Digital platforms have fundamentally changed the news and media industry. They have made news more accessible, instantaneous, and tuned to individual consumer preferences. Traditional media outlets have been compelled to adapt to the digital environment by engaging in new methods of news dissemination and creating novel business models. An excellent example of this is BuzzFeed, which touted itself as the “first new social news organization” that mixed the “serious and stupid” styles of journalism. At one point, digital media exemplified by the likes of BuzzFeed, HuffPost, and Mashable – which published everything from in-depth analysis and breaking news to celebrity gossip, animal memes, and humorous lists – seemed poised to define the next generation of journalism. But then the demise of BuzzFeed News was heralded as the end of an era.

Amid all these ups and downs, what is evident is that the business of media companies has become inextricably linked to digital platforms. Several issues arise at the interface of platforms and digital media, including concerns of content moderation, misinformation, privacy, etc., and most importantly, how their interaction affects the competitive dynamics of the news media industry.

Platforms and Publishers: An Uneasy Relationship

Both new-age media companies and traditional publishing outlets rely heavily on digital platforms for discovery, engagement, and revenue. According to Pew Research, 69% of US Twitter (now rebranded to ‘X’) users get their news through the site. X and other social networking sites are especially crucial for breaking news and live news events. A survey by the Reuters Institute of Journalism found that nearly 84% of Indians use online platforms for their daily news consumption, making it one of the most important sources of news, alongside television (59%) and print (49%). Digital platforms are involved not just in distribution (i.e., driving traffic to news websites) but also in hosting and curating thenews through aggregator platforms like Google News and Facebook News Feed. Media behemoths like News Corp, who have managed to adapt their businesses to these shifts, have witnessed a steady increase in their revenue streams. However, local media, which hasn’t adapted nearly as well, has lost a large chunk of its revenue, despite continuing to be an important news source for local communities.

A survey by the Reuters Institute of Journalism found that nearly 84% of Indians use online platforms for their daily news consumption.

Indeed, this relationship runs both ways. While news media increasingly relies on digital platforms like Google and Facebook for discovery of content (that too by the right audience through targeted recommendations) and monetization (through advertising), platforms too, rely on news media publishers to keep churning out interesting, timely, and varied content to incentivize consumers to spend more time on their platform. X acknowledges that one of the biggest reasons why people come to its platform is to “stay informed about current events” and have conversations about the news. The advertising revenue from these services subsidizes digital platforms’ “free” services. This relationship though isn’t always vertical (with news media providing content and digital platforms distributing it), it is also horizontal in some circumstances. In an attention economy, news media plays a crucial role in grabbing eyeballs and directly competes with digital platforms and social media for consumer attention. Other areas in which digital platforms and news publishers directly compete are news curation and digital advertising services.

What initially seemed like a simple symbiotic relationship, with digital platforms increasing overall traffic and ad revenues for news websites and in turn benefiting from the content these websites generated, has now become more complex and inexorable. This love-hate dynamic is best evidenced in the ongoing tussle between Musk’s X and journalists. Despite their openly public disdain for each other, they have been unable to break off this co-dependent relationship.

Despite their potential to make news media more competitive and democratic, contemporary dynamics between publishers and digital platforms are often characterized by an imbalance of bargaining power. As more people get their news online, the power of digital platforms over news media has grown. Specifically, Facebook and Google together with their subsidiaries like Facebook Blue, Instagram, WhatsApp, Google Search, Google News, YouTube, etc., control most routes of digital news referral. A survey by the Reuters Institute for the Study of Journalism (which was limited primarily to English-speaking users in India), revealed that YouTube (53%), WhatsApp (51%), Facebook (43%), Instagram (32%), and X (22%) are the most important sources of news for digital users in India. The advantages of scale, network effects, and Big Data which Big Tech incumbents enjoy are difficult to offset.

Additionally, Google and Facebook also control most of the digital advertising market. These two play the roles of the buyer, seller, intermediary, and exchange all at once, thus their control over the digital advertising market is absolute. Even if news publishers were to adopt the unconventional stand of not using digital platforms for the distribution of news, it is impossible to avoid these platforms in digital advertising. Additionally, publishers increasingly rely on platforms for curation, hosting, discovery, etc. Thus, publishers rely on platforms on multiple fronts, which gives them many more chances to exploit this dependence. Shilpi Bhattacharya, a scholar of Competition Law and Law and Economics, explains that while there are several competition cases against digital platforms, one important distinguishing feature for digital news media is the multiple roles that platforms play in this ecosystem, including aggregation, distribution, ad tech, etc. Many news media publishers have already raised complaints of digital platforms abusing their superior bargaining power in these multiple roles. This purported exploitative conduct manifests in several ways.

