Stakeholder engagement on fair revenue sharing between digital platforms and news media

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Introduction

Canadians need access to news and information on matters of public importance, including information regarding health, education and political life, in order to fully benefit and participate in democratic society. News and journalism serve to inform communities, drive civic engagement and counter the rise of disinformation on digital platforms – thereby playing an essential role in the vitality of democracy in Canada. However, the health of the Canadian news and information ecosystem is at risk. At least one-third of Canadian journalism jobs have disappeared since 2010,Footnote 1 and many Canadian news media businesses are shrinking, having to cut costs and jobs, and even closing altogether. The COVID-19 pandemic has amplified the crisis and exacerbated the decline in advertising revenue which, historically, has been a key source of revenue for many news outlets.

Canadians are increasingly accessing news online via digital platforms. Platforms act as intermediaries and gatekeepers to the information available to Canadians. They aggregate, package and offer news to Canadians in ways that are efficient and innovative, and derive significant financial benefit from their operations in Canada. Some also operate other critical digital business segments, such as the ad tech that supports the digital advertising market. The concentration of online advertising has resulted in 80% of advertising revenues going to a small number of platforms.Footnote 2

Digital platforms benefit from the sharing of news content on their platforms, both directly (advertising near news) and indirectly (user engagement, data refinement, subsequent targeted advertising). Similarly, news outlets benefit from the sharing and exposure digital platforms provide to their content.

Digital platforms and news outlets are negotiating agreements for the use of news content on their platforms. Digital platforms and news outlets are also building partnerships to fund news and journalism activities directly. These financial agreements with the news and information sector have been done voluntarily by the platforms. However, in the absence of regulatory oversight, it is difficult to determine whether agreements made on a voluntary basis meet the goals of a sustainable, fair and diverse news and information ecosystem for Canadians and the full protection of an independent, free press.

In the 2020 Speech from the Throne, and again in the Minister of Canadian Heritage’s 2021 mandate letter, the Government of Canada committed to ensuring that the revenues of web giants are shared more fairly with Canadian creators and media. To this end, the Department of Canadian Heritage (“Canadian Heritage”) is currently exploring a made-in-Canada approach to ensure that contributions made by digital platforms to news and information are in the public interest.

The Government’s commitment is part of a broader effort being made among like-minded countries, such as Australia and France, to address this issue. It builds on work by the Broadcasting and Telecommunications Legislative Review Panel, the Standing Committee on Industry, Science and Technology (INDU) and the Standing Committee on Canadian Heritage (CHPC). The development of policy options to support news and journalism complements efforts to modernize the broadcasting and telecommunication systems, to address online harms, and to review the Copyright Act.

Canadian Heritage is undertaking a phased approach to stakeholder engagement, to contribute to the policy development process on the issue of sharing of revenues with news media outlets. This report aims to update the stakeholders who participated in the first phase, and to solicit further comments from stakeholders and the public on key policy considerations that emerged. Canadian Heritage welcomes additional input and invites interested parties to submit written responses regarding the key policy considerations outlined at the end of this report. Information on how to submit comments is below.

What we heard

How we reached out

In the spring of 2021, Canadian Heritage initiated a phased approach to stakeholder engagement, beginning with targeted engagement with existing contacts and planned engagement activities with Indigenous organizations and partners. Engagement activities with Indigenous groups, including with the National Indigenous Organizations (NIO) and Indigenous publishers are ongoing and, therefore, comments from Indigenous partners are not captured within this report.

Canadian Heritage reached out to a variety of stakeholders within the Canadian news and information sector, including a number of publishers, broadcasters, platforms, academics, unions, journalist associations and organizations representing the interests of racialized communities, official language minority communities (OLMCs), remote communities and persons with disabilities.

Questionnaires (set out in Appendix A) were sent by email, which asked for feedback on two distinct approaches for how the revenues of digital platforms could be shared more fairly with Canadian news media: (1) a mandatory code and arbitration regime and (2) mandatory financial contributions from platforms distributed by an independent fund.

The first approach would dictate the rules for negotiations between digital platforms and news outlets to ensure news outlets are fairly compensated for their work. A mandatory code would introduce several minimum standards that digital platforms would have to meet in their dealings with news outlets, which could include measures such as good faith negotiations, transparency regarding algorithm changes or data sharing provisions. If parties were unable to reach a negotiated agreement, they would proceed to final offer arbitration where an arbitral panel would select the rate of remuneration to be paid by the platform. This regime would be similar to the one recently implemented in Australia.

The second approach would require digital platforms to make financial contributions to the news and information sector, as a percentage of their overall Canadian revenues, to be paid to an independent fund. These financial contributions would be structured to incentivize digital platforms to look for new ways to support Canadian news and a healthy information ecosystem. This regime would be similar to how TV distributors in Canada are required to contribute to Canadian content within the broadcasting regulatory framework.

