California lawmakers are abandoning an ambitious proposal to force Google to pay news companies for using their content, opting instead for a deal in which the tech giant has agreed to pay $122.5 million to support local media outlets and start an artificial intelligence program.

The first-in-the-nation agreement, announced today, promises $135 million for local journalism across California over the next five years, but represents a significant departure from the bill pushed by news publishers and media employee unions earlier this year.

Instead of Google and Meta being forced to negotiate usage fees with news outlets directly, Google would deposit $55 million over five years into a new fund administered by UC Berkeley to be distributed to local newsrooms — and the state would provide $70 million over five years. Google would also continue paying $10 million each year in existing grants to newsrooms.

The Legislature and the governor would still need to approve the state money each year; the source isn’t specified yet. Google would also contribute at least $17.5 million toward an artificial intelligence “accelerator” program, raising labor advocates’ anxieties about the threat of job losses.

Publishers who supported the bill said it was still a win.

“This is a first step toward what we hope will become a comprehensive program to sustain local news in the long term, and we will push to see it grow in future years,” Julie Makinen, board chairperson of the California News Publishers Association, said in a statement.

But unions representing media workers accused the news companies and lawmakers of settling for too little.

The agreement replaces two bills lawmakers had pursued the last two years as they tried to secure a cut of tech money to prop up California’s struggling local news industry. Following a nationwide trend, media companies have hemorrhaged jobs over the past two decades as advertisers fled print media for the internet and technological advancements reshaped how readers consume news.

To try to keep their readers, publications increasingly rely on social media and online search. Google controls the lion’s share of search in a way the U.S. Justice Department and one federal judge have said violates antitrust law.

The proposals to impose fees on Google’s use of news content in its search results prompted a flurry of tech company lobbying. In 2023, for instance, Google spent more than $2.1 million lobbying lawmakers against those bills and others — more than double what it spent in the Legislature two years prior, according to a CalMatters review.

The first bill, introduced in February 2023 by Oakland Democratic Assemblymember Buffy Wicks, would have required platforms such as Google and Meta to either pay a fee or negotiate with news outlets for using their news content.

It was sponsored by the California News Publishers Association, whose members include major newspapers including the San Francisco Chronicle and the Los Angeles Times. Australia and Canada both passed similar measures in recent years. The bill passed the Assembly last year, but Wicks paused it to try to bridge a split among media companies over how the money would be divvied up.

Google has argued the bill would unfairly force it to pay for sending free traffic to news sites, and disadvantage smaller sites. In a legislative hearing in June, the company’s vice president of global news partnerships, Jaffer Zaidi, called the proposal “profoundly unconstitutional and problematic” since it could compel platforms to show content that they were forced to pay for.

The second bill, introduced this February by Orinda Democratic Sen. Steve Glazer, would have imposed a fee on major tech platforms to provide news outlets a tax credit to employ local journalists.

In response to the Wicks bill, Google temporarily removed links to California news websites from its search results and in response to the Glazer bill, Google said it might stop funding nonprofit newsrooms nationwide. At the time, Senate Democratic leader Mike McGuire called the threats “an abuse of power.”

Glazer shelved his bill in May, after failing to scrounge up the two-thirds majority he needed, and said he would focus on trying to improve the Wicks bill.

Negotiations ramped up over the summer.

Tech companies doubled down on threats to stop linking to news sites in California if Wicks’ bill passed, and publishers had an incentive to reach an agreement that would give them the money quicker. In Canada, the government has estimated Google is paying $73 million a year to news outlets under its new journalism industry law, but proponents of California’s deal say the money has been slow to be distributed.

Another factor: Some proponents said it was unlikely Gov. Gavin Newsom, who pledged no tax increases this year, would sign Wicks’ bill, which could be seen as a tax on tech companies. Newsom in a press release today praised the deal, though his spokesperson Alex Stack on Tuesday denied the governor was involved or had taken a position on the bill.

“This agreement represents a major breakthrough in ensuring the survival of newsrooms and bolstering local journalism across California — leveraging substantial tech industry resources without imposing new taxes on Californians,” Newsom said in a statement.

By committing to pay into the new UC Berkeley fund, tech companies succeeded in killing the bill they opposed while appeasing both legacy print media and some digital-only news outlets with five years of support. The agreement is similar to a deal Google cut in France more than a decade ago, creating a “digital publishing innovation fund” when publishers there pushed for regulations.

Wicks, in a statement announcing the deal, called it “a cross-sector commitment to supporting a free and vibrant press.”

But the Media Guild of the West, which represents newspaper reporters in Southern California, slammed the agreement and accused publishers and lawmakers of folding to Google’s threats.

“Google won, a monopoly won,” said Matt Pearce, the group’s president. “This is dramatically worse than what Australia and Canada got … I don’t know of any journalist that asked for this.”

The guild said it was particularly concerned the deal involved a program promoting artificial intelligence technology, which it saw as a concession to the tech industry that could result in a further loss of reporting jobs.

The AI program appears to only be partly related to journalism: In its announcement, Wicks’ office said the program will give businesses, nonprofits and researchers “financial resources and other support to experiment with AI to assist them in their work” addressing challenges such as environmental issues and racial inequities. It would also create “new tools to help journalists access and analyze public information.” OpenAI will contribute tech services, said former lawmaker Bob Hertzberg, who helped negotiate the deal, and proponents expect other tech companies to join in.

Others, including an association of mostly smaller, digital news outlets, said the threat of tech platforms refusing to link to news articles would have been devastating.

Chris Krewson, president of Local Independent Online News Publishers, pointed to Canada, where Facebook no longer links to Canadian media in response to the new law there. That caused readership and ad revenue to plummet for small news outlets, Krewson said.

The organization gets significant grant funding from Google and Meta; CalMatters CEO Neil Chase, an association board member, last weekend urged member publications to support the deal.

“I just don’t know that this industry should be in the position of saying no to any help it can get,” Krewson said. “And I don’t think it makes us more or less reliant (on tech platforms) than we already have been.”

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CalMatters data reporter Jeremia Kimelman contributed to this story.

CalMatters CEO Neil Chase has been involved in the deal as a board member for Local Independent Online News Publishers. His views do not necessarily reflect those of the organization, newsroom or its staff. The CalMatters staff is represented by the Pacific Media Workers Guild, which is separate from the Media Guild of the West and says it has not been involved.

CalMatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.