California legislation was killed in a backroom deal spearheaded by Assemblymember Buffy Wicks (D-Berkeley), author of Assembly Bill 886, in exchange for a $250 million agreement in which Google will pay $25 million in 2025 and then $20 million annually for the following four years towards two journalism initiatives. The state has reportedly agreed to provide another $70 million in tax dollars in journalism funding.
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Along with concerns about taxpayers having to foot part of the bill, critics of the agreement point out that state tax dollar spending must be approved by the California legislature, and no bill or other initiative has been introduced. So the funds touted in the agreement are far from a done deal — especially since California is currently facing a massive budget deficit and enacting widespread budget cuts.
“I see a press release, I see a lot of quotes from publisher lobbies, but what I don’t see is anything that’s binding, or hard evidence that this thing is going to materialize,” Pearce said
Google will also contribute $5 million annually for five years to create a “National AI Innovation Accelerator” that will allow journalists, researchers, and others to “experiment with AI to assist them in their work,” according to a press release from Wick’s office. OpenAI, one of the leading artificial intelligence companies, will provide technology resources, according to a fact sheet from Wick’s office.
The New York Times, Chicago Tribune, and other outlets sued OpenAI earlier this year, alleging that the tech company violated copyright laws by using their news stories to train the AI technology.
The California deal comes after Meta threatened to remove all California news content from its sites. Earlier this year, Google temporarily removed all California news outlets from its website as a threat to what it would do if the bills passed.
Democratic California Gov. Gavin Newsom, who has deep ties to the tech industry, stayed silent on the bills. This leadership is in contrast to other places where similar legislation saw success.
In 2023, Canadian Prime Minister Justin Trudeau advocated for the passage of a Canadian law to force Big Tech to pay news outlets, saying that Google and Meta were using “bullying tactics” to block the legislation.
“You did not see a whiff of that from Governor Newsom,” Pearce said. “It’s that silence that really takes on an oppressive quality when you’re getting closer to making these bills real and you’re going around asking lawmakers to take hard votes.”
Google has spent more than $2 million since January 2023 lobbying the California legislature, Newsom’s office, and other regulators against the bills and other issues, lobbying disclosures show.
Google officials personally lobbied Newsom, Senior Counsel to the Governor Jason Elliot, and Secretary of Legal Affairs to the Governor Ann Patterson during an event at the San Francisco International Airport on June 28, 2023, according to state lobbying disclosures. The topics of discussion were not disclosed.
Newsom has received more than $71,000 from Google and nearly $90,000 from Google employees in campaign donations for his various statewide election efforts since 2008, state data shows.
Wicks has also received $8,500 from Google and nearly $2,000 from Google employees in campaign donations since 2017. Wicks’ office did not respond to multiple interview requests.
“Fearful Of Regulating Big Tech”
Google’s search engine, launched in 1998, quickly became a go-to resource for users seeking information on a wide variety of topics, including local issues that were once dominated by newspapers. In 2002, Google launched its Google News feature, which involved gathering links and ranking news stories to “help people search and browse news relevant to them.”
Facebook launched its social media site in 2004 and grew to become the top news source for Millennials and Gen X by 2015. By 2023, Facebook began de-emphasizing news content after multiple scandals and pushback from Republicans alleging that the platform had a liberal bias.
Google and Facebook often use news outlets’ coverage to provide headlines and short summaries of news developments on their sites, reducing the likelihood that users access the original content and depriving publishers of ad revenue. Earlier this year, Google implemented AI-generated answers to questions users post. Although these answers cite sources and news outlets, they still deprive news outlets of clicks.
Since 2005, as Google and Facebook grew into tech behemoths, more than 2,500 newspapers have ceased publication nationwide, leaving nearly half of all U.S. counties without a local news source, according to a 2023 report from Northwestern University. California has lost nearly 100 newspapers in the last decade, lawmakers estimate, and the recent bills were an attempt to help save California’s rapidly-declining newspaper industry.