The purpose of the questionnaire was to determine:

In total, Canadian Heritage received 46 written submissions from a wide range of stakeholders, with a response rate of 68 percent. The list of participating stakeholders is set out in Appendix B. Their responses helped illuminate the perspectives of key players across the Canadian news and media sector. This report aims to reflect the general ideas and perspectives raised in this stakeholder engagement. It does not attempt to include every comment received. It also does not intend to imply consensus on the part of all participants.

Finally, the views expressed below are those of the participants in the engagement process and should not be construed as representative of the Government of Canada’s positions or views.

Highlights of the stakeholder submissions

Overall, a large majority of submissions stressed the importance for action regarding declining revenues in the news sector and advanced that a significant imbalance in bargaining power exists in the market. However, no consensus emerged about the preferred way for the Government to address this issue, and the responses received regarding the two revenue sharing models were polarized. Stakeholders often favoured one model substantially over the other, but neither model was unanimously preferred by any stakeholder group.

Stakeholders who were supportive of the code of conduct and arbitration model felt that it would be the more effective option for balancing the negotiating power between digital platforms and news outlets, that it would provide greater transparency in data and algorithm changes, and that it could be implemented sooner. A large portion of participants were concerned about the current imbalance of power that exists between news outlets and digital platforms. Many participants were enthusiastic about an arbitration model, expressing the view that it would force digital platforms to negotiate with news outlets in good faith. They emphasized the need for legislative tools that would seek to address this imbalance and create a more equitable negotiating environment.

Conversely, many participants were opposed to this tool on the basis that it may further entrench more-established players on either side of the negotiations and that it would be less accessible to smaller outlets. A number of participants stressed the importance of additional support for smaller news outlets, who do not have access to the same financial, administrative and negotiation support as larger, corporate news outlets. Further, some respondents indicated that digital platforms may negatively respond to this model and may rescind their services for Canadian users, as happened recently in Australia.

With respect to the mandatory contributions and independent fund model, supportive stakeholders indicated that the model would treat all organizations fairly based on their size, that the funding may be easier to access for smaller news outlets or underrepresented groups, and that it may improve the funding of news outlets. Participants emphasized that any funding model would need to have built-in mechanisms for underrepresented groups so that funds serve to directly help marginalized peoples within the journalism sector. For instance, some suggested that an explicit portion of funding to be earmarked for Black, Indigenous and People of Colour (BIPOC)-owned news organizations. Further, proponents of this model emphasized the importance of having open board appointments and decision-making processes to be transparent with the public. Many also maintained that this model allows funds to be used in support of journalists and news production, as opposed to executive compensation, in furtherance of a healthy news and information sector.

However, those opposed to the funding approach raised the following concerns: that the model would not address the broader issue of imbalance of market power between digital platforms and news outlets; that it would not provide news outlets with the regulatory tools, such as algorithm change notifications or data sharing, necessary to improve their negotiating power; and, that the administration of the fund may become politicized.

That said, some of those stakeholders that stated they preferred the code of conduct and arbitration model said that they would support the mandatory contributions and independent fund model if that option were chosen, and vice versa, as government action was preferable to nothing at all.

Finally, there were a number of additional key themes that were raised, such as:

Moving forward

Canadian Heritage thanks all participating stakeholders for their responses. The Government recognizes the urgency of the situation faced by Canadian news media outlets, and is committed to developing a solution that will ensure Canadians continue to have access to a diversity of local and regional news sources that serve their needs and interests. A number of key policy considerations have emerged from the stakeholder submissions, which will help inform the policy development process:

  1. Freedom of the press: It is essential to Canada’s democracy that the freedom of the press be protected. Any legislative proposal should first and foremost ensure to safeguard and protect freedom of expression under section 2(b) of the Charter of Rights and Freedoms. Additionally, in considering possible legislative models, the potential for undue influence on news media outlets by digital platforms warrants careful consideration.
  2. Fairness: The negotiating imbalance between digital platforms and news outlets is a key concern for many stakeholders. Tools that allow press publishers to negotiate on a level playing field could help ensure that the ensuing commercial deals between news outlets and platforms are fair.
  3. Diversity: Measures that seek to support news and journalism in Canada must consider Canada’s diverse needs and realities. Barriers to entry or innovation, lack of opportunities for journalists and news organizations from equity-seeking groups, as well as challenges in coverage for underserved communities (e.g. local, Indigenous, OLMCs, rural and remote) all constitute important challenges to overcome.
  4. Sustainability: In considering possible legislative models, the Government could consider how best to foster a sustainable news ecosystem, to ensure that the various parts of the ecosystem contribute sufficiently and appropriately to news and journalism.