X acknowledges that one of the biggest reasons why people come to its platform is to “stay informed about current events” and have conversations about the news.

Publishers have raised issues of inequity in contractual relationships with digital intermediaries like Google and Facebook about information asymmetry in advertising revenue generated, and the basis of revenue division and monetization strategy. They have also highlighted the unilateral imposition of technical standards and formats like AMP. Lack of control over data collected is also a key source of tension. Publishers have alleged that they do not have access to their own first-party data i.e., the manner in which consumers interact with different types of news content on Google and Facebook ecosystems. They receive only aggregated and anonymized data, whereas Google and Facebook have granular data about consumer interactions and preferences, allowing them to further entrench their advantage in the digital advertising and news referral markets. Similarly, publishers allege that they have no information about the total digital ad revenue generated from their content and the basis on which this revenue is divided between platform and publisher.

Even as people consume more digital news and can easily multi-home (i.e., are not tied to one news publisher but easily move between different news websites), the revenue of many news publishers has steadily declined over the years. This stands in stark contrast to the ballooning advertising revenue of digital platforms. The pandemic has further exacerbated the problem and resulted in many newspapers closing down or laying off workers. Closure of smaller newspapers has given rise to concerns of consolidation in the news media industry where only a few players backed by private equity funds and larger media houses might survive while small local newspapers run the risk of being shut down. Google, on the other hand, has steadfastly denied allegations that it is taking a large chunk of the digital advertising pie and claims that news publishers keep over 95% of the revenue they generate. Google’s research shows that the decline in publishers’ overall revenues is due to a decrease in revenue from classifieds and print subscriptions and not due to publishers receiving a smaller share of advertising revenue. Overall, it seems that even though digital advertising revenue is increasing, this increase is not enough to offset the loss from print subscription and ad sales and this trend of advertising revenue moving from print to online media is only expected to continue.

“It isn’t evident that ‘all’ of the revenue loss being suffered by media companies is attributable to digital platforms,” says Arul George Scaria, a legal scholar specializing in Intellectual Property and Competition Law. He posits, “Media companies also need to rethink their business model and introspect whether they have been responding to changing consumer preferences and consumption patterns.” As evidence of this, Scaria points to how news subscriptions work, “When you need to access a digital copy of a newspaper article, it is sometimes behind a paywall. Even if as a consumer I subscribe to the print newspaper, I do not have access to the same article in digital format and I have to pay once again to access the digital copy of the newspaper article which is unjustifiable.”

Despite their potential to make news media more competitive and democratic, contemporary dynamics between publishers and digital platforms are often characterized by an imbalance of bargaining power.

In the case of the Indian market, the media has its own idiosyncrasies which digital media companies need to respond to. Arul points out that the Indian market is especially price-sensitive and most people might not be able to afford multiple digital news subscriptions. Shilpi also explains that “the business models of platforms have shaped our expectations of receiving ‘free’ content and as a result, nobody wants to pay for news anymore.”

Publishers have also complained about the ‘free’ use of their content. There are several ways in which news can be consumed perfunctorily nowadays without even visiting the news website. For instance, publishers are not compensated for the use of their short explanatory news snippets or hyperlinks on social media websites or search services. For certain types of news, the consumers view only the headline and the short snippet, without actually clicking on the link and visiting the website. While such zero-click searches, continue to generate advertising revenue for digital platforms (due to all the advertisements on the search engine or news referral platform), the news publisher in such zero-click searches does not receive any revenue. The tendency to consume news content within the Google and Facebook ecosystem without clicking on the link to read results in a situation where platforms continue to generate revenue from consumers staying on the platform and viewing news snippets without clicking on it; whereas the publishers who created that news do not receive any revenue from such engagement.

Closure of smaller newspapers has given rise to concerns of consolidation in the news media industry where only a few players backed by private equity funds and larger media houses might survive.

Publishers rely on digital platforms for discoverability. Sudden changes to search and ranking algorithms of Google and Facebook therefore have a direct impact on their website’s traffic and revenue. Many publishers have traced a direct and immediate impact on website traffic to changes in Facebook and Google’s ranking algorithm. Importantly, the changes to these algorithms are often made unilaterally and without sufficient notice. Additionally, publishers have claimed that the parameters of ranking aren’t always clear to them and sometimes even biased or commercially motivated. Thus it isn’t always possible for news publishers to customize their news in a way that increases its discoverability, ranking and associated monetization.