In a comment to California lawmakers, Google claimed that news searches accounted for only 2 percent of all queries it received worldwide in 2022.
But Google and Meta rake in colossal amounts of ad revenue — revenue that previously went to news outlets.
Alphabet, Google’s parent company, reported more than $307 billion in revenue for 2023 — and more than $237 billion of that was ad revenue from Google and YouTube. Meta reported more than $131 billion in ad revenue for the same year.
A 2023 study from the Initiative for Policy Dialogue at Columbia University found that if there was a 50-50 revenue split between U.S. news publishers and Google, the tech company would pay publishers between $10 billion and $12 billion annually. Facebook would likewise pay news publishers around $2 billion a year, the study found.
“The decades of underpayment from platforms to news publishers have helped boost profits for Google and Facebook and increase their respective market (and monopoly) power,” the authors wrote. “The market power also means that many governments have become fearful of regulating big tech companies.”
Last month, a U.S. District Court in Washington, D.C., ruled that Google violated antitrust laws by spending billions of dollars to muscle out competitors in online search businesses. The judge noted that Google controls about 90 percent of the search options and spent more than $26 billion in 2021 to ensure that it is the default search option for smartphones and internet browsers.
There has yet to be a ruling on remedies regarding Google’s monopoly status on searches.
Google is set to go to trial this week to defend against another antitrust lawsuit from federal prosecutors who claim it has a monopoly on online ad sales. The Justice Department is alleging that Google controls about 90 percent of the market for online ad space, more than 85 percent of the market for the software used for advertisers to place ads, and more than 50 percent of the market for ad exchanges.
“Google pockets on average more than 30 percent of the advertising dollars that flow through its digital advertising technology products; for some transactions and for certain publishers and advertisers, it takes far more,” the Justice Department said. “Google’s anticompetitive conduct has suppressed alternative technologies, hindering their adoption by publishers, advertisers, and rivals.”
Small Outlets Against Hedge Funds
Several media trade groups lobbied in support of the now-killed California legislation, including the California News Publishers Association, whose members include the Los Angeles Times, the East Bay Times, the Orange County Register, the San Francisco Chronicle, and other major newspapers. The California Broadcasters Association, which represents “all licensed commercial and noncommercial radio & TV stations in California,” also lobbied in support of the bill.
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Multiple unions representing news employees likewise came out in support of the two journalism bills, including regional chapters of the National Association of Broadcast Employees and Technicians as well as the Pacific Media Workers Guild.
But some small, independent outlets staunchly opposed the legislation — because they didn’t want the funds going to hedge fund- and billionaire-owned news outlets that they say have also helped gut the industry.
Alden Global Capital, a hedge fund, owns more than 200 newspapers nationwide and has been dubbed “the grim reaper of American newspapers,” by Vanity Fair. Alden is known to buy papers, lay off scores of employees, outsource some operations, and sell off valuable real estate. Alden has admitted to diverting hundreds of millions of dollars away from its newspapers and investing in risky real estate.
Alden owns at least 30 newspapers across California, including Bay Area-based East Bay Times, the Orange County Register, the Los Angeles Daily News, the Chico Enterprise-Record, the Eureka Times-Standard, and others.
Gannett, which owns the USA Today chain of newspapers and has been accused of union busting and refusing to negotiate on union contracts, owns eight papers in California.
Critics of the California bills highlighted how funds would go to papers based on the number of employees a newsroom had, which would have delivered a disproportionate amount of money to companies known for unfair labor practices and gutting newsrooms.
Hank Sims, founder and editor of the Lost Coast Outpost, based in Eureka, California, came out against the bill that would have forced tech companies to pay publishers that link to their stories. Sims thought the legislation would incentivize low-quality news content and clickbait. He was also opposed to sending money to hedge fund-owned media outlets. (This reporter formerly worked at Lost Coast Outpost.)
“I built this business based on the fact that hedge funds came in and destroyed the local paper, they’ve done this throughout the country,” Sims told The Lever. “They’ve decimated it, stripped it for parts, sold all the assets, and are basically keeping it open as a skeleton crew.”
