California Journalists Slam ‘Backroom Deal’ After Big Tech Upends Agreement Meant to Bolster Local News

California journalists are slamming a $250 million agreement between the state and Big Tech that was meant to bolster local news, saying that a legislative push to check Google’s stranglehold on news instead turned into a “backroom deal” that will provide a fraction of the intended funding.

The legislative agreement will provide an estimated $15 million in its first year from Google — just 3% of the $500 million from tech companies that was initially discussed.

“This backroom deal was a disaster,” Matt Pearce, president of Media Guild of the West, told TheWrap. “This first in the nation partnership needs to be a last in the nation partnership.”

Pearce’s longtime adversary, Patrick Soon-Shiong, the billionaire owner of the Los Angeles Times, tweeted bitterly that by passing this bill, Gov. Gavin Newsom and California lawmakers “bow to Google, sticking it to the news industry.”  

“Politics ugh,” he said also with unusual candor. 

“From the lawmakers who are involved in the making of this deal to big tech itself, there’s no accountability whatsoever,” said Alicia Ramirez, the founder and publisher of The Riverside Record, who spoke to TheWrap. “And that is so deeply frustrating, even as somebody who would benefit from this deal… If it’s not good for the news ecosystem, it’s not good.”

Journalists say the agreement announced Aug. 21 — a five-year partnership between California lawmakers and Google — does not hold the tech company accountable enough for compensating writers and news organizations for unauthorized distribution, but rather positions the company as a philanthropic partner. 

Google will be putting no more than $15 million a year towards supporting local journalism in the state, compared to the $500 million per year that Senate consultants had initially discussed tech giants Google, Meta and Amazon pay in taxes for local news in California, according to the California Senate Standing Committee on Revenue and Taxation. It was unclear why Meta and Amazon are not part of the program.

And unlike the initially proposed legislation that required a vote, the final budgetary agreement — which still requires Newsom’s sign-off — did not involve any working journalists in drafting it, union leaders told TheWrap. However, union leaders are also not confident that the state has “appropriated the public funds necessary” to actualize the partnership, which is set to go into effect in 2025 and run through 2029, according to a Wednesday statement from Media Guild of the West. 

The final agreement also did little to allay fears in journalism circles that more advanced artificial intelligence could threaten job security. The deal calls for tech companies to pay $62.5 million to create a nonprofit to administer a new AI accelerator project, the National AI Accelerator, details of which are still largely unclear.

Big Tech companies, including Google, are in a multi-billion-dollar arms race to develop AI-fueled Large Language Models that can be applied across a variety of creative industries, such as journalism and Hollywood film and television production. Already, a number of major news organizations have licensed their content to industry-leading OpenAI or are suing over copyright violations.

California’s apparent capitulation to Google could also set off alarm bells for the rest of the country’s newsmakers. As the most populated state in the country, California is often a blueprint or trial-run for future federal legislation. The deal will “set a bad precedent for other states hoping to take strong action against monopolies in the tech space,” Pearce said.

“The entire reason this legislation existed is because Google already dominates the news industry and has so much power over everything that we do,” Pearce said. “I don’t think that it’s a good decision to hand a literal monopoly the keys to AI development in the journalism industry.”

Google did not respond to repeated emails from TheWrap seeking clarification about why the company’s funding commitment ended up being so much less than originally discussed, and why the AI accelerator ended up being a national initiative using state funding.

“California lawmakers have worked with the tech and news sectors to develop a collaborative framework to accelerate AI innovation and support local and national businesses and nonprofit organizations,” Kent Walker, president of global affairs for Google parent Alphabet, said in a statement to TheWrap. “This public-private partnership 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.” 

While the agreement is not yet official, Newsom has praised the effort. “The deal not only provides funding to support hundreds of new journalists but helps rebuild a robust and dynamic California press corps for years to come, reinforcing the vital role of journalism in our democracy,” he said in a statement. 

The number of journalists in California has declined by 68%, or about 5000, in the last two decades. Anna Bruggman of the non-profit Rebuild Local News told TheWrap that the state needs $375 million per year to make up for the loss and “create a better, more dynamic local news sector in California.”

Breaking down the deal

Last year lawmakers proposed two California laws — State Assembly Bill 886 and Senate Bill 1327 — to provide protections for journalists and media companies. AB886, or the California Journalism Preservation Act, would have required internet and social media platforms to compensate digital journalism outlets for distributing their content, in a similar way to Australia’s 2021 News Media and Digital Platforms Mandatory Bargaining Code. SB1327, which the California Senate passed in June, proposed a 7.25% tax on gross receipts derived from data extraction, essentially taxing social media companies, online retailers and large search engines for generating clicks from digital-first journalism.

Media Guild of the West was initially involved in the drafting process for the two state bills, Pearce said, but was not asked to collaborate on the final agreement — and did not receive a press release from Assemblymember Buffy Wicks, who announced the negotiated deal last week. 

Jon Schleuss, president of The NewsGuild-CWA, Pearce and five other news leaders, authored a statement decrying what they termed a “shakedown.”

