California lawmakers are abandoning an ambitious proposal to force Google and Meta to pay news companies for using their content, opting instead for a deal in which Google has agreed to pay $172 million to support local media outlets and start an artificial intelligence program.

The first-in-the-nation agreement, announced Wednesday, promises $175 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 $12.5 million each year toward an artificial intelligence “accelerator” program, raising labor advocates’ anxieties about the threat of job losses.

Publishers who initially pushed for the proposal forcing Google to pay them said the deal was still a win. The UC Berkeley fund will be overseen by news industry groups; the money will be distributed according to the number of journalists employed at each publication, with some  reserved for smaller or ethnic media outlets.

“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.

In an interview, Makinen said that the deal was “not what we had hoped for when set out, but it is a start and it will begin to provide some help to newsrooms across the state.”

“Sometimes, the political realities, they are what they are,” she said. “And there’s many of them in this state and in this election year.”

Unions representing media workers accused news companies and lawmakers of settling for too little.

Senate Democratic leader Mike McGuire, whose chamber earlier this year passed a bill “to hold Big Tech companies accountable for the profits they make off” linking to news articles, also raised concerns. In a statement, he said the deal “lacks sufficient funding for newspapers and local media, and doesn’t fully address the inequities facing the industry.”

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. The state has lost one-third of its newspapers since 2005 in a trend experts say worsens civic engagement, polarization and misinformation.

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 the past 18 months, for instance, Google spent more than $2.1 million lobbying lawmakers against those bills and others — more than triple what it spent in the same time period two years earlier, 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 news publishers association, whose members include major newspapers including the San Francisco Chronicle and the Los Angeles Times. (CalMatters is also a member.) 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.

Australia and Canada both passed similar measures in recent years — but the political headwinds were different in the tech companies’ home state.

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. The measure would have raised $500 million a year.

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, 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. He later resurrected it; it passed the Senate in late June and is in an Assembly committee.

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 support 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 bills 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.

“This public-private partnership builds on our long history of working with journalism and the local news ecosystem in our home state,” Kent Walker, an executive at Google’s parent company Alphabet, said in the press release announcing the agreement.

Wicks called it “a cross-sector commitment to supporting a free and vibrant press.” In contrast, Glazer said it was “completely inadequate and massively short” of what Google is paying in Canada, and “seriously undercuts our work toward a long-term solution to rescue independent journalism.”

The Media Guild of the West, which represents 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 Pacific Media Workers Guild, which represents journalists in Northern California, also opposes the deal.

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. OpenAI will contribute tech services, said former lawmaker Bob Hertzberg, who helped negotiate the deal, and proponents expect other tech companies to join in.

The AI accelerator would also create “new tools to help journalists access and analyze public information.” Makinen, of the news publishers association, said more details of the program “need to be made public as soon as possible,” and said she wants to see “more of those resources directed toward publishers.”

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’s major funders include 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.”

Jeanne Kuang is a reporter with CalMatters. Jeremia Kimelman contributed to this story.