The Canadian Link Tax is Dead and the $100 Million Figure Has Already Been Chopped to $66 Million

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As lobbyists start coming to terms with the demise of the Canadian link tax, a third of the $100 million figure has already vanished.

Yesterday, we reported on the “deal” struck by Google and the Canadian government. Many were entranced by the $100 million figure and tried to parade around that Google was the one that folded under the pressure. The problem was that the details already emerging told a very different story.

Among other things, the Canadian government gave up on negotiated deals between the platforms and publishers (opting instead to just take over the entire process and skipping the “dealmaking” step altogether). The idea of uncapped liability for the platforms is now gone, now fixed to a $100 million price tag to be squabbled over with different legacy players (rumours suggest that it will adjust to inflation). Further, Google got everything it wanted by basically tossing the entire Online News Act out of the window and getting a fund model that it originally asked for.

What does that all mean? The Canadian link tax is now dead in this country. What deals were struck between Google and publishers before this disaster unfolded will be rolled into the $100 million pool of cash as well, making the value more implied than an actual $100 million cash infusion to the Canadian media sector. Once those deals are no more, there will be no more traces of the link tax.

By some estimates, the Canadian media sector actually needed $1 billion to obtain general stability. They got nowhere near that and the most optimistic way of telling the story on that front is that the sector got up to 10% of what it was needing here. Not really a ringing endorsement by any means.

While some are spinning hard and saying that the details that have emerged so far are just false and that the Trudeau government totally won that fight, the reaction from stakeholders told the story, largely confirming our assessment of the abysmal failure that is the Online News Act. Google was very upbeat and thanked the government for their work:

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.

FRIENDS, a lobbyist for the Canadian link tax, was taking a much more solemn approach to what is currently unfolding:

“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.”

All of this tells a story of what really happened behind the scenes. The Canadian government went in thinking that they had all the power in the world to negotiate and get pretty much everything the lobbyists were demanding. When Google didn’t budge on these absurd asks, time simply kept ticking down. The Canadian government grew more and more desperate and eventually folded under the pressure. They opted to just ask what Google wanted and the government simply agreed to what Google asked and left.

The government was caught between a rock and a hard place and didn’t want to be known as the government that destroyed the Canadian media sector. This outcome was the only out they had and they finally took it, sparing the country the sight of what happens when Google delists the entire Canadian media sector in the process (the outcome here is not a bad thing, though a heck of a hit to the government’s ego). The government got absolutely mauled by not only Google, but their incredibly weak position going into such talks in the first place.

Probably the big question in the back of the lobbyists mind is just how big the Canadian governments betrayal to them was. The clearly wary reports from the larger outlets suggests that the larger outlets are, at minimum, wondering what the heck happened, what went so horribly wrong and, more likely, realizing that this whole thing finally went sideways with the government retreating with its tail between it’s legs and just putting on a brave face for now. This as they wait for some sort of silver lining in this bad situation to latch on to.

While it is bad enough that the $100 million price tag isn’t even new money and won’t even come close to making up for the losses with Meta’s pull out of news links, the numbers are apparently already shrinking pretty dramatically.

Word is that the CBC has confirmed in parliament that it would be taking in a third of the revenues pulled from this funding pool:

This all goes back to my previous report when I spoke about how a lot of the math revolving around who gets what hinges on the number of full time employees. The CBC straight up said that they figure they have about a third of all full time employees in the country and, since they are an eligible news source, would be entitled to about a third of the money pool.

We’re already just days into finding out that a “deal” had been reached and the price tag for anyone not the CBC has already been optimistically chopped down to $66 million. We say optimistically because that doesn’t take into account the previous deals being rolled into the remaining pool of funding.

All this happened as News Media Canada, the biggest lobbyist in this debate, released a cryptic statement about the deal:

News Media Canada made the following public comment:
“We thank Minister Pascale St-Onge and the government for coming to an agreement with Google that provides a regulatory framework ensuring cash compensation, indexed annually to inflation, for publishers. We commend Google for their good faith, socially responsible approach. The impact of this regulatory framework for the news publishers is dependent on the final regulations, which are essential to ensuring our publishers receive fair market value for their news content.”

Michael Geist commented:

Translation: If we only get 25% (ie. $25M), Bill C-18 didn’t work.

The math is already looking really bad in that regard. With $66 million remaining and large private sector players having yet to take their turn at the trough, even getting $25 million from the pie is going to be mathematically rather tricky. What’s more, this doesn’t even take into consideration how much small players (the same players this whole debacle was supposedly about in the first place) are going to get out of this – and it’s looking increasingly likely that larger parts of the sector are going to end up with squat or, at best, mere crumbs that make little financial difference to them.

None of this even gets into the debate over whether or not the CBC should even be snapping up that money in the first place. There are certainly voices that argues that the CBC shouldn’t be getting this financial infusion given that they receive over $1 billion in taxpayer revenue in the first place. That alone, many argue, makes it very difficult to even compete against from a private companies perspective. Snapping up a third of this pot of revenue will invariably cause the remaining cash to dwindle even further, reducing what they will end up getting to mere pocket change in the grand scheme of things.

All of this really raises a serious question: was all of this pain and agony worth it? As the pool of cash rapidly diminishes, so does any remaining straggling arguments that point to “yes”.

(This article was updated to say that the remaining pool is actually $66 million, not $77 million as originally published. Yes, I screwed up the math to be excessively optimistic for the lobbyists, but it’s not like they complained about the math, there. I caught the mistake on my own and fixed it so I at least look like I can do math in this article, so, whatever. Original points still stand.)

Drew Wilson on Twitter: @icecube85 and Facebook.

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