News Media Europe prepared a comprehensive response to the public consultation on the Digital Services Act (DSA) (full document). In the coming days, we’ll be sharing some of the highlights in a series of blog posts. Today, we’re kicking off with “The impact of major platforms on media pluralism”.

The emergence of online platforms over the past two decades has contributed positively to the spread of online news content, helping news publishers to reach greater audiences than ever before. However, online platforms have also had a huge adverse impact on media pluralism in Europe and beyond globally.

There are multiple underlying reasons for this, but above all is the understanding that the phenomenal growth and profits achieved by certain platforms have taken place at the expense of other market participants.

It has become clear over recent years that large and powerful online platforms have overtaken media companies and content producers in their capacity as the main beneficiaries of digital media content[1]. Certain large online platforms are able through intermediation to monetise the biggest share of the value of third-party content, mainly through advertising.

Indeed, certain online platforms now profit disproportionately from third-party content that they do not produce, ultimately to the detriment of media plurality. That is particularly true when one considers what the real added value of their service is: mere intermediation. Yet with the unique structure of digital markets, platforms are able to extract significant excess value from third-party content that sits in sharp contrast with the actual value they offer.

This means that it has become much more difficult to develop self-sufficient, sustainable businesses in the news industry, which also undermines the ability of the market to sustain more companies and therefore greater media plurality in the form of higher participation in the market. That, in turn, has been a key driver of growth in market concentration since economies of scale have become a necessity to maintain profitability.

Overall, this broader shift in the allocation of profits along the media value-chain has created a serious and fundamental problem. The profits derived from monetising content are no longer flowing back to media companies and producers of content, and instead stay within platforms ecosystems, which in turn further undermines business models and content production in the broader media sector.

Ultimately, unless a direct and fair split approach to advertising revenues derived from monetisation of third party content is adopted, or some form of “new deal for online media” is achieved, it is very likely that problems related to funding of media content will persist and worsen, in particular when it comes to news content because it is so reliant on advertising for funding in the first place[2].

Both Google and Facebook often reduce the debate about the commercial and social value of journalistic content to a simplistic argument which suggests that the provision of web traffic constitutes a one-way, altruistic and charity-like exchange of value in favour of publishers, who in turn should be grateful for the mere existence of these platforms.

This is of course a deeply flawed reasoning and demonstrates poor judgement and a lack of consideration for other non-commercial concerns of a broader, social value. This line of reasoning also completely ignores and dismisses the fact that it is third party content, including journalistic content, that brings users in the first place to platforms.

While the ability of the biggest technology platforms to act independently of other market participants increases, they also play an important role in defining future formats for digital content and are already attempting to unilaterally dictate and shape the future of news, powered through artificial intelligence and machine learning. Google’s Google Assistant and Amazon’s Alexa voice-based assistant are good examples of this[3].

Such products already show that providing traffic, advertising revenues, brand attribution or any form of payment or remuneration if any to media companies and content producers, are not concerns at all. This is deeply concerning for several reasons as it reinforces the abusive cycle of exploitation of third-party content along lines that undermine the principle of fair market competition on the merits.

[1] Digital Content Next (2017) Distributed Content Revenue Benchmark Report (link)

[2] Australian Competition & Consumer Commission (2019) Digital platforms inquiry (link)

[3] Oxford Reuters Institute for the Study of Journalism (2018) The Future of Voice and the Implications for News (link)