The major media outlets most likely to benefit from the proposed tax will never run a single word critical of it.
The major media outlets most likely to benefit from the proposed tax will never run a single word critical of it.
L ate in his tenure as president, Ronald Reagan summarized the government’s view of the economy when he first took office: “If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.”
Reagan certainly did not anticipate the future online economy, which is now so expansive it allows self-interested politicians to do all three of those things at once.
Take legislation currently working its way through Congress that would force Big Tech companies to the bargaining table, allowing traditional media outlets to extract a mandatory fee for allowing Google and Facebook to link to their stories. The Journalism Competition and Preservation Act (JCPA), introduced by Senator Amy Klobuchar (D., Minn.), would effectively make the local news industry dependent on the government for revenue, setting up a state-run media system that would induce any local paper to think twice about criticizing politicians who voted to stuff their bank accounts.
The enemies of Big Tech claim companies like Apple, Google, and Facebook are getting fat on the work product of local reporters while themselves “providing nothing.” So in order to “save local journalism,” Klobuchar’s bill would force these big internet companies to negotiate a fee with the local papers. It will surprise no one that most (although not all) newspapers support the bill, as it could lead to a substantial windfall and reverse their flagging fortunes.
There is no doubt traditional media outlets have been hammered by the emergence of the online information world. In 2005, U.S. newspapers collected nearly $50 billion in advertising revenue. By 2020, that revenue had fallen to $9.6 billion.
And that means fewer people working in the newspaper sector. In 2006, employment at newspapers in the U.S. topped out at over 74,000. By 2020, it had fallen to 31,000. With fewer reporters out there covering local stories, congressional candidates like George Santos, whose outrageous lies went undetected on his way to election, may soon be a dime a dozen.
This is why support for a link tax has swelled in recent years. California is looking at instituting its own, as are Canada and the European Union.
One would think taxing large, successful online media companies to subsidize smaller struggling ones is a progressive fever dream. But the plan is actually supported by a number of Republicans, including Senators Ted Cruz (R., Texas) and Lindsey Graham (R., S.C.), who view the scheme as a chance to reduce the influence of Big Tech.
This is where the “regulation” bit comes in. Ever since Twitter suspended President Donald Trump because of the risk of his inciting violence after the January 6 Capital riot, “conservatives” have been hatching ways to regulate social-media companies, forcing them to carry content with which the companies disagree. Threatening them with a hefty new tax would be a fine way of trying to get them to run content more pleasing to your ideological palate.
Other major figures on the right, such as Rupert Murdoch, have supported the tax for different reasons. In fact, the link tax has been tried in Murdoch’s native Australia, with predictably disappointing results.
As the Cato Institute’s Paul Matzko has pointed out, most of the revenue collected by the Australian link tax didn’t go to small newspapers but instead went to Murdoch’s conglomerate of media outlets. Murdoch’s networks then took those funds and started hiring employees away from the mom-and-pop local newspapers.
This would be the case in America, as well. Given that local outlets produce news stories that typically get regional attention, their cut of the revenues would be small, while it will be the large newspapers that reap the biggest windfall. The JCPA stipulates that media companies of over 1,500 “exclusive full-time” employees will be ineligible for payouts, which would exclude papers like the New York Times, Washington Post, and Wall Street Journal. But it would include other outlets like the New York Post, the Los Angeles Times, and the Chicago Tribune. (The employee cap does not apply to television companies, meaning a multibillion-dollar company like Sinclair, with 13,000 employees, would be able to accept link-tax money.)
And, of course, much of this revenue would be going to the hedge funds that are buying up local media outlets and stripping them for parts.
With an incentive to get bigger, local media outlets would undoubtedly do what their Australian counterparts have — start to merge and consolidate. If larger companies get more of the link-tax revenue, it only makes sense for the little guys to be part of a larger company. Small-town papers are already going extinct; financial incentives to consolidate will only hasten their demise.
In fact, as Matzko has noted, there could not possibly be a worse time for a link tax, given that Big Tech companies are already trying to rid their platforms of third-party news content. In an effort to force users to share more content on his site and not drive readers elsewhere, Elon Musk has removed headlines from news links shared on X (formerly Twitter) and reduced the reach of stories (known as “throttling”) shared from papers like the New York Times.
Google recently laid off a number of employees in its news division, leading publishers to note that traffic from the search engine is down. As the Times recently put it, “the major online platforms are breaking up with news.”
Perhaps these large online conglomerates are anticipating a link tax and getting ahead of it by severing the ties between Big Tech and Big Ink. But soon, traffic from Facebook, Google, and X may completely dry up, leaving local papers with far fewer readers.
And, of course, if online companies are incentivized to stop linking to news stories, it will have a significant impact on what we can find when surfing the internet. Finding articles backed with actual reporting will be far more difficult — undoubtedly, these articles will be replaced by blogs and Substack articles that make baseless claims, distorting reality for people who live online.
For instance, in 2014, Spain passed a “snippet tax” forcing Google and other aggregators to pay newspapers for every article to which they provided a link. Facing a huge tax bill, Google News pulled out of the country entirely, while all 84 news organizations in the country lost both readership and revenue. Making it more difficult for people to find news stories ended up damaging every news-producing company, hitting the smallest outlets the hardest.
Of course, the major media outlets most likely to benefit from the JCPA will never run a single word critical of Klobuchar’s proposal. You will sooner find the word “amplexus” (the process by which frogs mate) in a major newspaper than any criticism of the link tax. To fairly report or editorialize on the downsides of federalizing news coverage would be to cost your newspaper millions of dollars in future revenue.
And if newspapers aren’t willing to be straight with their readers on the link tax, imagine how their coverage might skew toward elected officials who argue that the tax is necessary to preserve journalism. Once legislators get on board with a media subsidy, the papers have an entrenched interest in keeping those politicians in power. Don’t expect any hard-hitting investigative pieces when Congressman Golden Goose’s seat is at risk.