While consultation has so far focused on the two approaches described above (the mandatory code and arbitration regime, and the mandatory financial contributions from digital platforms, distributed by an independent fund), other arrangements are possible. Elements of the two approaches could be combined in a model that aims to address a broader range of policy concerns while mitigating their respective risks. For example, fair commercial deals could be supported using regulatory tools (e.g. a regulator could be given powers to ensure digital platforms do not confer an undue preference or disadvantage on news outlets), which could be combined with either an arbitration or a mandatory contributions scheme. Commercial deals could be incentivized, either through an arbitration mechanism or a contribution scheme (e.g. a levy mechanism where financial obligations are reduced in recognition of negotiated commercial agreements). An approach combining a levy mechanism with other regulatory tools could both support fair commercial deals and use the proceeds of the levy to support other key objectives, such as support for news organizations that represent equity-seeking communities.

Canadian Heritage welcomes input from stakeholders and the public on the best way to achieve the balance of outcomes described above. Written submissions should refer directly to the above policy considerations. Canadian Heritage also invites participants to support their submissions with evidence or information relating to the news sector, for example, by providing information on investments and revenues within the news and journalism sector, on online presence and business models of news media outlets, or any other data that will help Canadian Heritage better understand the online news and information ecosystem.

Submissions should be short and concise and should provide descriptive text for any tables or graphs.

Submissions can be sent to pch.mediasdinfo-consultation-newsmedia.pch@canada.ca until September 15, 2021.

Following the end of the comment period, the Government intends to publish a list of all individuals and organizations that participated in the second round of engagement. Submissions will be made available, upon request, by Canadian Heritage officials in the format and language in which the documents were submitted.

Canadian Heritage looks forward to continued engagement with all interested stakeholders, in support of the Minister of Canadian Heritage’s mandate commitment of ensuring that the revenues of web giants are shared more fairly with Canadian media.

Appendix A: Questionnaire in the first phase of stakeholder engagement

As you may know, the Government has committed to ensure the revenue of online platforms is shared more fairly with Canadian creators and media (2020 Speech from the Throne and 2021 Mandate Letter). In accordance with this mandate, Canadian Heritage is currently exploring policy options for new legislation to support news publisher remuneration, specifically regarding how global digital platforms can appropriately contribute to a healthy Canadian news ecosystem.

In doing so, we are reaching out to you to ask for your input on this issue. Below you will find specific questions we have prepared regarding potential approaches that could be taken to address this issue.

Policy Questions:

  1. As you may be aware, the Australian government is in the process of implementing a mandatory code that dictates the rules for negotiations between platforms and publishers to ensure publishers are fairly compensated for their work. In addition, the Code introduces minimum standards for digital platforms to meet in their dealings with news media businesses, such as transparency regarding algorithm changes, facilitating open communication and non-differentiation requirements. Where parties cannot come to a negotiated agreement, the parties proceed to final offer arbitration where an arbitral panel makes a binding decision upon both parties.
    1. If this model were adopted in Canada, how might this impact your organization?
    2. What would be your organization’s position with respect to a mandatory code and arbitration regime?
    3. What criteria should determine which platforms should fall under this regime? What criteria should determine which news media businesses can avail themselves of the regime?
    4. If an arbitration model were in place, should collective bargaining be allowed and for whom?
    5. In your view, how will this type of approach impact the availability of news content online to Canadians?
  2. What are your thoughts on a funding scheme that would require mandatory financial contributions from online platforms? Similar to how TV distributors (cable and satellite companies) are required to contribute to Canadian content within the broadcasting regulatory framework, platforms would be required to make financial contributions to news, as a percentage of their overall Canadian revenues to be paid to an independent fund. These financial contributions would be structured to incentivize online platforms to look for new ways to support Canadian news and a healthy information ecosystem.
    1. If this model were adopted in Canada, how might this impact your organization?
    2. What would be your organization’s position with respect to this model?
    3. If the government were to set up an independent third party fund to support news and journalism, who should be required to contribute to it and why? Similarly, who should be entitled to access it and why?
    4. What activities should be supported by this fund?
    5. In your view, how will this type of approach impact the availability of news content online to Canadians?
  3. Which of the two approaches presented above do you prefer and why?
  4. What should the government be focusing on in bringing forward legislation to address news media remuneration? Rate each priority below, based on how important they are to your organization, using a scale of 0 (not important) to 10 (very important).
    1. Balance of negotiating power
    2. Sufficient financial support for news content
    3. Independence of the press
    4. Transparency and access to data
    5. Business Innovation
    6. Supporting the vitality of English and French linguistic minority communities in Canada and fostering the full recognition and use of English and French
    7. Supporting local, regional and community sources of news
    8. Supporting news that serves diverse communities (e.g. Indigenous, Francophone, Official Language Minority Communities, racialized groups)
    9. Other (please specify)
  5. Are there other views, challenges and circumstances specific to your community, organization or business model that the Government should understand as it moves forward on this issue?

Appendix B: List of stakeholders who provided input

Platforms

Publishers

Broadcasters

Other Stakeholders

Academics/Individuals

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