Shortcuts / 10 December 2020
Paying for the News
Australia is set to become the first place in the world where Google and Facebook will have to pay for news content, with the mandatory bargaining code currently up for debate in Parliament. In this episode of Squiz Shortcuts we’ll set the scene for how we got to this point, the problem news organisations have with big tech platforms, the counterarguments from Facebook and Google and what the code will do to address each parties issues.
How has the media landscape changed in Oz and the rest of the world?
It all comes back to the rise and rise of the internet. Gone are the days where Australians turned on the TV for free-to-air channels or pay TV, switched on the radio to hear a news update on the hour, or bought a newspaper as their way of keeping up with the news. The internet has changed all that forever. Some still do it that way, but there are so many other ways to consume news.
So how have media’s business models changed?
Pre-internet it was all about advertising in their publications or broadcasts, and for newspapers there was a strong market in classified ads where people paid for notifications to sell stuff and let their community know about events and the like. But changes have happened very quickly… and what is has meant is that that business model for news outlets has been smashed. Now, official analysis says for every $100 of online advertising spend, $53 goes to Google, $28 goes to Facebook, and $19 goes to other participants, including news organisations and other platforms like Amazon, Pinterest etc. This has seen news publishers and broadcasters bleed advertising dollars. Between 2002 and 2018, newspaper revenue fell $1.4 billion, from $4.4 billion to $3 billion. And 92% of the decline was from the loss of classifieds.
How do most people consume news now?
The stats say more than a third of Australians read news on Facebook. And Google, which commands a 96% share of the online search market in Australia, is another way people routinely find news or have it recommended to them by apps on their phone.
So what’s the main issue when it comes to Big Tech and news companies?
It’s a David and Goliath battle over revenue. Facebook is worth more than US$800 billion and Google is worth US$1.2 trillion. They are two of the world’s biggest companies. Meanwhile, Nine Entertainment – which owns what was Fairfax newspapers and the TV network – is our biggest media company with a valuation of $4.1 billion. There’s little doubt that Facebook and Google are very successful businesses. We live in a capitalist system that rewards innovation and success, so there’s no problem with that. The issue comes from big businesses using their market power to stifle other competitors.
How has the Australian government been trying to address the issue?
The federal government has been considering the issue for nearly three years and in April 2020 it asked the Australian Competition and Consumer Commission – the ACCC – to look at the “fundamental bargaining power imbalance between Australian news media businesses and major digital platforms.”
What have news companies been saying?
While media companies can’t dispute that the world of advertising revenue has changed – with millions of people now digesting their news via Facebook and Google – they can dispute how those platforms benefit from carrying their content free of charge. And they have been lobbying for some time now for a formal mechanism that would ensure they’re paid for that content. They say that’s fair because it’s a key reason people use these platforms in the first place. They also say that Google and Facebook have a big impact in curating the news due to their complicated algorithms. So basically, no users of those platforms have the same experience, and that’s because when you search for something on Google or click on a post in your Facebook news feed, it works out how to serve you more content that will get you clicking and engaging. And that can see news outlets benefit, or miss out – and that’s largely out of their hands.
What do Facebook and Google say?
The tech giants take a different view. They argue they should not have to pay for news because they send traffic to the publishers for free. They also argue that news sites voluntarily post their content to these platforms and fully participate in digital and social media using their tools. And in the process of working this out, Facebook has said it could drop all local, national and international news from its Australian platforms if the code becomes law, and Google says plans to make them pay could damage its services too.
So what’s the Australian government’s plan?
Touted as a world first, the Morrison Government’s plan – which is officially called the News Media and Digital Platforms Mandatory Bargaining Code – is a framework for negotiations that would see news media businesses fairly paid for the content they generate and that’s then shared via Facebook and Google. It aims to ensure that news media businesses are fairly remunerated for the content they generate which at the heart of it, is about ensuring we have a strong journalism industry to, as Treasurer Josh Frydenberg says, to help “sustain public interest journalism in Australia”.
But first, the the government would like to see negotiations happen outside of this. That is, that media companies and the tech platforms get on with making deals that suit them. The code is only enforced if the parties need help to bargain in good faith and reach binding agreements. That means if they can’t come to an agreement, there’s third party on hand who is able to determine who should be paid what.
What else is included in the plan?
One thing that’s been included is the tech companies are able to put a value on the distribution of that content as part of the negotiation. That’s seen as a nod to Google and Facebook and their argument that they are providing a service to the media companies, currently free of charge. And on the flipside, there’s a nod to the news outlets with a concession on those algorithm changes. What the government had announced is a process of 14 days advance notice of algorithm changes that impact news media businesses. This is where the process starts. That legislation has been introduced into the federal parliament and there will be rounds of inquiry, consultation and debate.
How is this expected to work out?
So while other nations are looking at doing a similar thing, we’re the first to move. Which makes us a bit of a test case, including for Facebook and Google. Where it will land is too hard to say, but both sides of this are coming at it with different views of fairness. It’s a new process so there’s an expectation that some of this might take some time to work out. Purists say governments are never best placed to intervene in commercial negotiations, but this is considered to be a failure in the market so they can have a role if required.
Has a code like this been implemented before?
Yes, this isn’t the first code of conduct that’s been set up to address issues of a market power imbalance. A notable recent one is the food and grocery code that was set up as a safety net for suppliers in their negotiations with the big supermarket chains. Others include dairy, franchising, and electricity. They are markets where it’s been identified that securing a good outcome for industry players and ultimately consumers can be problematic, but it’s important.
Get the Squiz Today newsletter
It's a quick read and doesn't take itself too seriously. Get on it.