Evan Scrimshaw, who writes an engaging Substack primarily focused on Canadian politics, posted an interesting piece over the holiday weekend that linked the Toronto Raptors failure to resign guard Fred VanVleet and the reaction to Google and Facebook’s announcement that they plan to block news sharing or links as a result of Bill C-18. I liked the piece and it got me thinking about the parallels, leading to this post. Scrimshaw argues that the public commentary on both developments featured similar “I told you so’s”: those that argue the Raptors should have traded VanVleet at the trade deadline rather than risk losing him for nothing and those who now argue that Bill C-18 would invariably lead to Google and Facebook blocking news sharing or links. He makes the case that it is too early to conclude anything with respect to Bill C-18 and that the Internet companies and government are merely engaged in a very public negotiation that could well result in either or both seeking a compromise before the law takes effect.
Scrimshaw is certainly right that royal assent is not the end of the story. The late negotiations last week suggest that both Google and the government are looking for a middle ground, but both have red lines they won’t cross. Those lines could obviously change as implementation gets closer (I think Meta is different story as even the government seems less convinced a compromise is likely). Scrimshaw indicates that the government was ready for this, though given Canadian Heritage Minister Pablo Rodriguez flailing response, I’m not so sure. Regardless, I think there is a more important point to be made about the loss of VanVleet and the current state of Bill C-18, namely that both are the product of similar failed processes. Reaching this point – a lost star point guard for nothing or announcements of blocked links and cancelled deals – could have been avoided and reflect badly on their respective leadership.
The Raptors’ mistakes are nicely articulated in this piece by Josh Lewenberg, who covers the team for TSN. Drawing from that piece, there are at least three that merit mention. First, the Raptors misjudged the market for VanVleet, which left them without a viable response to a massive contract offer from the Houston Rockets that they did not see coming. Second, the Raptors took the wrong lesson from past experience, in which they previously had managed to recoup some value even when losing a star player. Third, the Raptors engaged in disastrous risk analysis, opening the door to losing a player without any return rather than pre-emptively pursuing a less-risky alternative.
I think the same three mistakes apply to the government’s inept approach on Bill C-18. First, it badly misjudged the market for news links on Internet platforms. Even as Facebook repeatedly emphasized the limited economic value of news links on the platform (three percent of user feeds and highly substitutable), the government appeared convinced it would still be open to paying $50-100 million for those links. The same seems true for Google, who is focused on its platform that is built on links and a global market that could lead to billions in liability if the Canadian approach became a model for others. A compromise is still possible, but if even one Internet company complies with the legislation by stopping links and cancelling deals, the government policy will at best break even or more likely still result in a net loss. With the recent Postmedia-Torstar merger proposal, Bell Media layoffs, and regulatory requests at the CRTC to reduce news spending, the sector appears to have already made up its mind and is rapidly losing faith in the bill.
Second, the government drew the wrong lesson from the Australian experience as it convinced itself that the situation would play out in the same way with room to negotiate a late settlement (Scrimshaw hints at this too). While that might still happen, the government ignored notable differences in the legislation (Australia left itself with more flexibility to negotiate a settlement than does Bill C-18), the economic circumstances (Facebook was flush with cash during the Australia fight, while it has laid off tens of thousands in recent months), the value of news (news has been steadily de-emphasized on Facebook in the years since it reached its deals in Australia), and the global environment (Australia was largely alone, while the Canadian bill comes at a time when the issue is playing out in multiple jurisdictions including the U.S., where a U.S. senator is cheering it on). In other words, simply thinking history would repeat itself was a major error that failed to identify important distinctions between the two countries that could well lead to different outcomes. If Australia proves to be the example of how the system can work, Canada may become the model no one will want to emulate.
Third, the government’s risk analysis has been disastrous at every step. It started with adopting the riskiest available legislative model premised on mandated payments for links even when there were other less controversial options to support the media (taxing big tech, mandated support for a fund model). During the legislative process, it actively excluded contrary voices, considered blocking Facebook from even appearing as a witness during the study of the bill, and went out of its way to criticize the tech companies and their concerns. At the very end of the process, it amended the law by establishing a six month deadline for the bill to take effect, thereby decreasing the time available to find a compromise. The approaches only expanded the divide and made a compromise more difficult to achieve.
Any reasonable risk analysis accounts for the downside if things go wrong, but the government appears to have ignored those risks altogether. If the future of many Canadian news outlets did not hang in the balance, perhaps the approach could be justified. That the government chose to ignore warnings from smaller media outlets of the existential risks in the event of a standoff is unconscionable regardless of the final outcome of Bill C-18. Indeed, much like the Raptors, who now face the prospect of a series of bad roster choices in light of their miscalculation, the government finds itself without many good options on Bill C-18 and a media policy that may be about to foul out.