Time is ticking on a fascinatingly divisive piece of tech legislation moving through Congress—and Meta is making a final push to run out the clock.
The tech giant threatened Monday to pull news stories from its Facebook platform if Congress passes the Journalism Competition and Preservation Act, a bill that would essentially force Meta and Google parent Alphabet to share ad revenues with most media publishers. Meta’s warning came as various reports emerged that the JCPA might get attached to a piece of national defense legislation that must pass before the end of the year.
“If Congress passes an ill-considered journalism bill as part of national security legislation, we will be forced to consider removing news from our platform altogether rather than submit to government mandated negotiations that unfairly disregard any value we provide to news outlets through increased traffic and subscriptions,” Meta officials said in a statement.
The pronouncement further reinforces perceptions of Meta as the greedy bully of the block, using its immense power to coerce and cajole legislators into upholding an advertising duopoly. Meta briefly made good on a similar threat in Australia last year as policymakers considered a similar bill, but ultimately relented after extracting favorable legislative concessions.
But setting aside Meta’s brazen lobbying, it’s worth examining the merits of a government proposal that could transfer hundreds of millions of dollars from Big Tech to the mainstream media.
The JCPA’s bipartisan backers are honorably trying to tackle a civic crisis: the slow decay of the local news industry. According to the Pew Research Center, the number of employees working in U.S. print, digital, television, and radio newsrooms fell 26% between 2008 and 2020. Newspapers have been particularly decimated, with employment falling from about 71,000 to 31,000 during that time.
The reasons for the decline are numerous. Trust in the media has plummeted. Fewer people are willing to pay for news. Subscription rates keep rising. Digital ads generate less revenue than print ads. Craigslist destroyed newspapers’ classified ad business.
A major contributor, however, has been the emergence of Facebook and Google as the dominant advertising platforms. The two tech giants suck up most digital ad revenues through their market supremacy and lucrative ad-tech platforms, leaving a small percentage of the pie for publishers.
Rather than tackling a sweeping overhaul of U.S. antitrust code, Congress decided this year to push through the JCPA, a narrowly tailored exemption to existing law. The legislation, which mirrors the law ultimately enacted in Australia last year, would allow nearly all newspaper publishers and all television stations to negotiate with Google and Facebook for a cut of digital ad revenues generated by news articles hosted on their platforms. Disputes would go before an independent arbiter.
The bill advanced out of the Senate Judiciary Committee in September on a 15–7 vote, and it boasts the backing of the News/Media Alliance, the industry’s leading advocacy group.
“The tech giants have built their empires by profiting off the hard work of journalists without fairly compensating them,” the News/Media Alliance wrote last month. “And as local publications struggle to stay afloat, Big Tech has only doubled down on their anticompetitive practices, further consolidating their control over the flow of information. This is fundamentally unfair, and the JCPA will bring about much-needed change.”
Yet a strange collection of anti-JCPA bedfellows has emerged in recent months, offering several critiques of the legislation. The opponents include anti–Big Tech nonprofits, civil liberties champions, free-market devotees, newspaper unions, small publishers, and mainstream media antagonists on the political right.
Some of the criticism stems from fears that the JCPA sets a poor precedent for the digital ecosystem, fails to address larger antitrust issues, and injects the government into complex business matters.
Another critique centers on the beneficiaries of any JCPA-related revenue. Some labor advocates and independent publishers worry that major media organizations—including publicly traded companies and hedge funds that own outlets—would serve corporate interests ahead of the public good.
“We have no confidence that these massively consolidated publishers will use whatever revenues they collect from JCPA to invest in journalists rather than more mergers, stock buybacks, overpaid executives, and union-busting lawyers—because that’s how these companies spend the revenues that they already extract from our members’ journalism,” the leaders of 15 news guilds wrote in September.
We’ll see whether Meta makes good on its promise should the JCPA become law. Monday’s statement certainly makes clear that it’s increasingly nervous about that prospect.
Want to send thoughts or suggestions to Data Sheet? Drop me a line here.
