what I should be studying... by Jonathan Coffey https://flic.kr/p/JPyac (CC BY-NC-ND 2.0)

what I should be studying... by Jonathan Coffey https://flic.kr/p/JPyac (CC BY-NC-ND 2.0)

News

What is the Logic Behind The Logic’s Demand for Internet Platform Payments?

The Logic is a Toronto-based news startup that focuses on the innovation economy. Launched in 2018, it has attracted some great reporters with a subscription-based business model that starts at $299 per year. I’ve been a subscriber for several years, dating back to when it began providing extensive coverage of the Waterfront Toronto – Sidewalk smart city project and I was serving as chair of the Waterfront Toronto Digital Strategy Advisory Board. The site, which tends to produce one or two new articles per day, uses a hard paywall as nearly all articles – other than an occasional Letter from the Editor – can only be accessed by paying subscribers.

In addition to subscription revenue, The Logic licenses some content to Postmedia (which happens to be one of the lead lobbyists for the bill and a strategic investor in The Logic) and has also qualified as a Qualified Canadian Journalism Organization (its inclusion is cited as evidence that a broad approach is taken when assessing applicants), meaning that it benefits from the Journalism Labour Tax Credit, which covers 25 percent of its qualifying labour expenditures. It also qualifies for Digital Subscription Tax Credit, which creates an incentive for subscribers, who get a tax credit with their subscription. Taken together, the public has likely provided The Logic with hundreds of thousands of dollars in support through government programs, though access is limited to those willing to pay a subscription fee similar to that found at many daily newspapers.

David Skok, The Logic’s founder and CEO, has emerged as a go-to voice in favour of supporting Bill C-18, which mandates payments from Internet platforms. He regularly appears on panels (here and here) and this weekend published a Letter to the Editor, which he titled Rebutting Critics of the Online News Act. Since I was one of the critics cited, I thought I would respond. Skok says that this isn’t a solution he initially favoured, but now feels compelled to support to remain competitive. The piece raises several issues – for example, he dismisses concerns about press independence even as he implicitly acknowledges the issue by noting his own “potential journalistic conflict of interest” – but much of his argument seems premised on gaining greater transparency in the deals between Internet platforms and media companies. He says Internet companies already pay for news and that a level playing field requires transparency.

Yet the lack of transparency in the deals – which is a concern – is neither solved by Bill C-18 nor sought after by many Canadian media organizations. I’m not sure what bill Skok has been reading, but Bill C-18 doesn’t require public disclosure of the terms of the agreements and effectively encourages private deals subject to CRTC approval. At best, the CRTC would be required to disclose who qualifies and participates in the process and require an independent auditor to release an annual report on the impact of the agreements, including their total commercial value. Simply put, if transparency of the actual agreements is Skok’s goal, he should be criticizing the bill.

But beyond the limits of the bill, the reality is that many Canadian media organizations don’t actually want to disclose this information. Watch this debate on the Future of News, where former Torstar CEO John Boynton is asked about transparency and he hedges by noting that these are agreements between commercial entities. In other words, many in the industry would prefer to keep the information confidential too. Indeed, for all of Skok’s professed desire for transparency, he has provided no details on his efforts to strike deals with the Internet platforms, which he said last year were “unproductive” even as companies of all sizes were finding common ground.

Skok also takes aim at claims that the bill does not feature a link tax (he also oddly assures that the bill will only affect Facebook and Google, which is questionable advice when the industry is abuzz about how everything from Twitter to LinkedIn to Apple could be caught). Skok seems to base his argument on the notion that individual links are not compensated and that the money isn’t strictly a “tax” because it doesn’t go into the public purse. However, the bill’s scope is even broader than individual links to articles, since it covers facilitating access to news. This might not result in a per-link charge, but the payments must be based on something and links are a well established metric that have been brought within scope of compensation by the bill with Canadian Heritage Minister Pablo Rodriguez saying they have value worthy of compensation.

