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New research published by the Institute of Economic Affairs argues that forcing digital platforms to pay publishers to host their content would prop up failing media business models and harm consumers.

• Policymakers have misunderstood the relationship between digital firms and traditional publishers;
• Rather than viewing platforms ‘free riding’ on journalism, we should appreciate their ability to spread quality news content to wider audiences;
• Plans by the UK government to force platforms to pay legacy media a share of their revenues risks inhibiting innovation, undermining journalistic quality, and leaving the British public less well informed.

A new report from the Institute of Economic Affairs warns government against intervening in the relationship between digital platforms and legacy media. Breaking the News?, by IEA Head of Public Policy Matthew Lesh, suggests that a policy which mandates tech platforms pay publishers for hosting their content could undermine the evolving tech sector and leave the British public less well-informed.

While there is a narrative of digital platforms free riding on journalism, publishers benefit from being hosted by large web platforms, with their increased audiences driving web traffic and subscription revenue towards traditional publications.

Internet platforms are now a fixture of the media landscape: forcing them to forfeit part of their revenue will harm both consumers and publishers. When Spain imposed a similar system in 2014, it led to a six per cent decline in traffic, impacting 84 Spanish online newspapers. Introducing a similar policy in Britain, Lesh writes, would likely result in similar outcomes.

IEA Director General Mark Littlewood said:

“Every major technological change has disrupted established business patterns and undermined existing business models. The internal combustion engine disrupted the horse and carriage, while the electric light displaced the tallow candle sector.

“The internet and the new business models it has created are no different. Instead of attempting to undermine innovation through heavy-handed state action, smart publishers should be building new models that better reflect the world we live in today.”
 

Notes to Editors

IEA spokespeople are available for live and pre-recorded broadcast

A copy of Breaking the News? can be read here: https://iea.org.uk/publications/breaking-the-news-should-digital-platforms-be-required-to-fund-news-publishers/https://iea.org.uk/pdfviewer/breaking-the-news/

A study from the Reuters Institute for the Study of Journalism found that half of all news traffic comes from searches and social media, demonstrating the value added from hosting content on digital platforms. 

Between 92 and 95 per cent of the average American Facebook user’s content is generated organically without external links. The number of Brits who report using Facebook as a main source of news declined from 28 per cent to 19 per cent between 2016 and 2022.

In 2021, Facebook temporarily removed news content from its platform in Australia in response to the threat of a compulsory news media bargaining code system. This resulted in a 22 per cent decline in traffic to leading Australian news sites.

A healthy process of ‘creative destruction’ is responsible for the woes of traditional publishing. Google and Meta did not take publishers’ money any more than Henry Ford stole from the horse and carriage industry. New technology emerged, consumer preferences changed, and the previous business models fell apart.

The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems. The IEA is a registered educational charity and independent of all political parties.