Jacob Carpenter
NEWSWORTHY
A pro-choice decision. European Union privacy regulators ruled Monday that Meta is violating regional laws related to targeted advertising, paving the way for government orders that could hurt the Facebook and Instagram parent’s marketing prowess, the Wall Street Journal reported. EU regulators determined that Meta must give users the option to opt out of tailored ads that are delivered based on in-app activity. The ruling hasn’t been publicly released, and Ireland’s Data Protection Commission must issue an order mirroring the decision for it to become enforceable. Meta shares sank 7% in midday trading Tuesday.
Putting VIPs in check. Meta’s oversight board called Tuesday for major changes to an internal system that gave preferential treatment to high-profile users, the Associated Press reported. Board members said the system, known as XCheck, is “flawed in key areas,” including the slow-pedaling of content moderation decisions on posts by celebrities and inconsistent application of platform rules. Meta requested a review of XCheck after Facebook whistleblower Frances Haugen exposed aspects of the system last year.
Probing for monkey business. Federal regulators are investigating whether the brain-implant company Neuralink violated animal-welfare laws while testing its products, Reuters reported Tuesday, citing sources familiar with the matter and internal documents. About 1,500 animals have been killed over the past five years following Neuralink experiments, though it isn’t clear whether that number violates federal laws and regulations, sources told Reuters. Neuralink cofounder Elon Musk said last week that he hopes to begin human trials next year with federal approval.
Two for the price of billions. Taiwan Semiconductor Manufacturing Co. prepared Tuesday to unveil plans for a second chip plant in Arizona, a project that would raise its investment in the state from $12 billion to $40 billion, CNBC reported. The world’s largest semiconductor fabricator planned to formally announce its intentions alongside President Joe Biden, who signed legislation this summer allocating billions of dollars in federal subsidies for domestic chip manufacturing. TSMC expects its first Arizona plant to open in 2024, with the second facility coming online in 2026.
FOOD FOR THOUGHT
Picking up the scraps. Snap investors are hoping Twitter’s advertising losses are their much-needed gains. Bloomberg reported Tuesday that the struggling social media outfit—which has seen its stock price tank 80% year to date—could snag some of the ad dollars pulled in recent weeks from Twitter, following Elon Musk’s tumultuous takeover. The Snapchat parent likely won’t see a huge windfall from advertisers fleeing Twitter, but even a modest uptick in sales could help the company weather a broader pullback in ad spending and reverse a sharp slowdown in revenue growth.
From the article:
Even if Snap only draws 5% of brands’ ad dollars from Twitter, that should help the company handily beat fourth-quarter revenue estimates, said Bloomberg Intelligence analyst Mandeep Singh.
For social-media companies that have been swept along in this year’s bear market in technology stocks, any boost from Twitter’s woes would be welcome. While higher interest rates from the Federal Reserve have hurt the whole sector, Snap in particular has suffered from increased competition, difficulty in tracking users, and the weakening ad market.
IN CASE YOU MISSED IT
‘The clock has struck midnight in China’: Wedbush analyst Dan Ives says Apple needs a new plan after major iPhone supply-chain disruptions, by Will Daniel
‘Ripping the Band-Aid’—Solana cofounders talk SBF, FTX, and what comes next, by Taylor Locke
Dropbox let employees work remotely and saw record-high turnover. Then it offered in-person retreats. Retention soared, by Paolo Confino
BEFORE YOU GO
Doing them dirty? Twitter employees trudging back into the company’s San Francisco offices might want to bring some extra trash bags. Insider reported that janitors servicing Twitter’s headquarters went on strike Monday after failing to secure a new contract agreement with the company that employs them. A statewide labor union supporting the workers claimed Twitter has since hired a replacement contractor that will not bring on striking janitors, a violation of city law. Twitter officials haven’t responded to requests for comment on the matter, a common practice at the company after new owner Elon Musk disbanded its communications team.
This is the web version of Data Sheet, a daily newsletter on the business of tech. Sign up to get it delivered free to your inbox.