Is it a Competition or Copyright Problem?

In most jurisdictions, one of two legal frameworks has been evoked to redress the issues that arise in this respect – copyright and competition law. Under the first camp, are countries like France and other EU nations which view this as a copyright issue i.e., unfair or inequitable compensation for copyrighted material, and hence, have devised the EU Copyright Directive in response. However, as David Lindsay, Prof. at University of Technology, Sydney, argues, the imbalance in bargaining power between parties is the root cause of conflict. Copyright in such a case offers an “imperfect analysis of the policy problem and a flawed mechanism for addressing the problem”. Arul echoes this idea that copyright is the incorrect lens for analyzing this problem, and explains, “Most jurisdictions have moved away from a fairness theory-based justification to an incentive theory-based justification of copyright protection. The fact that someone has put work or money into creating certain content is no longer a justifiable rationale for a grant of copyright over the said content. Here we would effectively be affording protection over facts and data which is not permissible under the existing established standards.”

In contrast to the copyright camp, other jurisdictions like the US, UK, Australia, Canada, and India, view this as being a problem of imbalance of bargaining power which results in market failures. Abuse of market power is essentially seen as a competition law issue and hence these countries are using their existing competition law or devising new tools and regulations under the broad umbrella of competition policy. The Journalism Competition and Preservation Act in the US, which was dropped following Facebook’s aggressive lobbying efforts, was based on competition law principles and would have given an exemption to publishers and broadcasters from antitrust laws, allowing them to form a unified bloc for negotiations with tech companies. The UK is similarly analyzing this problem using the framework of competition law and deliberating the introduction of the Digital Markets, Competition and Consumers Bill and the creation of the Digital Markets Unit. The Competition Commission of India has also initiated an investigation against Alphabet Inc., (the parent company of Google) for abuse of its dominant position vis-à-vis news publishers.

Some jurisdictions like Australia and Canada have realized that existing competition law tools are insufficient. As Shilpi highlights, “It is hard for competition law to fix fair compensation- that role is usually associated with a sectoral regulator. A better remedy could be finding a process to create a more equal bargaining position so that the parties themselves can agree upon compensation.” Australia and Canada have already adopted such an approach and designed an altogether new process and remedies, although these new laws share the overarching principles and aspirations of competition law. Australia’s News Media Bargaining Code (NMBC) requires platforms to negotiate with news media businesses and if those negotiations do not yield appropriate results then it triggers arbitration. Under NMBC, the threat of arbitration is expected to even up the bargaining power and compel digital platforms like Facebook and Google to enter into fair agreements with news media for the distribution of revenue. The Indian government has also expressed an interest in introducing a new law along the lines of Australia’s NMBC to compel digital platforms to share revenue more equitably with news publishers.

“Media companies also need to rethink their business model and introspect whether they have been responding to changing consumer preferences and consumption patterns.”

While some have heralded its success, the NMBC has also been criticized on many fronts including that it benefits only the big media companies which have the wherewithal to negotiate with Google/ Facebook and thus exacerbates consolidation in the news media industry. While some have called it out for being too stringent and threatening to create a chilling effect on innovation, others believe that the NMBC does not do enough and more sweeping changes to antitrust law are needed to address the root cause of the problem. For instance, Stucke and Grunes emphasize the need for a more comprehensive merger review in the news media sector which assesses not only the impact of a potential merger on advertising rates but also other qualitative factors such as non-price editorial competition, diversity and localism in journalism. Under this analysis, competition law through merger review will promote access to the marketplace of ideas.

As Rod Sims, the Chair of the Australian Competition and Consumer Commission, explains while an imbalance in bargaining power is not uncommon in commercial settings, the reason why this problem requires immediate attention and specialized regulatory intervention is the large positive externality that journalism brings. A market failure for digital news creation and distribution has far-reaching consequences for independent journalism and the functioning of healthy democratic discourse. Shilpi has also stressed that the “centrality of news media to democracy and the social fabric” and the need to “ensure that news media remains viable and independent” is what distinguishes these competition issues from other competition concerns that arise on digital platforms.

Is there Currently a Legal Problem Meriting Regulation?

