Big Media Would Get a Windfall from a California Journalism Bill

The local media landscape in California is rapidly deteriorating. Hedge funds are snatching up newsrooms in major cities, historic newspapers are filing for bankruptcy after 150 years of operation, and some media outlets — like the Salinas Californian — have been hollowed out entirely, leaving not a single local reporter to cover a city of more than 160,000 people.

In an attempt to stem this decline and improve access to trusted news and information, state lawmakers this year advanced the California Journalism Preservation Act (CJPA). The legislation would require online platforms of a certain size — essentially just Alphabet, Meta and Microsoft — to pay individual news outlets for each webpage that the platform hosts that links to that journalism provider’s content.

The CJPA is a modified version of the Journalism Competition and Preservation Act (JPCA), harmful federal legislation backed by giant media companies. The JCPA was inspired by a broader international push: In Australia in 2021, Rupert Murdoch’s News Corp. was the original proponent of a law that forced platforms to negotiate with news outlets if they wanted to share links to their stories. A similar bill became law in Canada this year — with disastrous consequences for local news outlets — and now, the idea has taken root in the United States. 

New analysis undermines claim that CJPA would bolster local media

To better understand who would benefit under the CJPA and how the proposed law would impact independent local media outlets — which are closest to the communities they serve and arguably in most need of assistance — Free Press Action conducted a study of the website traffic going to the outlets that would qualify for support.

Data limitations prevent us from predicting the precise benefits that outlets would receive. But our methodology does enable us to estimate the likely magnitude of differences in CJPA payments between classes of news outlets. The results paint a clear picture: The CJPA, however well intentioned, would result in a windfall of payments flowing to wealthy broadcast-television firms, hedge funds and nationally focused news and entertainment outlets.

Meanwhile, locally focused independent, nonprofit and ethnic media outlets would likely receive very little funding from the CJPA and could see their financial struggles worsen as larger outlets’ profits grow. The effects of the bill only cascade from there: The mechanism that determines the payouts would create incentives that could kick off a “clickbait gold rush,” which would lead to a more toxic online news environment for California residents.

The CJPA: a windfall for the rich and crumbs for the rest

Some findings from our analysis:

• Giant corporations would receive nearly all of the CJPA payments coming from Alphabet and Meta, with a substantial majority of payments going to outlets that do not produce local California news. 
• Broadcast-TV network affiliates — which are already very profitable — would receive a disproportionately large share of the Meta-referred traffic compared to legacy newspapers and local independent, nonprofit or ethnic media outlets. 
• Right-wing political websites in our national sample on average generated three times the number of Meta referrals and four times the number of Alphabet referrals as the average local independent, nonprofit or ethnic media outlet in our sample. Outlets like Breitbart, The Drudge Report and Newsmax — which traffic in hate and disinformation — are all eligible for CJPA payments. 
• The Murdoch family — which owns Fox News and News Corp. — would be the single largest CJPA beneficiary, accounting for 14 percent of Meta’s California referrals and 10 percent of Alphabet’s California referrals. (This isn’t surprising given the Murdochs’ significant role in advancing the core approach behind the CJPA.) 

In sum, the CJPA is a massive giveaway to large and already-profitable media companies. Meanwhile, California’s independent media outlets would likely see little-to-no benefit from this legislation. These independent news firms might initially receive at best less than pennies on the dollar. And over time the CJPA-created clickbait gold rush would further reduce these small outlets’ online visibility, shrinking their readership and rendering them worse off than before.

Even California’s major daily newspapers would see relatively small payments from the CJPA compared to broadcasters and national website owners — and most of this already-small slice would go to giant hedge funds that have gutted their newsrooms and replaced local coverage with cheap-to-produce national content.

In short, the CJPA seems poised to funnel money into the pockets of some of the players most responsible for the ongoing destruction of local news and civic information. 

The CJPA’s unworkable approach

These problems are inherent to the CJPA’s design, and would require far more than legislative tweaks to be properly addressed.

Even if the bill cut out giant media firms from receiving payments, the website traffic from those companies must still factor into the valuation of news for covered platforms. This is unavoidable due to the mechanism that lies at the heart of the legislation. No amount of tinkering would change the reality that the independent, nonprofit and ethnic media outlets that most need help would receive at best token payments.

Worse still, the click-driven incentive structure baked into the CJPA would create an automatic revenue stream for companies that can afford to invest in search-engine optimization and viral content production. This would reduce smaller outlets’ visibility and crowd out impactful local news on social media and search platforms.

Smaller community-focused outlets are innovating and pushing the entire field of journalism forward, away from the boardroom’s focus on quarterly profits, and toward a future where impact is not measured in revenue growth. Yet any CJPA payouts such outlets would receive would be — at best — the leftover crumbs from revenue pies gorged on by already-wealthy media companies.

Alternatives to the CJPA

Lawmakers have the right instinct. Big tech platforms have upended the local-news environment in California and across the country, and it’s clear that the market cannot right the ship on its own. Policy intervention is desperately needed — but there are far better alternatives to the CJPA that ensure that benefits actually flow where they’re most needed.

For one, we strongly urge policymakers to reinvest in local and state public media, specifically in newsrooms and journalism. Recognizing that reinvestment requires revenues, we urge lawmakers to explore the creation of public-media trust funds. After an initial period of capitalization, these trusts could operate independently of both commercial and governmental financial support or interference.

The bulk of the initial capital for this fund could still come from the social-media platforms, whose dominance over online advertising contributes to the financial disruption of local news and civic-information markets. Instead of forcing only Alphabet and Meta to pay link taxes that come with a host of negative side effects, California should instead tax advertising revenues to seed a public-media trust fund.

The CJPA is a misguided policy based on good intentions. We strongly encourage lawmakers to focus instead on equitable and better-targeted policy options.

Learn more about Free Press Action’s report on the CJPA.

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