Editor’s note: This story has been updated throughout with recent breaking news since its original version earlier this month.

The Canadian government’s unprecedented deal with Google on the amount of money it will pay the news media industry during collective bargaining will reset the relationship globally between the search giant and digital media.  

The agreement, announced in early December 2023 before further refinements, ended the six-month standoff between Google and Canada over its Online News Act. 

The fact Google endorsed the initial deal and then stuck with the process for another two weeks to reach a comprehensive agreement that included its sought-after exemption pathway will shape how other commercial payment deals between Google and news publishers proceed. 

The final details of the regulations were released just before the Online News Act was due to take effect on December 19, and they help us sketch out the new playbook.

Key points

• The Canadian government dealt itself directly into negotiating money on behalf of media.

• Google has agreed to contribute C$100 million cash annually to a “wide range of news businesses,” according to a four-paragraph statement from Heritage Minister Pascale St-Onge.

• Publishers will receive 63% of the funding, private broadcasters 30% and the state broadcaster capped at 7%.

• Google has been given the choice of dealing with a “single collective” to allocate the funding across “eligible news businesses.”

• The funding will be allocated within these categories based on full-time equivalent headcount of journalists engaged — not on their payroll costs. 

• The amount will be indexed each year for inflation.

• Agreeing to this package means Google will technically be exempt from the law (more on this below).

Areas now clarified 

• For now, the C$100 million annual fund is in addition to the direct deals Google has already struck with some news publishers, including some of the largest players. These have been receiving their payments throughout the standoff.

• When those existing three-year contracts expire, those companies will be rolled into the collective fund. It is likely the largest of these companies will try to maintain separate deals with Google when that time comes. 

• This means for the first couple of years of the collective fund, the medium- to small-sized publishers will receive a higher proportion of their $63m allocation before the bigger players join. Later, most or all of the larger publishers will need to be accommodated within the collective fund.

• It remains to be seen whether individual companies are able to achieve supplementary non-cash deals on top of their share of the C$100m cash to receive other benefits. (Google has been known in other countries to include in its commercial contracts in-kind technology access or discounts, advertising deals which lock in committed spending, revenue share deals, direct development grants and/or training.) 

• Anything that happens outside the collective cash deal will be entirely at Google’s discretion. 

• The government-owned Canadian Broadcasting Corporation (CBC) and Radio-Canada are in the fund, but the government capped their allocation at 7%. This is to reflect “the dynamics of the Canadian news industry,” according to the government statement. Sharing cash from platform deals with state-funded media companies has been a contentious point in some countries, where private media houses and national alliances have fought to limit the benefit to government-owned online competitors.

A breakthrough that becomes a playbook

There were several sticking points for Google about the Canadian law that passed parliament in June 2023. All now appear to have been addressed in the final version. 

1. The right to pick partners

Google wants to be able to pick which news media companies it directly deals with — and wants that right to be accompanied by a mechanism for how it deals with the rest without triggering a breach of the law. 

Google strongly preferred to have a single point of contact, which the Canadian collective fund now delivers. Uniquely in Canada, Google has negotiated the sum payable directly with the government. Making her announcement, the Canadian Heritage Minister Pascale St-Onge said Google would have the option to work with a single collective to distribute its contribution to all interested eligible news businesses.

2. The right to avoid being penalised 

Google does not want to be subject to the tough “final offer arbitration” process if one media company holds out on negotiations after Google had made best endeavours to reach an arrangement.  

Canada’s new default focus on collective bargaining effectively removes Google’s arbitration risk. This type of arbitration, also known as “baseball arbitration,” would swing the power balance back towards smaller players if triggered and is strongly disliked by the digital platforms.  

3. A path to exemption 

The Canadian act targets any digital platform with 20 million unique monthly users in Canada and annual revenues there of C$1 billion. Only Google and Meta are caught by this. 

As has been the case in Australia and New Zealand, Google seeks (and now formally received in Canada) an option to be declared exempt from the law if it concludes deals with a threshold number of media publishers. 

Google’s president of global affairs, Kent Walker, stressed in a blog statement in mid-December the overriding importance for Google of achieving a “streamlined path to an exemption.”

4. Not a link tax  

The deal with the Canadian government steers the act further away from looking or smelling anything like a “link tax,” where payments might have been seen to have been made for each article clicked. 