Sims has a crew of five reporters and is looking to hire a sixth right now to cover Humboldt County, a rural county with about 135,000 people in Northern California. He gets some funding from the Google News Initiative, a funding and training program for news outlets, but credits his success to a lively sales team, a partnership with a local radio company, and an active local political scene.
“There are outlets like the Outpost all across the country trying to figure out what comes next after the age of big capital media and to infuse a bunch of capital largely to legacy media at a time when I feel like we’re doing the work to reinvent media for the 21st Century, it’s kind of like a slap in the face,” Sims said.
Annelise Pierce, editor and founder of the Shasta Scout, feels similarly. Pierce, whose outlet received funding from the Google News Initiative, runs a news outlet in Shasta County, a deeply conservative county in Northern California that is still embroiled in a hotbed of conspiracy theories regarding the 2020 election.
“My biggest concern with the legislation is whether we’re going to be giving additional oxygen to forms of news that shouldn’t be given additional oxygen right now,” Pierce told The Lever. “What I’m talking about is hedge fund-owned news organizations. I support my legacy reporters in the trenches beside me, but I don’t support Gannett, and I don’t support the way that they’re producing news.”
A News Trade Association In Bed With Google?
The Local Independent Online News Publishers (LION), a trade association dedicated to growing local independent news outlets around the nation, came out against the bill to make tech companies share revenues with news outlets. But multiple California-based LION members who spoke to The Lever said they had concerns about a lack of disclosure from LION leadership regarding their relationship and discussions with Google representatives.
On Aug. 17, LION leadership sent an email urging its California members to support a settlement, rather than the journalism bills.
“Negotiations have become intense over the past couple weeks, and the result is a proposal that would generate tens of millions of dollars from tech companies and from state funds,” wrote Neil Chase, CEO of California-focused news outlet CalMatters and LION board member.
“That proposal is close to the finish line, but there’s some opposition from people who think it’s not enough and that tech companies should be forced to cough up more,” he continued. “Our sense at LION, and mine from my perch at my day job, is that this is serious money that’ll make a real difference and that it’s unlikely we’d get more money anytime soon by scuttling this deal and pursuing legislation that’ll be hard to pass and likely challenged in court.”
(This reporter previously reported for CalMatters. David Sirota, The Lever’s founder, owner, and editor-in-chief, took a class taught by Chase at Northwestern University’s Medill School of Journalism.)
Multiple California-based LION members who spoke to The Lever said the fact that Google was behind the push for the settlement was never disclosed to them before they were asked to support the deal.
“The lack of transparency across the board on this should be deeply alarming to everybody, but especially journalists,” said Alicia Ramirez, publisher of the Riverside Record and LION member. “We are people who are tasked with holding those in positions of power accountable, and we should demand the same for the organizations of which we are a part.”
Pierce, who is also a member of LION, felt similarly.
“The original email we received asking us to support the settlement deal didn’t even mention that Google was behind that request,” she said. “So if you want to really do the right thing and be honest and get people’s permission, you should maybe do that with us too as members. Let us know who you’re actually speaking for when you contact us.”
Chase said that he sent the email urging LION members to support the agreement on short notice because he was alerted to the settlement agreement on a Saturday and that Chris Krewson, LION’s executive director, was away from his computer.
“LION is a trade association fighting for its members. It’s brought in millions and millions of dollars for publishers all over the country through grant programs,” Chase told The Lever. “And that’s what they do, they try to figure out how to get more resources for publishers. I appreciate there’s an organization out there scrambling to do this stuff.”
Additionally, Pierce and Ramirez raised concerns about how Chase reportedly “suggested” that CalMatters could host the AI accelerator project that is a part of the agreement, which is estimated to bring $62.5 million in funding over the course of five years. The two said this development was not known to LION members until after it was reported in The Wrap, a news outlet focused on entertainment and media reporting, days after the settlement was reached to kill the legislation.