With all due respect, it seems to me the question left unanswered in Skok’s piece is why The Logic in its current business model should be entitled to any payment at all from the Internet platforms. There is no reproduction of any articles and even links do not lead to an accessible news article. Given that there is no reproduction and no access to articles without a subscription, what is the value in need of compensation? At best, The Logic might argue that the content of its articles are indexed by search engines. Yet that indexing takes place at its request and if compensation is required simply for indexing content, then every website can make the same argument that it too is entitled to some form of payment and the very foundation of the Internet is placed at risk.

14 Comments

  1. David Skok says:

    Michael, thank you for being a loyal subscriber and for engaging in my column!

    The Logic’s business model, of which you make some assumptions, should not be a determinant of whether we are included as that would be the nation getting into the affairs of the bedroom.

    Your rebuttal to my rebuttal doesn’t address how existing deals are already distorting the marketplace. My main argument is that platforms and publishers are tilting the playing field and it is Bill C-18 which seeks to rectify this market imbalance. Small business owners, like me and countless others, are often ignored by big business and policy-makers, this is one of those rare times we are being considered and for that I am grateful.

    Thanks for reading,

    -David Skok

    • The problem is, Bill C-18 doesn’t rectify any kind of “market imbalance”. It basically tilts the market in the favour of larger players in the publishing sector while at the same time basically freeloading off of the success of a completely different industry in the process. Section 27 makes that crystal clear that if you are one of those pesky upstarts upsetting legacy publishers, you won’t see a dime out of it. It’s not just anti-competitive practices, but anti-competitive practices baked into the law.

  2. Chris Smith says:

    Isn’t the entire *point* of C-18 to target specific business models, either as a journalism business of some kind or an advertising business of some kind?

    If we carve out the question of business models, then every website that is either a provider or a destination of a link is subject to this regulation.

    • David Skok says:

      Maybe a semantic definition difference but, to me, the business model refers to the revenue inputs in my business, not market size/revenue. ie Subscriptions, advertising, licensing, events etc.

      As for the link description, I’ll just paste what I wrote in my column here:

      “This is not the nanny state coming after you for linking to a news article in a social media post or from a blog. According to Section 6 of the act, platforms must have “a significant bargaining power imbalance” to be forced into negotiations with publishers. The cabinet will determine this threshold based on market size and revenue. It will likely affect Facebook and Google, but not Twitter. [ED: I don’t know who Michael is referring to re industry buzz…]

      Nowhere does the legislation assign value to an individual hyperlink outside the scope of the negotiation of a licensing agreement between platform and publisher. Further, the transactions are between the platforms and the publishers. The public purse doesn’t benefit.”

  3. Chris Smith says:

    I realize this is not the interpretation you intend, but ‘ platforms must have “a significant bargaining power imbalance” ‘ often seems to amount to “if you have run your business so poorly that don’t have revenue, the government will force other companies to both advertise for you AND pay you for them to do it”.

    I can find references in newspapers annual reports going back nearly two decades that talk about the arrival of new competitors with different cost structures. Many of these journalism businesses have had two decades – and often more – to adapt to a changing advertising marketplace. They failed, even with twenty years of advance warning.

    If the government thinks they deserve support in spite of their failure, that is fine – fund them, along with the transparency of seeing that government support. But a “bargaining power threshold” is an extremely soft metric, far too subject to opinion and lobbying, either by cabinet or a body like the CRTC.

    Is there a problem that needs solving? Yes, without a doubt. But journalism often seems like basic research. You do it one hundred times, but only one of those times – one you cannot identify ahead of time – turns out to be the one that makes doing it a hundred times worthwhile. There is a reason that so much basic research is publicly funded – because it is almost impossible to justify the returns from doing it as a business investment. Maybe it is time we considered that journalism is much the same.

    • I’ve worked in traditional media outlets in the past. From personal experience, I’m willing to bet that after seeing more than 20 years of warning that this was coming, they probably mostly just thought, “yeah, we’ll deal with that later”. They put off adapting their business model and investing in their own future for the here and today. A number of them probably thought that the Internet was a fad that would go away on its own eventually.

      What’s funnier is that they were the ones throughout the mid 2000’s reporting on the radically shifting change in the music industry when Napster first became a big deal. All the signs were there, but they chose not to do anything about it.

