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More Bad News for Link Taxes, Eh?

Paul Matzko

Canada’s link tax on online news goes into effect next month, but the preemptive embargo imposed by Google and Meta on news content is already having a significant, negative effect on smaller Canadian news outlets.

As Politico details, small news outlets are desperately begging Justin Trudeau’s administration for relief after a dramatic decline in online traffic:

“Between Google and Meta announcing their intention to exit news, we now expect a catastrophic 60 percent reduction in traffic,” ZoomerMedia’s chief operating officer Omri Tintpulver wrote to the prime minister’s office and heritage officials. “Jobs are going to be lost. Soon. Entire divisions may also be lost.”

This was an entirely predictable outcome. As I noted in my link tax analysis paper earlier this year, when Spain created a link tax variant — a “snippet tax” — in 2014, Google News pulled out of the Spanish market; and all 84 major Spanish newspapers endured a significant loss of traffic and revenue. The smaller the paper, the more severe the effects.

The outcomes from a link tax aren’t much better even when the social media platforms opt to fully comply rather than embargo the news as they did in Spain and Canada. When Australia passed a link tax in early 2021, Google and Meta eventually paid off the major media conglomerates to continue operating as usual. But small outlets weren’t able to shoulder‐​in at the link tax trough like their larger competitors, leading to the ongoing hyper‐​consolidation of the Australian news industry. The Big Ink news conglomerates are hiring away journalists from small newspapers or are simply acquiring their competitors outright.

news canada

You don’t have to take my word for it. It’s two years since the Aussie link tax was implemented and the early returns are coming in. It has been a bloodbath for small, local, and independent news outlets. Just look at all the red ink on this chart of Australian news outlet openings/​closures since early 2021!

Chart showing loss/gain in number of Australian news outlets.

It’s not only small news outlets that are struggling. As Politico noted, Canadian news publishers are worried that the link tax embargo will fall most heavily on newspapers serving Indigenous communities. They are right to worry. While I’ve yet to see data from Australia that specifically looks at the effects of their link tax on news outlets in Aboriginal communities, there is reason to suspect that the size‐​favoring incentives baked into the link tax especially hurt smaller outlets serving minority communities.

Were a link tax like the Journalism Competition and Preservation Act (JCPA) passed in the US, a similar effect would likely hold for smaller, independent newspapers serving black communities. As I wrote in my analysis:

The National Newspaper Publishers Association, formed in Washington, DC, in 1940, serves more than 200 black‐​owned newspapers, many of which have existed since the era when white‐​owned newspapers explicitly excluded black journalists and were generally disinterested in reaching black audiences. … The NNPA’s CEO called the JCPA a “blank check for large corporate media” that “leaves small minority‐​owned news out in the cold.” It would be perversely ironic if the JCPA, while seeking to preserve the newspaper industry, instead ends up preserving—or even deepening—the de facto segregation of the industry.

Of course, these aren’t the intended outcomes, but the road to policy hell is paved with good regulatory intentions. For example, the Minister of Canadian Heritage, Pascale St‐​Onge, is responsible for implementing their link tax. But St‐​Onge might just end up overseeing an erasure of Canada’s distinctive regional and cultural heritages as news outlets serving those specific interests and communities shut down, merge, or shrink.

Indeed, it’s possible that St‐​Onge could feel the effects in a very direct way; she represents a district in Quebec, Canada’s predominantly French‐​speaking province. (She only eked out a victory over the Bloc Québécois candidate in 2021.) Even if Google/​Meta ended their news embargo, a link tax regime would still favor large, national, English‐​language news outlets at the expense of smaller, regional, French‐​language ones. I can’t imagine that losing local, French‐​language newspapers will warm the hearts of French Canadians towards their government representative in Ottawa.

American policymakers should pay attention. We now have clear indications from three different countries — Spain, Australia, and Canada — that link taxes are a failure on their own terms. They hurt rather than help local news outlets. They act as a cross‐​subsidy from Big Tech to Big Ink. Ultimately, link taxes mean fewer articles from fewer newspapers reaching fewer consumers.

Crossposted from the author’s newsletter. Click through and subscribe for more posts from the intersection of history, policy, and mass media.

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