Traditional news publishers have faced challenges from technological and market changes for more than a century. Most recently, the internet has transformed the way people gather and process information and disrupted entire sectors of the global economy. One of the sectors most profoundly affected is the news industry, where reduced costs of gathering and distributing information have lowered entry barriers, the proliferation of content has increased competition for audiences, and technological changes in the advertising industry have challenged traditional business models.

The news industry has respond to these changes in various ways, with many publishers seeking to improve the depth and timeliness of their content, embracing new approaches to online delivery and monetization, and adopting a variety of new business models. Nonetheless, revenues and employment at many traditional news outlets have continued a decades-long decline. In this context, some in the traditional news industry have alleged that digital platforms are profiting unfairly from the use of journalistic content on their platforms. In response, policymakers in several major economies—including Australia, Canada, the European Union (EU), and the United Kingdom (UK)—have adopted or are considering adopting policies designed to enable news publishers to extract compensation from major online platforms, primarily Google and Facebook. Such legislation typically takes the form of forced arbitration schemes, antitrust exemptions to allow publishers to form a bargaining cartel, changes to copyright rules, or a combination of the three.

To assess whether such measures represent sound public policy requires an accurate understanding of the economic and institutional relationships between online platforms and the news industry. As part of a broader study of the value of news links on Facebook, NERA was commissioned by Meta Platforms, Inc. (“Meta”) to review the economic evidence on whether Facebook is extracting an unfair share of the value of news publishers’ links to their content across the globe. The paper applies generally accepted economic approaches to the valuation of intellectual property to analyze the value created by the sharing of news links on Facebook. Further, it assesses whether, under the current institutional and commercial circumstances—i.e., in a market-based system—each party is receiving an economically reasonable share of the value being created, that is, a share that reasonably approximates what economists refer to as fair market value.  A companion paper looks more closely at these issues in the UK.

The evidence presented here indicates publishers reap considerable economic benefits from their use of Facebook, including by exposing their content links to Facebook users and driving traffic to their websites. This results in more subscribers and higher advertising revenues for publishers. While Meta also benefits to a relatively small extent—in that some Facebook users enjoy the ability to share and engage with publisher content—the evidence suggests news content is highly substitutable with other content on the Facebook platform, meaning the loss of news content would not significantly reduce user engagement on Facebook.

Overall, the evidence suggests the market-based economic relationships between publishers and Meta reasonably reflect the value of the bargain to each party. Thus, the economic evidence contradicts publishers’ contentions that Meta is benefiting disproportionately from the use of news content on Facebook, and there is no basis for government interventions designed to tip the scales in favor of publishers. To the contrary, such interventions have the potential to distort the and harm all participants, including news publishers and consumers. Moreover, such proposals do not address the fundamental issue of how publishers can best alter their business models to respond to economy-wide technological transformations—just as other industries have adjusted to changing business conditions.