Google and its vocal Silicon Valley advocates have criticised the Canadian act and others like it for creating what they claim would be a tax on the fundamentals of Internet search. This, they say, would have opened up Google to claims for payments from any sector that has ever posted anything on the Internet. 

The Canadian government’s deal formally positions its media payment regime as supporting professional journalism based on the number of journalists employed by eligible news producers. It’s not a payment-for-links clicked, volume or value of audience delivered to either party, article counts, or as compensation for visits diverted from the publisher’s Web site because of Google’s use of snippets. 

How it compares 

Canadian media has done well financially out of the deal. 

The government had estimated Google should be paying Canadian media houses C$170 million each year under the act. 

For its initial two-year phase — when the C$100m collective fund is in addition to the value of the existing deals — the government’s estimate is likely to be achieved. 

That would make it slightly larger than the Australian deals with Google. In Australia, the search giant concluded a deal with each of the large- and medium-sized media companies and all small publishers. The latter were via two separate collective bargaining deals.

The former head of the Australian competition regulator, Rod Sims, who was the architect of its media bargaining code, said he believed Australian deals amounted to about US$200 million a year. But this figure also includes Meta, and it almost certainly underestimates the value of in-kind components that larger companies struck with each platform giant.  

After 2025 the Google cash contribution to Canadian news media is likely to fall as publishers with existing deals are rolled into the industry fund. 

This might push Canada down a place or two on the international league table — perhaps near or just below France where a recently revised collective deal (after regulator intervention) covers more than 90% of news publishers. But Canada’s deal is still a strong result for media.

Interestingly, the Canadian government announcement about its breakthrough with Google said there would be a clause offering an escalation of terms for Canadians if any other country achieves a more favourable outcome.  

But there’s a catch: We may never know if someone else does manage to trump Canada. The digital platforms have always fought clauses that require disclosure of the size of deals. Every media contract they sign includes strict commercial confidentiality clauses.   

The Australian law does not require any notification of amounts, and New Zealand’s bill currently before its parliament only requires a platform to confidentially notify the total amount of its deals to a government agency. At the other end of the spectrum are the recent drafts of the U.S. Journalism Conservation and Preservation Act, which stipulate full transparency of all deal amounts. 

There is, however, no doubt Canada’s media is on track to be among the most supported anywhere. Its federal government recently boosted the amount of payroll tax deduction available to media companies. The benefit is payable for “eligible newsroom employees” of “qualified Canadian journalism organisations.” The maximum tax credit that can be claimed per journalist per year jumps from C$13,750 to C$29,750. The tax credit rate rises from 25% to 35% for the next four years, after which it is scheduled to return to 25%.

There’s another noteworthy element about the news publishers’ sustained campaign to push for the legislation: The campaign, bolstered by Meta’s news blackout in Canada, created much greater public awareness there of the need for and challenges facing professional journalism. 

Taking advantage of this attention, the news industry greeted the government’s final Google agreement with an broader pitch: “With the Online News Act and recent changes to the Canadian Journalism Labour Tax Credit, Canadians have shown the world how smart policy can support journalism,” said Paul Deegan, president and chief executive officer of News Media Canada. “We now call on ‘Corporate Canada’ to support fact-based, fact-checked Canadian journalism by advertising directly with our trusted news titles.”

The new global framework

The Australian media bargaining code was the first into law using anti-trust tools to rebalance power between platforms and publishers over payments. Canada sought to improve on it, to address perceived shortcomings. 

The Canadian reform ambitions have now been tempered slightly after finding a workable compromise with Google. In turn, New Zealand sought to refine Canada to make their bill as Google-friendly as possible from the outset, which helped get the new industry collective agreement with the U.S. giant across the line. 

Let’s look at where the key elements now stand:

Australia

It introduced many of the core ingredients: 

• A requirement for platforms to strike commercial deals with media publishers, which includes a payment for their use of media’s content. 

• Deals had to be concluded with all news media, and if not, no news from any source could be published on that platform. 

• Strict “final-offer arbitration” would apply in the event a platform doesn’t strike deals.

• Collective bargaining as an option for media companies to join at the media companies’ discretion. 

• An exemption mechanism for platforms from being named or designated under the act if a platform completes all required deals. 

• No transparency of deal details required. (The government flagged in December 2023 that it will give the regulator powers to confidentially access information as part of a wider refresh of its media code). 

• And the code includes no specifics about which news media companies qualified for coverage.

