Canadian Government Folds: Hands Google Everything and Calls it a “Deal”

With just over half a month left, the Canadian government has folded and let Google walk away with virtually everything.

A catastrophe in the Canadian news sector was seemingly all but a sure thing. With Meta already dropping news links, Google’s position of being set to drop news links unchanged, and the Canadian government fresh off a highly insulated chest thumping exercise trying to convince people that they are the ones in charge of this whole sorry state of affairs, it seemed like the outcome next month was going to be an obvious resolution. Google was going to drop news links and the Online News Act was set to accelerate the demise of numerous outlets – smaller ones more so than others.

As I’ve said all along, the only way disaster is averted is if one side blinks. Google pretty much holds all the cards in this. They would come out of the news link drop pretty much unscathed as their business model is decidedly not revolving around news links in the first place. What’s more, they would have a considerable amount to lose should they balk at their position. So, there was no way they were going to blink.

The government, meanwhile, was running on pure ego, shouting that they would never back down because it would be better to let the whole news sector collapse rather than admit they were wrong. As a result, the government completely painted themselves into a corner with no good solution to be had.

It is with that that it is not really a big surprise that it would be the government to be the one to blink. Yesterday, word came down that a deal had been reached. Details began to emerge over what the deal involved. To make a long story short, the government folded on pretty much every position and handed Google everything they wanted. Then, after the handshake, called it a deal and tried desperately to spin this as some sort of victory (spoiler alert: even the lobbyists that pushed for this law are furious at the government over what took place). The more you know about what the government was gunning for all this time, the more you realize just how much they gave up on this whole ordeal.

One of the big asks by the government was saddling platforms with unlimited liability. The Online News Act stipulates that publishers get to negotiate so-called “deals” with the platforms – “deals” that can be revoked by the CRTC at any time with the regulator ordering Google cough up more cash for the publishers in question. Further, the government wanted no ceiling for how much Google would be asked to fork over. These big asks were surrendered by the government.

The government also demanded that all of the finances being handed over be all new funding, not touching existing funding. The government capitulated on that.

From there, the government wanted to just stay out of the negotiations and, supposedly, let the two “parties” hammer out deals with the threat of government intervention afterwards favouring news publishers. Instead, the government intervened in the most intrusive way possible by working out a deal for the entire sector.

Fundamentally, the government demanded payments for linking. That is basically gone.

What did Google ask? A cap on liabilities in all of this. Google got that.

Scrapping the entire Online News Act and, instead, replacing it with a fund model was another ask. Many critics agreed and considered this a better way to go. Google got what it wanted.

Google called for a much smaller class of beneficiaries instead of giving everyone and their dog a deal. Yes, some details are still needing to be worked out, but Google largely got that too.

The ultimate story here is that the Canadian government, while trying to act tough (even though they had nothing to work with here), basically capitulated on everything just for the sole reason of being able to say that they got a deal. As many critics rightfully pointed out, this was an effort to save face while averting a much larger disaster that would see countless jobs all but wiped out overnight.

While it was obvious that the government was, behind the scenes, desperate to get any deal of any kind, officials were trying to spin this as some sort of “win”. It was a spin even some mainstream outlets were skeptical about. From the CBC:

Faced with Google’s threat to stop distributing Canadian news, the government seems to have softened its position.

But the government source argues that an agreement constitutes a victory and a net gain for Canadian media. The framework for a single negotiation is likely to serve as an example for other countries, the source added.

Bill C-18 applies to digital platforms with 20 million unique monthly users and annual revenues of $1 billion. Only Meta and Google meet those criteria.

Meta’s talks with the government have not resumed.

That… is far from the “we got ’em!” coverage the government was hoping to get out of all of this.

Amidst the positive spin in all of this by the large media companies coverage is the $100 million price tag associated with it. On the surface, that seems like a massive win in the end… until you realize what the government was originally asking. As we noted a whole year ago, one of the estimates was set to be $329 million. Keep in mind, this is supposed to be all new spending. Further, that loot was expected to come from Meta and Google with Meta footing a third of it and Google footing the remaining cash pool. For Google, that would come to at about $217.1 million in new spending. This seems like a dream amount by comparison to the current figure.

The math only gets worse from here. As university law professor, Michael Geist, points out, this cash isn’t even new funding in the first place:

Third, the reality is that Bill C-18 is now barely at break-even. Google’s $100 million is not all new money. The company was already paying millions in deals for its Google Showcase program with many Canadians news outlets. Those deals will now be cancelled with the single payment replacing the other contributions. There is obviously some new money – particularly for broadcasters – but it isn’t the full $100 million and it must be offset by the losses sustained by the exit of Meta.

With existing deals basically over, the $100 million figure amounts to little more than creative accounting just to make it to that number.

To pile on to this number, you also get to take into account the fact that roughly 75% of that funding pool will also get shoved towards the largest players in the industry. That leaves less than $25 million for everyone else who find themselves, at best, fighting for scraps. Peter Menzies notes that all of this would likely be based on how many full time employees each company has on offer for calculation. Guess which companies would have the most full time employees? The largest players. Bingo:

The second assumption is that this fund will be distributed across about 15,000 media workers nationwide. But whether that number turns out to be 15,000 or 5,000, here’s what really matters:

Such an agreement is likely to bring an end to Google’s existing commercial agreements — at least with those organizations that join the collective. That means the incremental amount of cash coming into the industry once its internal negotiations have been completed could be somewhat less than $100 million. How much less would be pure speculation, but individual agreements certainly exist — with the Star, for example, and also with Postmedia. Or at least they did.

