The digital age has created more demand than ever for local news. It also has given rise to an unfair economic model in which online platforms collect all the money from digital advertising while contributing nothing to the cost of reporting the news.
The news industry has seen revenues drop 54 percent since 2006, according to research from Pew Research Center. The rise of the tech platforms and their dominance of online content has played a major role in this trend, which has led to the layoffs of reporters at newspapers throughout the country, and given rise to “news deserts” – areas served by no local newspapers. There are more than 1,000 such areas in the United States today, and unless something changes, that number will grow.
What will grow after that? The cost of government. Researchers from the University of Illinois at Chicago and the University of Notre Dame found in a 2018 study that the cost of government borrowing increased significantly in communities after the closure of the local newspaper. Without anyone reporting on them, government officials agreed to higher wages, budget deficits and other fiscal mismanagement, the study found.
Although many may claim that the news industry has not adapted to digital distribution, a new study, containing analysis conducted by experts at strategy and economics consulting firm Keystone Strategy and written by the News Media Alliance, illustrates that the news industry’s loss has been directly impacted by Google’s gain.
According to the study, news content has produced significant financial returns for Google:
• 39 percent of search results and 40 percent of clicks on trending queries are news content.
• 16 percent of results and clicks on the “most searched” queries are news results
• In 2008, Google News generated approximately $100 million to the company
• Based on News Media Alliance members’ traffic, news consumption on Google Search is at least six times larger than on Google News
• Taken together, Google made an estimated $4.7 billion in revenue from news content in 2018 – and this is a conservative estimate, with the actual number likely being considerably higher.
This true value of news content is likely much higher for several reasons that are difficult or impossible to quantify. Not only is Google driving Search with news, but the company is using news content for product development, such as training its artificial intelligence services, in order to keep users in the Google ecosystem. The additional uses of news content as drivers of engagement are also potentially serious drivers of data and revenue for the platform.
As with any business, in order to survive, news publishers need to be able to make money from their own product, which can be reinvested in reporting. Digital subscribers, who understand the importance of local news and are willing to support it financially, are crucial for the survival of the industry.
Also necessary will be finding common rules for a fair and equitable online ecosystem that allows publishers to thrive and maintain the quality of their content that readers expect. Federal lawmakers should keep this in mind as new antitrust investigations of digital giants Google, Apple, Facebook and Amazon begin to gather steam.
Local news publishers’ health and sustainability – and that of our democracy – requires the platforms to acknowledge their role and to engage with publishers to create a more just digital marketplace.