Canada

• A collective fund, with the amount negotiated by the government.

• Final offer arbitration.

• Direct deals at Google’s discretion.

• An exemption path for platforms which can prove they comply with the intention of the law. 

• A tight definition of which news media companies qualify for coverage. 

• No requirement to announce deal details. 

• Explicitly not a link tax.

New Zealand

• Its bill is before parliament and passed its first reading, but Google has already begun paying media under a collective agreement. The focus there has been to come up with terms that keep Google in the game. Its components are as follows:

• Final-offer arbitration.

• Collective bargaining as the default, plus direct deals at Google’s discretion.

• Option for AI companies to be included along with digital platforms. This a first anywhere globally. 

• A wide list of which media companies qualify for coverage (foreign-owned digital publishers are excluded). 

• The companies which may qualify for deals include any “creator” company that have had their intellectual property used by AI companies to train their models. 

• No public transparency on deal size or terms. Confidential communication of deal outcomes is sent to the regulator. 

• No path (yet) to exemption for a digital platform that proves it complies with the spirit of the law. To achieve Google’s support for the New Zealand bill, a clear path to exemption would need to be added based on Canada’s experience.

Other issues

Small publishers: How will small publishers do after the latest turn of events in Canada? 

In a nutshell: OK. The allocation formula will be based only on journalist headcount in the newsroom, not on their salaries. 

Big city and larger media companies pay more per head and pushed unsuccessfully for the fund to use an allocation formula using wages. In Australia, small- and mid-sized publishers covered by the collective deals have secured as much as one-third of their journalists’ headcount from Google and Meta payments. The Australian collective deal formulas are based on headcount not salaries.

Advertising technology: There’s no mention of ad tech in the Canadian Act. The legislation only covers content payments. Google’s dominance of the ad tech ecosystem is subject to separate class actions brought by media companies in the European Union, United Kingdom, and the United States, as well as actions by regulators in all three jurisdictions.  

Artificial Intelligence (AI): There’s no explicit coverage for any payments from AI companies for training their large language models on content, including professional journalism. However, there appears to be scope for its later inclusion. New Zealand is the only country so far to formally include AI in its bill. 

Meta: No developments to report. Meta continues to claim news is of no use to its platforms or its users, and it continues to say it is no longer part of the news ecosystem. Meta has blocked all local and foreign-originated news from its brands in Canada and it hasn’t been involved in these latest talks. Meta might also get swept up in any extension in Canada to cover AI. Meta has used journalism posted on the Internet in the training of its open source large language model, LLaMA, which is by far the largest model of its type in the world.

Canadian Prime Minister Justin Trudeau said after the Google deal was reached: “Unfortunately Meta continues to completely abdicate any responsibility towards democratic institutions and even stability.” 

Meta repeated its rejection of the Online News Act after the Canadian government released the final details before the law went live: “News outlets choose to use our free services because it helps their bottom line,” said Rachel Curran, head of public policy for Meta Canada, “and today’s release of final regulations does not change our business decision.”

In New Zealand, Meta’s only comment on the final bill there was to object to the word “fair” being included in the New Zealand bill’s title, “Fair Digital News Bargaining Bill.” Meta maintains that only 3% of its users come to its brands seeking news, based on research it commissioned, contradicting multiple global studies that show most people get their news from social media brands and with those brands being led by Facebook.

Key takeaways

The Canadian government-brokered agreement with Google has settled the list of the key components that are important for getting the search giant to support other countries’ attempts to legislate for commercial deals with publishers:

1. A simple path for exemption from the law if the digital platform has complied with all elements of it. 
2. A default to collective negotiation to minimise the resources to complete deals.
3. Any exceptions to collective deals is entirely at Google’s discretion.
4. A default to automatic coverage within the collective to minimise arbitration risk.
5. A mechanism with a bias towards helping journalism to remove risk that it would be a precedent for paying for clicks on links.
6. The amount of cash for the collective fund is agreed up front by a government or a regulator — and not principally by the news media industry. This last one is the most surprising development and was critical to the Canadian peace deal.

While this list is framed from Google’s perspective, the sizable Canadian, French, New Zealand, and Australian media deals that have resulted from the introduction of national laws (or credible threats of one) have proved more valuable than any alternative model so far. Therefore, these countries all underscore the importance of getting Google to come to the party.

In that important sense, this new list forms the updated playbook and will see many other countries reappraise their approach.

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