How Subsidy for Big Tech Wrecked the Arts (and Journalism)

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Image by Gerd Altmann from Pixabay

In the 2010s, cheap solar panels from China began flooding the US market, killing off US domestic panel-makers who couldn’t compete on price. The US government slapped a 40 percent tariff on Chinese panels, claiming under World Trade Organization rules that China’s government was unfairly subsidizing panel-makers. Given how quickly solar panel costs were plummeting and the Byzantine ways in which industries are subsidized supported, the claims under WTO rules were difficult to prove.

But America can be trigger-happy when it comes to using WTO law to try to protect its own industries and markets when it believes other governments are competing unfairly. Under international trade law, a country can’t subsidize an industry to give its exports unfair advantage over industries of a trading partner if it wants to compete in that partner’s markets.

But what about domestic subsidies that distort markets? American governments use tax laws to subsidize many industries. Oil and gas drilling, transportation, the steel industry, farmers… the list goes on. Many of these subsidies are in support of public goods. We need energy. We need roads. We need a stable food supply.  

In the era of Big Tech, there’s an even more powerful subsidy that has emerged, a “scalability subsidy” that has ignited disruptive technologies that have transformed the world. The prospect of having 2.5 billion users (YouTube), or 3 billion users (Facebook), or 8.8 billion searches per day (Google) makes investors’ eyes water. And Silicon Valley industries have sucked up multi-billions of dollars of investment, creating trillion-dollar companies and minting dozens of billionaires. Capitalism at work.

Prospects for such scale of success means investors are willing to subsidize companies for years. Amazon didn’t have its first profitable year for nine years. Spotify, founded in 2006, has never had a full year of profitability, despite now having more than 400 million users. Netflix took eight years before its first annual profit; TikTok took eleven years (2019) before it turned profitable. In the meantime, investors ploughed billions in subsidy investment into the companies in expectations of big returns later.

And why? To have millions of viewers, as the old broadcast TV networks had, made their business model wildly profitable. We called it mass culture. To have thousands of ticket-buyers, concert and theatre companies could make a workable income. In the digital world, though, a company attracting only a million users is a failure. A company with 50 million users that has stopped its wildfire growth is a company likely in decline. Back in the real world, pretty much every traditional content producer (hate the term, but as a catch-all it works) has seen the structural economics that support their business wither away as scalability subsidy mindset has taken hold. Even the old mass-culture audiences of television.

Companies like Netflix, Amazon, Facebook, Spotify, Apple and Google have subsidized what they offer (super-cheap or free content, faster service and better accessibility) to capture audience and attention in ways that have played havoc with culture producers and artists everywhere, whether or not they create on any of these platforms. These platforms for years have offered “content” at well below the cost it took to make it, putting “terrestrial” content models (including, broadly, the arts) at a disadvantage. Then, having massively subsidized their platforms and scaled up to capture their markets, now that the bills are coming due (investors wanting to see returns) we’re seeing these giants slash how much they’re producing, raise prices, and impose other tolls, resulting in what Cory Doctorow describes as an “enshittification” cycle, when, having captured a market, an industry starts degrading its deal to both its producers and consumers.

But, you protest, I make theatre or dance or play in a symphony orchestra. What does this have to do with me? The old culture gatekeepers may have seen their power dwindle, but the new Big Tech platforms have taken their place with a vengeance, creating their own rules and exacting big taxes not just on producers who use the platforms, but anyone who wants to create something and get it out to an audience.

Where musicians and authors used to sell their work as physical objects, they now have to participate in bundled digital platforms which offer a fraction of the compensation the old markets did. Newspapers and magazines used to be able to monetize their work by selling ads. They still can, but the scalability subsidy has slashed ad rates to pennies on the dollar. And the big adtech monopolies (looking at you Google and Facebook) force you to play by their rules and compensation structures, taking care to take a generous cut of every transaction and earning billions, while journalism starves.

TV and movie industries have likewise been impoverished (relatively speaking) by streamers who bundle content into subscriptions that can’t realistically return fair rewards to producers. They get away with it because in order to get to an audience you can’t afford not to sell on Amazon or have your music or movie on a streaming service.

Every website you visit has to play by Google’s rules or it becomes invisible in Google’s search engine. Every product you sell on Amazon has to play by Amazon’s rules on pricing and distribution or it either doesn’t appear in the store or gets relegated to page 487 of customer search results and gets no sales. Every app for your phone downloaded from the Apple app store has to pay a tax of around 30 percent on every transaction made on that app. So when you download the New York Times or Spotify apps and then subscribe through the app, every month Apple gets around a third of your subscription payment. And these producers are trapped. Every musician has to upload to Spotify and accept its shitty streaming compensation or remain invisible to the vast majority of music lovers.

Big Tech argues that requiring producers to play by its rules makes a better consumer experience. Optimizing websites to Google standards results in more streamlined web browsing experience. Amazon’s rules for sellers protect consumers from bad players. And Apple claims its onerous standards protect the public from bad apps. All of which are probably true to some extent.

But here’s the thing – these companies have all had years of investor subsidies that allowed them to capture audience/users, lock them in, forcing creators to play on the platforms because that’s where the audience is.

There are lots of reasons markets for culture have changed and business models have been disrupted. But years of zero-percent interest rates have allowed tech companies to borrow vast sums of free money and capture users in unprecedented numbers, stealing attention and users from traditional markets. Having done so, along the way destroying infrastructure that supported creative production, they now control these new market platforms, and, as the middlemen, both setting the rules and taking lucrative pieces of every transaction.

Is it a surprise that when interest rates went up over the past year, money was no longer free, and investors needed Big Tech to start earning, that we’ve seen investment in content go down, big layoffs, and steep increases in subscription costs? All the while, Big Tech in the middle collects more.

Social media platforms have become overrun by bots, and “sponsored content” ads choke Instagram, TikTok and Facebook feeds. Google’s search results are now vast scrolls of “sponsored results” that get between you and what you’re looking for, or worse, capturing your attention with compromised results.

Journalism and artists can point to mistakes made, difficulty in adapting, and structural factors that make what they do difficult to compete in a digital world. But the truth is, journalism and the arts haven’t been playing on a level playing field for a long time. The audience is online. That audience has been captured by a small number of platforms who dictate who gets access to what and on which terms. The scalability subsidy has decimated culture and is leaving vast fields of wreckage.



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