California’s Landmark Law: Tech Giants Required to Pay News Publishers for Content
Sacramento, California – In a move poised to significantly alter the digital news ecosystem, California Governor Gavin Newsom today signed Assembly Bill 123 (AB 123) into law. The legislation, set to take effect on July 1, 2025, establishes a groundbreaking framework requiring large online platforms, primarily targeting major technology companies based or operating extensively within the state, to compensate California news publishers for the use of their journalistic content displayed on the platforms’ sites and services.
The core of AB 123 mandates a process of mandatory negotiation between designated online platforms and eligible news publishers in California. The intent is to facilitate agreements for fair compensation reflecting the value derived by platforms from news content that attracts and engages users. Should these direct negotiations fail to yield an agreement within a specified timeframe, the bill stipulates that the parties must enter into binding arbitration. This arbitration process will determine the fair market value of the news content’s use, aiming to ensure publishers receive equitable payment.
The enactment of AB 123 comes amidst ongoing challenges facing the news industry, particularly local journalism. Decades of declining advertising revenue, much of which has shifted online to the very platforms that distribute news content, have severely impacted the financial viability of news organizations. Supporters of the bill argue that large online platforms benefit immensely from the valuable, fact-based journalism produced by publishers, which drives traffic and user engagement, contributing substantially to the platforms’ own commercial success. They contend that it is only fair and necessary for a portion of that value to be returned to the originators of the content.
The California News Publishers Association (CNPA), a prominent industry group representing local newspapers across the state, has been a strong advocate for the legislation. CNPA hailed Governor Newsom’s signing as a critical step towards sustaining independent journalism. They argue that the revenue generated through this compensation mechanism is vital for news organizations to continue investing in robust local reporting, investigative journalism, and coverage of community issues that are essential for an informed citizenry. According to CNPA, without new revenue streams like those potentially created by AB 123, many local news outlets face an uncertain future, potentially leading to news deserts where communities lack access to reliable local information.
Conversely, major technology companies, often referred to collectively as ‘tech giants’ and largely headquartered in California, have voiced stringent opposition to AB 123. They argue that the bill fundamentally misunderstands how the internet and news distribution work. Their primary contention is that linking to news articles or displaying snippets of content actually benefits publishers by driving traffic to their websites, where they can generate their own advertising revenue or subscriptions. They claim that being forced to pay for simply linking or displaying summaries could disrupt the free flow of information online and might even lead platforms to reduce or eliminate the visibility of news content altogether to avoid the mandated payments and arbitration.
Opponents also raise concerns about the arbitration process, questioning its fairness and the methodology for determining ‘fair market value’ for news content shared on platforms. They argue that the bill creates an unfair playing field that could stifle innovation and negatively impact the user experience by potentially limiting access to news. Some have even suggested that the economic burden imposed by the law could force platforms to consider withdrawing certain news-related services or reducing their presence in the California market, though proponents dismiss these as speculative threats.
The legislative journey of AB 123 involved considerable debate, reflecting the complex interplay between technology, journalism, and economic sustainability in the digital age. Legislators supporting the bill emphasized the public good served by a healthy news industry and the need for platforms that benefit from news content to contribute to its creation and maintenance. Opponents highlighted concerns about regulation of the internet, potential impacts on small publishers who might not benefit as much as larger ones, and the risk of setting a precedent that could be replicated elsewhere.
With the law taking effect in just over a year, the coming months are expected to see intense activity as platforms and publishers prepare for mandatory negotiations. The specific regulations and guidelines governing the negotiation and arbitration processes will be crucial in determining the law’s practical impact. The outcome of these future negotiations and arbitrations under AB 123 will be closely watched nationally and internationally, as other jurisdictions grapple with similar questions about the relationship between technology platforms and the news industry they increasingly rely upon.
Ultimately, AB 123 represents a significant regulatory intervention by the state of California into the business models of some of the world’s largest companies, aimed at addressing the economic crisis in journalism and ensuring the continued production of essential news content for Californians. Its implementation will test the effectiveness of legislative mandates in realigning value distribution in the digital information landscape.