The largest beneficiaries — because they have the most journalists — will almost certainly be the CBC/SRC, Bell Media and Rogers, none of which actually need the money, and that may also convince the Canadian Radio-television and Telecommunications Commission (CRTC) to shake down foreign streamers to subsidize their newsrooms.

Because of all of this, the events proved once and for all that the smaller players were never destined to get any significant benefit from all of this. The best they could’ve hoped for is leftover crumbs (which is actually a paraphrase of what one of the smaller players told the Canadian senate during one of the Bill C-18 hearings).

There will be little doubt that some out there will look at all of this and say that this is just all clever rewording and that the government and backers of the bill got everything they wanted. If that were the case, then lobbyists who pushed for this bill would be popping the champaign over the news. Instead, they are very decisively unhappy about all of this:

Image in case the post gets taken down:

“While this deal will provide a much-needed cash injection into the Canadian news media sector, it will not deliver the kind of support for Canadian journalism that we originally hoped for.

Since this deal confirms that The Online News Act will not be a panacea for protecting Canadian journalism, other tools to provide support for news must be put in place, the first of which should be through the contribution requirements from foreign online platforms in the first stages of the implementation of the Online Streaming Act.”

You could call this a lot of things, but a victory lap, this is not. If anything, lobbyists have now more or less admitted defeat on the Online News Act and have moved on to their designated “plan B” by trying to chisel money out of platforms through the Online Streaming Act (which is a campaign that has been long under way at the CRTC).

Obviously, it is no accident that the media companies are trying to squeeze more cash out of platforms in the first place. On the surface, this just seems like more par for the course greed, the sad reality is that the media companies know that $100 million – even in new money – won’t be anywhere near enough to “save” it. Here’s another excerpt from Menzies:

The bad news is that while 100 million bucks is nothing to sneeze at, in the grand scheme of things it is a drop in the bucket for an industry in need of at least a billion dollars if it is to recover any sense of stability. Indeed, when News Media Canada first began begging the government to go after Google and Meta for cash, some involved were selling the idea that sort of loot was possible.

Asking for a sum for survival purposes and only getting a tenth of what was originally asked is most certainly not the position the large media companies wanted to find themselves in. If anything, the large media companies must be feeling absolutely betrayed by the government in all of this. Further, hoping to extract $900 million from the Online Streaming Act is pretty much a foolish fantasy. I’m not aware of any estimate that says that the platforms are going to be expected to fork over anywhere near that amount of cash through the Online Streaming Act (and that’s not even getting into the math of how other producers are trying to get money out of the deal as well).

With the amount of money being so wildly below expectations, concentrated at the top players, and core aspects of the Act being essentially thrown out to save face, some might look at this whole situation and say, “Well hey, it’s better than nothing, right?”

The sad truth is that what the “deal” ended up giving publishers is ultimately less than that. Remember, Meta has already pulled out of news entirely. When Meta was before the Canadian Senate, they told senators that them allowing news links to be published on their platform for free was estimated to be at around $230 million in value to Canadian publishers. The Google deal, even assuming that it was all new money heading towards the publishers, doesn’t even cover half of those losses. Ouch, indeed.

Simply put, when everything is put together, the large media players lost massively. Little surprise that they are not amused by the situation in the end.

At the end of the day, the government saw the writing on the wall with the Online News Act. It cared more about making a good press release or pushing a positive headline in such a dismal story than anything else because it knew that they were about to otherwise send the entire Canadian news sector into the abyss for nothing.

Another angle in all of this is the international side of things. There will no doubt be those that will advance the notion that Google capitulated again and that it proves that it was all a big fancy bluff. Perhaps the message to the international community should be that the Canadian government got a deal largely in name only. Payments for links in Canada is officially dead and got replaced by the originally asked for fund model (a model the bills backers assured me was repeatedly was off the table). If you want the most broad stroke view while ignoring all the details, yes, a “deal” was made, but a deal the large media players are understandably furious about. The “deal” was ultimately all air and no substance – and it left the entire news sector far worse off than it was before. None of this was worth it.

For some of the smaller players, such as myself, there is a sense of relief. Essentially, we get to keep our jobs and can continue writing news like we always have. Meta may be gone, but we no longer have the threat of Google basically deep-sixing our careers. That is a huge source of relief to say the least. Yes, there are market distortions that are introduced because of this capitulated “deal”, but the magnitude of this isn’t going to be anywhere near as severe as it originally threatened to be. There might even be another pay cut coming to our Adsense accounts, but at this point, we can all be grateful that we’ll live at all.

As for Google, they are apparently all smiles and congratulations in all of this:

Following extensive discussions, the Government of Canada has committed to addressing our core concerns with Bill C18. We thank Minister @PascaleStOnge_
for deeply engaging with us.

Even if you don’t believe any of the details of the deal, the reactions of the stakeholders alone should tell you everything you need to know about how well the Canadian government made out here.

At the end of the day, the government saw the deadline looming, was desperate for a deal of any kind, handed everything over to Google and called it a “deal”. The link tax in Canada is now officially dead as there is no longer payments for links. In its place was a fund model that was what Google originally asked for. It’s arguably the biggest fold the Canadian government ever made in a tech policy issue – leaving their backers looking elsewhere for pillaging opportunities.

Drew Wilson on Twitter: @icecube85 and Facebook.

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