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Ricky Sutton: Don't fall for Meta’s mobster offer over news content

There's a very big catch: Meta will pay only for the news it wants for AI training

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Recently, Meta’s Canadian policy head was interviewed by David Cochrane on CBC’s Power & Politics program. The interview began with news that Meta and the Canadian government are back at the negotiating table over paying publishers for content after banning them from the platform for two-and-a-half years.

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Rachel Curran told Cochrane she would “love to bring news back.” She noted, “The Canadian government’s very keen on ensuring the news industry and publishers are properly supported, so we’re trying to find the right balance.” But the offer comes with a very big catch: Meta will pay only for the news it wants to train Meta AI. In return, it wants publishers to help persuade the Canadian government to repeal the Online News Act, the law it passed a few years ago requiring Meta and other platforms to pay for content.

Ricky Sutton: Don't fall for Meta’s mobster offer over news content Back to video

“If we could reach a resolution here,” Curran said, “it would enable us to engage in conversations around the kind of support that makes business sense for us.” So the idea that Meta might be open to returning to the bargaining table sounds great — but as always, the facts do not match the words. And there’s a devil’s bargain afoot.

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Curran indicates Meta was forced to remove news, but that’s nonsense. Australia had just passed a News Media Bargaining Code, and it threatened a precedent. Meta had joined Google in paying Australian publishers AU$200 million a year. Meta pulled out of the agreement after three years. Google is still paying. But Meta’s refusal to pay Canadian publishers was to avoid the normalization of paying for content to drive user engagement and sell ads.

And this is the crux: Meta is an ad company.  No less than 97.6 per cent of its income last year came from ads, and it competes with publishers in the advertising market, and has more users than it can sell. So, it doesn’t need to pay for news, because its users create enough posts to sustain its US$200-billion (and rising at 22 per cent) ad income.

But Meta can only grow top-line revenue at the pace the ad market grows, so it needs to be inventive to keep generating that double-digit growth. That means it’s about pricing, and margin. Meta used AI to increase the number of ads it served by 12 per cent last year. And it used AI to optimize targeting, and to increase prices by nine per cent. AI is a dream for Meta. It’s fast, it’s efficient, it can get rid of costly people, and it can be tuned to benefit Meta at everyone else’s expense. So, AI is Meta’s cash cow of the future. And that’s why it is talking to publishers.

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Curran told her CBC host, “We removed news because it doesn’t make business sense to pay for it.” Translation: We don’t really need news, and paying for it is just a cost we don’t need. It eats into our margins. The Online News Act is the perfect fall guy.

Then she says, “We’d love to bring news back; we value publishers; we just disagree on the value exchange.” Not sure about the love bit, but the rest is true. Publishers do suddenly have a value. I know what it is, but she wants to tease a bit before letting on. She says: “We already had private deals with publishers; now we’re doing AI training deals globally.”

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And there it is. The FOMO playbook. We’re paying publishers around the world for news content for AI (even though those deals are top secret at Meta’s behest).

Meta needs publisher content to train its AI and remain relevant.

Margins on AI are near-infinitesimal, and;

Meta’s overall value as a company is now linked to its AI growth.

That means Meta’s Mark Zuckerberg is ready to open his golden vault just so long as the publishers are willing to hand over all their brand, reputation and content.

But the offer comes with a carrot and some schtick. Curran can’t resist a dig at Meta’s main AI rival: “We’re different from Google. Publishers post voluntarily and get traffic and monetization.” And then the promise: “The government recognizes the reality and wants a resolution so news can come back.”

But then she claims, “We’ve been blocked from talking to Canadian publishers about AI because of the Online News Act.” Not true. That’s intended to get publishers to push the government to lift the law — leaving my publisher friends in Canada in a terribly tough dilemma.

Rod Sims, the former chair of the Australian Competition & Consumer Commission, recently wrote, “Having Canadian news back on Meta would be good, but not at the cost of massively damaging Canadian journalism.”

My advice to the Government of Canada: Don’t fall for the mobster bargain and sell out the hundreds of Canadian news businesses — like the Crowsnest Pass Herald owned by my feisty friend Lisa Sygutek — who are receiving $100 million annually from Google in lieu of content licensing agreements under the Online News Act, just so a couple of large news organizations can get AI licensing deals from Meta.

Ricky Sutton, a former media executive, is the author of Future Media, a Substack reporting on the collision of Big Tech and Big Media.

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