The $250 million in the agreement, which will be funded over five years, breaks down between taxpayer money and philanthropic partners. Of the total, $180 million will go to a 501(c)(3) nonprofit, managed by the University of California Berkeley School of Journalism and a seven-member board made up of members of the California News Publishers Association (CNPA), Ethnic Media Services, Local Independent Online News, Latino Media Collaborative, California Black Media and the Media Guild of the West. 

The $180 million would be distributed to qualifying California news organizations based on a framework that would ensure that money goes toward journalism jobs and not corporate profits, Wicks said in an interview with the Sacramento Bee. Specifically, 12% of the funds would be reserved for locally focused publications and outlets serving under-represented groups and so-called news deserts that no longer receive local news coverage.

Google and some unnamed tech partners will contribute $110 million, and $70 million will come from the state, according to the final deal framework.

The tech companies agreed to spend  an additional $62.5 million to fund the non-profit National AI Accelerator.

From the lawmakers who are involved in the making of this deal to big tech itself, there’s no accountability whatsoever. And that is so deeply frustrating.

Alicia Ramirez, founder and publisher of “The Riverside Review”

If approved in next year’s budget negotiations, the state would pay $30 million in 2025 and then $10 million a year through 2029, for a total of $70 million. Google is set to pay $15 million for the journalism fund in 2025 and a minimum of $10 million a year through 2029, for a minimum total of $55 million.

Wicks said she was confident that “the amount of money per year is doable from a budgetary point of view, even in a deficit year.” 

But Pearce stressed that the agreed-upon figure is much lower than state legislators initially discussed.

Under the original state Senate bill reviewed by TheWrap, companies whose gross receipts exceed $2.5 billion a year would be taxed annually to support local journalism. State Sen. Steve Glazer said in a May Senate revenue hearing that the bill “would likely only affect Google, Meta and Amazon” because they are the only companies whose grosses from digital-first journalism would place them in the taxable range. Committee consultants said the tech giants collectively would pay $500 million annually in taxes for local news in California. 

In the new partnership deal, Google will pay no more than 3% of that per year. 

“California hasn’t appropriated the public funds necessary to actualize a public-private partnership with Google, which was sketched out behind closed doors after the monopoly strong-armed California’s elected leaders and publishers,” Pearce said in a guild statement on Wednesday. “Given that legislative reality, we are skeptical about the viability of a draft framework that isn’t supported in its current form by a single organization representing California’s journalists and news workers.”

Heading into the AI unknown

The biggest source of controversy in the Google arrangement is the addition of the AI accelerator that was not included in either of the state legislature bills first proposed early last year.

In announcing the deal, Wicks said that the accelerator will complement the work of the Journalism Fund by creating new tools to help journalists access and analyze public information. But it is still unclear why the AI accelerator was lumped into the agreement in the first place.

“AI, it has a role in journalism going forward – nobody’s quite clear what that role is – but it doesn’t seem to me that AI is going to be the instrument through which we start to restore journalism, the presence of journalism in smaller communities,” said Edward Wasserman, professor and former dean of UC Berkeley’s Graduate School of Journalism. 

Wicks said in an interview with the Sacramento Bee that she envisioned this new AI tool to make school boards and city and county governments more accessible to both journalists and the public, similar to CalMatters’ AI-infused Digital Democracy project has done for the Legislature.

CalMatters’ CEO Neil Chase has been vocal about his support for AI in the newsroom and his support of the Google agreement. Chase has also suggested that his site host the new accelerator tool, a media source told TheWrap. 

A troubling precedent

Earlier this year Illinois filed a similar Senate bill, SB3591, that called for tech funding for journalism in that state. The Journalism Preservation Act, introduced in February, would require companies like Meta and Google to track the number of times it presents or links to a news outlet’s work each month and pay a fee to the journalism entity behind the content.

Canada also reached an agreement last year similar to California’s bill. But it struck a better deal with Google — $75 million (USD) per year compared to California’s $15 million. 

Federal legislation is also under way. Senators Amy Klobuchar (D-MN) and John N. Kennedy (R-LA) introduced the Journalism Competition and Preservation Act, or S1094. It would address similar issues with the intention of providing fair compensation to news publishers. The bill has strong bipartisan support and was passed by the Senate Judiciary Committee in June 2023.

The News/Media Alliance, a nonprofit that specializes in the challenges of a dynamic media environment, called for federal legislation to implement greater checks on the tech giants.

“Google is a dominant monopoly that reaps significant revenue off scraping and repackaging quality news content, depriving publishers of the opportunity to monetize their content and reinvest in journalists,” News/Media Alliance President & CEO Danielle Coffey said in a press release. The California agreement “reinforces the need for federal legislation and potential court remedies to address this broken marketplace.”

Amid the tussle between lawmakers and tech companies, local journalists like Ramirez are grappling with the ethics of taking financial handouts from Big Tech to help ensure their survival. 

“I am not anti-deal, but when we are making backroom secret deals between legislators and big tech companies that don’t involve the actual stakeholders — which at this point is journalists, publishers, and the entire population of California at large,” Ramirez said. “It’s not a good deal for anybody except Google. And that, to me, is the most frustrating part of all of this.”

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