The Fallout of California’s Local News Deal With Google

“I know what Google owes us, and I know they did not pay their fair share.”

California legislators this year were poised to start reversing the collapse of local journalism and hold massive companies like Google accountable. Instead, state leaders struck a deal with Google that not only waters down the proposed reinvestment into local news but also creates a “national AI accelerator” that journalists fear could threaten their jobs. 

An earlier version of AB 886 would have required companies like Google to negotiate with local news publishers over ad revenue, and the publishers to reinvest the money into hiring and keeping news staff. Advocates say that legislation could have set a model for the rest of the country and even the world in forcing tech companies to reinvest in local newsrooms. But the final deal guarantees far less compensation from Google in addition to investing in AI tech, and while it’s been praised by some publishers and trade groups, the bill has been panned by journalists across the state. 

Alphabet’s Kent Walker, the company’s president of global affairs, said in a statement to More Perfect Union that the deal “builds on our long history of working with journalism and the local news ecosystem in our home state while developing a national center of excellence on AI policy.”  

Meanwhile, Media Guild of the West President Matt Pearce — a former Los Angeles Times reporter who testified in support of AB 886 as it moved through the legislature — described the deal as a “total shitburger.”  

The apparent collapse of the California deal has major consequences for efforts to regulate big tech and rebuild local newsrooms, which have been decimated by the loss of ad revenue. For some researchers and anti-monopoly activists, it underscores the need to reduce the leverage Google wields through its immense size, wealth, and political power.

Why does Google owe newsrooms money?

In the filings for its initial public offering in 2004, Google included the transcript from an interview with Playboy where co-founder Larry Page said: “We want to get you out of Google and to the right place as fast as possible.” 

But over time, Google began introducing more and more tools such as AMP and featured snippets that effectively siphoned off revenue from news organizations and made it more difficult for them to build a subscriber base, as the trade group News/Media Alliance wrote in a 2022 white paper. 

Ad revenue for the newspaper industry hit nearly $50 billion per year in 2005, according to Pew, but by 2022, it was less than $10 billion. At the same time, the share of ad revenue that came from digital advertising went from under 20 percent to nearly half of revenue. Now, more than 1,800 U.S. counties have one or fewer newspapers, according to the Medill School of Journalism. In California, newsroom employment has plummeted 68 percent over the past 20 years, according to Anna Brugmann, director of policy at the nonpartisan group Rebuild Local News. 

A 2023 working paper authored by researchers from Columbia University and the University of Houston suggested Google owes U.S. publishers between $10 and $12 billion annually; one of the researchers, University of Houston assistant professor of finance Haaris Mateen, told More Perfect Union that Google owes California publishers alone at least $1.4 billion annually, a number the tech giant has disputed. 

Solutions have begun to emerge for this global problem, including bargaining code laws. Australia, for example, passed the News Media Bargaining Code in 2021, and Canada passed the Online News Act in 2022. Deals reached under the former’s bargaining code have come out to approximately $166 million per year in payments from Google and Meta to Australian newsrooms, according to the Los Angeles Times; in the latter example, Google settled with Canada to pay $74 million US ($100 million CDN) annually, around two-thirds of which will go to print and digital outlets, according to Brugmann. Tech platforms ardently opposed those bills and others over the past decade. 

California weighed two distinct but similar bills this year. AB 886, sponsored by Assemblymember Buffy Wicks, would have similarly empowered news publishers to band together to negotiate a “usage fee” from platforms like Google and Meta, while SB 1327 would have taxed big tech platforms a “data extraction transaction” fee, to fund up to $500 million annually for local journalism and $400 million for public schools. 

The deal that was ultimately struck provides far less to newsrooms and journalists. Under the agreement with California, Google will pay $110 million over the course of five years to fund journalism efforts through an initiative at the University of California-Berkeley and other “existing journalism programs,” and $62.5 million to the AI accelerator, according to the Sacramento Bee. (The deal calls for no state funding for the accelerator.)

 The deal’s framework also calls for $70 million in state dollars for the journalism fund at Berkeley, which has to be appropriated by the legislature, but already, Senate leader Mike McGuire and SB 1327 author Steve Glazer have criticized the deal. The latter said the agreement “seriously undercuts our work toward a long-term solution to rescue independent journalism.” 

"The thing that is very much up in the air here...is there a deal?" Pearce told More Perfect Union, pointing to McGuire's public skepticism of the deal. "I see a press release. I see some quotes from publisher lobbies on it. What I do not see is an actual allocation of funding to see this thing through."

How Google wields influence

In the wake of the deal, much of the blame has been directed toward Gavin Newsom, California’s powerful, industry-aligned Democratic governor. Danielle Coffey, the News/Media Alliance’s CEO, praised Wicks for attempting to shepherd the legislation through the California State Legislature, but told More Perfect Union that Newsom — who never publicly indicated his position on the legislation — was “interested in a negotiated settlement.” In a statement accompanying Wicks’ announcement, Newsom said the agreement was a “major breakthrough” in funding local journalism “without imposing new taxes on Californians.” 

“I know what Google owes us,” Coffey said. “And I know they did not pay their fair share.”

California’s outsized role in both national policy and the tech sector could also impact similar state efforts to rebuild local journalism and properly regulate tech. Illinois Sen. Steve Stadelman, a former TV reporter, filed a similar bill this year in his state that he said was “opposed heavily” by tech companies. 

“I think the big tech companies are very effective in their narrative and trying to undermine the importance and why this is a potential solution,” Stadelman said, pointing to industry talking points that his bill would “tax” social media sites. “It's just ridiculous, but if you're not familiar with the issue, that's gonna cause hesitancy and reluctance to move forward.” 

Stadelman told More Perfect Union that the failure to pass a bill in California “obviously has an impact” on his efforts to tackle the collapse of local news in his state.

"California is a big state, it's the home of the big tech companies,” Stadelman said. "I'm spending the next couple of months analyzing and figuring out, is there a path forward with my legislation?”

The deal underscores the fact that the federal government may be the only entity with the resources to take on Google. A bill spearheaded by U.S. Sens. Amy Klobuchar (D-MN) and John Kennedy (R-LA) would, similar to the original California legislation, allow journalism organizations to band together to negotiate a fair deal with the tech platforms. This bill has bipartisan support but has yet to receive a vote in the Senate.

More importantly, the Department of Justice won a landmark antitrust case last month against Google, with a federal judge finding that the company is a “monopolist” in the online search and advertising markets, and has fallen afoul of federal antitrust statutes to maintain that monopoly. The Justice Department is now reportedly considering breaking up Google to bring it back in compliance with federal law; a separate trial against Google over its alleged ad-tech monopoly will begin this month.  

“If Google is broken up, that would have a huge effect,” Mateen said. “All of this is because of bargaining power…the poor economic health of newsrooms comes in no small measure because of the revenues being taken up by these platforms, because of the way the market is structured.” 

There have been some limited moves in legislatures around the country this year to try to chip away at the loss of newsrooms and newsroom jobs. New York will provide $30 million in tax credits annually for the next three years to local newsrooms, money earmarked mostly for staff retention as well as new hires. 

And Stadelman and his colleagues did push through legislation that provides $25 million in tax credits to local newsrooms over the next five years, a measure he said was “probably modest” but he hopes will serve as a starting point.

“My bill and what was discussed in California can be helpful, but this is all the problem, it doesn’t save local journalism,” he added. “A lot of work needs to be done to create a sustainability model here.” 

Stay tuned for an in-depth video looking at the impact of Google and Meta on local news. In the meantime, check out our video from earlier this year looking at the Department of Justice’s antitrust actions, including against Google.