Chase said that he had a conversation internally with his staff about the possibility of CalMatters hosting the AI project, but the details of the project have yet to be determined and he has not heard anything about if the AI project will be journalism-focused.
Chase told The Lever that he also spoke with staffers from Wicks’ office about hosting the AI project.
“It wasn’t like a proposal or anything, it was casual conversation,” he said. “If it needs a home, I would be happy to be the home for it. I think using AI to figure out how to do better journalism for everybody is a great idea.”
CalMatters currently has a site dedicated to using AI to track “every word spoken in public hearings, every dollar donated to politicians, every bill introduced, every vote cast and more.”
“I wouldn’t lobby for anything,” Chase said. “If there’s some announcement that this thing needs a home and what would people do with it, we might create a proposal.”
Chase said he thought the agreement to kill the journalism bills wasn’t perfect and doesn’t fault publishers for wanting a better deal. But Chase said that time was running out and Wicks had little leverage to force Google and other tech companies to cough up more money.
“Nobody I know thought that either bill had a really good chance of passing and then getting signed by Newsom and then clearing court hurdles,” Chase said. “I wish it was more, but the idea that somehow I, or anybody else, could say, ‘No, we don’t want this because it’s not enough money,’ and then what happens? A bill next year and start the whole conversation over again? I mean, it’s not realistic.”
Google claims to have donated more than $1 billion to support the news industry through projects like the Google News Showcase, a program in which Google pays publishers to “editorially curate content on this online experience and to give free of charge user access to select paywalled content.”
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The tech company also runs the Google News Initiative, a training program started in 2018 that has helped more than 7,000 “news partners” in more than 120 countries. LION is funded in part by the Google News Initiative, as well as by sources including the Meta Journalism Project and the Knight Foundation, a philanthropic fund to promote journalism and democracy — all of which highlights how closely intertwined journalism and big tech has become.
“Practically everyone has some kind of conflict of interest, primarily economic,” said Pearce, with the Media Guild.
The Future Of Journalism
A federal bill introduced in 2023 would allow news publishers to bypass federal antitrust laws and form a collective to negotiate ad-revenue sharing with big tech companies. The bill, called the Journalism Competition and Preservation Act of 2023, was introduced by Sen. Amy Klobuchar (D-Minn.) and has a sizeable bipartisan backing, including many senators allied with former President Donald Trump.
But the bill has stalled in the Senate and is unlikely to be voted on this session.
Google has spent more than $2.7 million since January 2023 lobbying Congress on the federal journalism bill and other matters, disclosures show.
Meta has spent more than $3.7 million since January 2023 lobbying Congress, the U.S. Trade Representative, the Federal Communications Commission, and other regulators on the journalism bill and other matters, disclosures show.
Meanwhile, around the world, battles are heating up over who’s responsible for — and who deserves a cut of — Big Tech’s billions in ad revenue.
In 2021, Australia passed a law that required tech companies to negotiate ad revenue sharing with news outlets. While both Google and Meta initially agreed to negotiate sharing ad revenue, the latter eventually pulled out and ceased linking news content on its platforms. It remains uncertain if the Australian government will force Meta into arbitration with news outlets.
Last year, Canada passed the Online News Act, a law that requires tech platforms to negotiate revenue sharing with news outlets. Meta refused to negotiate and pulled all Canadian news content from its site. Google agreed to pay $100 million in Canadian currency to a fund that will distribute the money to news outlets.
Funding the news is a tricky situation for many publishers, especially smaller ones, across the United States.
Chase, with CalMatters, sees a future that utilizes AI to complement work undertaken by reporters on the ground.
Pierce, with the Shasta Scout, said the reason why many corporate-owned outlets are failing is because they have lost touch with the communities they report on and don’t produce content that is useful for local residents.
Sims, with the Lost Coast Outpost, feels similarly.
“We’re lucky in that we have locally-based ownership that really believes in the mission,” he said. “They’re not looking to make bank off of us. They want us to exist and to do the work we do because they care about the community.”