      Now that the issue is more front and centre, they realize that their laziness and apathy towards the shift in technology bit them in the rear end. So, their solution was to demand money from the government to save them. The punchline? Even as they are getting life preserver after life preserver from COVID-19 relief funds and journalism support programs, they are still conducting business as usual as if there was nothing wrong with their own business model. It’s like looking at your ship with holes everywhere and water rushing in and saying, “Pfft, like that is any real cause for concern, amirite?”

      Bottom line is that a lot of these outlets are just plain poorly run. Management is more focused on getting their golden parachute so they can retire rather than looking to the future and longevity of their own companies they are running. For some of them, that’s a problem someone else can deal with.

  4. Nicolas Rodrigue says:

    With the internet, the industry changed since anyone can publish content now and that naturally means people will prefer to consume free news.

    Newspaper have not been able to adapt to the new market and want someone to fund them to have more funds.

    They’ve convinced the Liberal government that, somehow, tech companies should bear the cost of driving free traffic to their websites. More views, more ad clicks and likely more subscribers, all thanks to sites like Facebook or Google News yet somehow, they should pay for helping them.

    It’s so absurd I’d like nothing more than seeing them go cold turkey (with Canada being taken off Google news, etc…) and then watch them panic as their revenues et views plummet. Only then will they realize they were the ones getting value from tech sites publicizing news feeds.

  5. Nicolas Rodrigue says:

    With the internet, the industry changed since anyone can publish content now and that naturally means people will prefer to consume free news.

    Newspaper have not been able to adapt to the new market and want someone to fund them because they revenue problems.

    They’ve convinced the Liberal government that, somehow, tech companies should bear the cost of driving free traffic to their websites. More views, more ad clicks and likely more subscribers, all thanks to sites like Facebook or Google News yet somehow, they should pay for helping them.

    It’s so absurd I’d like nothing more than seeing them go cold turkey (with Canada being taken off Google news, etc…) and then watch them panic as their revenues and views plummet. Only then will they realize they were the ones getting value from tech sites publicizing news feeds and not the other way around.

    • As someone who is building a news site myself, I’d love to see that too. In fact, it’s precisely what happened in Spain. Spanish publishers were begging Google to return to their country after once they saw what was a happening to their online properties.

      Unfortunately, part way through the Australian version of the debate, Google decided that if they go along with these link taxes, then they could effectively destroy any future competition they may have in the search business (likewise with Facebook and the social media industry). Right now, we are seeing the outcome we all pretty much predicted – news publishers around the world are now wanting their pound of flesh from Google and Facebook as well.

      So, unfortunately, it’s unlikely that we’ll see Google and Facebook leave Canada over link taxes. They like the idea of solidifying their monopolistic power of the Internet and a few million dollars in license fees is just something they can get from spending a few minutes rummaging around in their respective couches.

      • Yep, everyone pushing for these policies claims that Google and Facebook are monopolies, when those policies are exactly what will help make them actual monopolies, legally government-protected ones. It’s so obvious I don’t know how it can’t be intentional.

  6. Here’s a question… I have my home page for Firefox set to msn.com. On that it lists a number of news stories from a number of news sources, including the Canadian Press , the Globe and Mail, Toronto Star and National Post. The links go to essentially copies of the text of the website, including a separate comments area. Does MSN pay for those articles, or do the news organizations pay MSN for posting there?

    If I understand the bill it appears that the news organizations want to be paid for a link which directs to their website, where they are also able to collect revenue from the advertisers on that page, even if they themselves posted the link to the social media website. If that is the case then I see Facebook, Twitter, etc, suddenly deciding to moderate all posts from accounts associated with news organizations to either prevent them from posting links or ensuring that they only post a given link once.

    • In that instance, they probably have worked out a separate license to republish the articles. If I remember right, MSN does that a fair bit: just pay other publishers for the right to republish their own articles. Other sites do that too (like Yahoo! News). This sort of activity is actually quite common – even in traditional newspapers where you see stories from the Canadian Press and the Associated Press.

  7. So, unfortunately, it’s unlikely that we’ll see Google and Facebook leave Canada over link taxes. They like the idea of solidifying their monopolistic power of the Internet and a few million dollars in license fees is just something they can get from spending a few minutes rummaging around in their respective couches.

  8. I am really happy to visit your blog.

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