The design choices of the Web 2.0 era have created the present platform infrastructure, which is heavily reliant on digital advertising for monetization and incentivizes attention-grabbing and maximization of data collection. High dependency and power asymmetries have created an imbalance in bargaining positions of legacy media and digital companies. Given the potential for digital platforms to act as both catalysts and inhibitors of competition in the news media industry, it is important to question whether there is a problem meriting regulation. We need to be wary of an approach that simply presumes a reduction in competition based on abstract doctrinal theories and studies conducted in other countries. In other jurisdictions that are attempting such regulation, there have been extensive market studies to show the reduction in competition, foreclosure, and consolidation effects. In countries like India too there is a need to adopt an empirical approach to identifying the existence of the problem and the extent of its effects. Is there evidence to show a decrease in competition in the Indian news media? How much of such competitive harm or loss of revenue can be attributed to digital platforms and how much of it is due to changing consumption patterns? An empirical evidence-based approach rather than a purely theoretical model would reveal the competitive dynamics of the market and would guide regulation in a direction that would prevent abuse of market power by digital platforms without compromising their innate ability to make the market for digital news more competitive.

Many publishers have traced a direct and immediate impact on website traffic to changes in Facebook and Google’s ranking algorithm.

Recent scholarship has shown that the problems of digital platforms are not simply due to lack of regulation but also because of the design, infrastructural, and incentive choices that have now become rampant in the platform economy. Zuboff, Hwang, and Wu, amongst many others, have called for a drastic rethinking of the business models and incentive structures underlying digital platforms. For instance, Hwang challenges how Big Tech’s business model is almost entirely built on monetizing attention and exposes the dangers of over-reliance on the existing platform economy of digital advertising. Similarly, Zuboff warns us of the dangers of ‘surveillance capitalism’ and the insidious effects of ‘a global architecture of behavior modification’ which weaves through the internet. The aggravated effects of platform behaviors are not merely because regulation has been too slow to respond, but also because the underlying infrastructure, design, monetary incentives and business models have been misaligned with prevailing social, ethical, or even political goals. Evidence of these misaligned business models and antithetical incentive structures also emerge when we closely examine the digital news ecosystem. Shilpi underscores that “Big Tech’s business model is focused on grabbing the attention of consumers. Their approach towards news media is similarly defined. Their incentives lie in producing and distributing ‘engaging’ or ‘attention-worthy’ news rather than accurate or independent journalism.” Hence, she recommends that we need to re-examine the business models and incentive structures of digital platforms. Arul also explains how the news publishers, for their part, could redress at least a part of the problem by rethinking their business models. Given the price-sensitive nature of the market, he emphasizes the need to come up with creative solutions, for example, “Having a repository or collective where users pay a single subscription fee to get access to multiple newspapers instead of paying separate subscriptions for each individual newspaper and then the fee is divided amongst the news media companies.” Shilpi too expounds, “as long as news publishers rely on digital platforms as the primary way of distribution of news, this imbalance of bargaining power will continue to exist.” This failure of the underlying business models is best observed in countries that have gone to the extent of introducing new specialized NMBC in Australia and yet grapple with a lack of competition in the news media industry. It has been argued that competition law and special codes like the NMBC can only go so far; these regulatory pressures will have to be supplemented by finding alternatives to journalism’s advertising-funded business model.

Given the potential for digital platforms to act as both catalysts and inhibitors of competition in the news media industry, it is important to question whether there is a problem meriting regulation.

Given the nature of news media, we need to carefully consider the objectives of regulation. For instance, are we primarily interested in infusing competition in the market for news media and do we expect such competition to automatically lead to an improvement in the quality of journalism? Or are we more directly concerned with encouraging independent, good-quality journalism and therefore need to design regulations that are geared towards these ends? As Shilpi elaborates, “There are multiple objectives that could be pursued here including making good-quality independent journalism viable. Existing regulation might not be perfect for furthering at least some of these objectives although competition law can operate simultaneously to correct certain issues like imposition of unfair conditions or the imbalance in bargaining power, etc. However, given the nature of journalism as a ‘public good’ and depending on which objectives you wish to further, a new specialized regulation might be warranted.” Contemplating what we are trying to achieve through regulation in this space, would not only help us assess whether existing laws are sufficient or not but would also provide insights on what form new regulation (if any) should take.

While some of these proposed guiding questions might seem too elementary, they should form the foundation upon which regulatory action is built. It is not uncommon to see lawmakers and policymakers hastily jump into regulation, following in the footsteps of other countries, without first contemplating these foundational questions. The result is often the naïve import of laws which are ill-suited to the needs of our domestic markets and society. Hence, it is paramount to think clearly about these questions and adopt an empirical rather than a theoretical or doctrinal approach to regulation to ensure that we correct market failures in the digital news media industry without hindering the potential of digital platforms and the internet to catalyze competition.

This essay has been published as part of IT for Change’s Big Tech & Society Media Fellowship 2022.