Australia’s move to force digital platforms to pay to re-use journalism has entered its final stretch with the unveiling of legislation this week that stands firm on its boldest elements to generate bigger payments to media than other types of negotiations would achieve.
Thanks to the compulsory mechanism the Australian government has adopted, the valuation amounts are likely to eclipse those recently agreed in France and will far exceed the current spate of one-on-one offers that platforms are making globally to publishers.
Australia’s “news media and digital platforms mandatory bargaining code” contains a range of compromises. Some of these are to appease the digital platforms, some to build a cross-party coalition of supporters in parliament. Taken together, they will ensure the bargaining code will be passed into law in eight weeks.
This will effectively create a global standard.
The digital platforms have won the right to include in negotiations their valuation of the traffic referred to the publisher, as well as other small concessions.
But the thing the Big Tech platforms have railed against the most — the use of the so-called final-offer arbitration mechanism to determine the value of a content deal — stays intact.
More than anything else in the code, this forced arbitration if no agreement can be reached will drive up the size of content payments. Australia’s competition regulator insisted on this very big stick to address what it found to be the demonstrable power imbalance in commercial negotiations between platforms and publishers.
The government adopted an unusually strident and unapologetic tone when it introduced the final code. The Australian treasurer, Josh Frydenburg, said the legislation would ensure the rules of the digital world mirror the rules of the physical world: “That has been our intention all along … to sustain our media landscape here in Australia.”
The code, he said, would see news media companies fairly remunerated for the content they generate, helping to sustain public interest journalism.
Key points of the code
Among the key points of code are:
Platforms are required to negotiate in good faith with each or a collective of publishers to reach binding terms for paying for the re-use of journalism content.
Platforms will publish a rate card of standard offers, depending on size and segment, particularly aimed at small publishers to click-and-collect a deal. These offers will bypass the need to negotiate but will be binding.
If a deal cannot be reached after 90 days, an independent arbiter will impose so-called final offer arbitration. Final-offer arbitration, known in some countries as pendulum arbitration, involves both parties bringing their best offer to the table and the arbiter simply selecting the one they prefer. (It rose to fame as a way of resolving intractable pay disputes with U.S. baseball players).
Only if the arbiter finds that neither offer is credible can she impose her own price.
The code is mandatory. Penalties for a platform breach of the code is set at the larger of 10% of Australian revenue, A$10 million, or three times the value of the benefit gained — per breach.
How it compares
There are two other benchmarks that are relevant for comparison with the Australian code. The first is the recent platform/publisher deal in France. The second is the wave of one-on-one offers that the platforms are selectively issuing in many countries.
The case in France is fundamentally derived from a copyright negotiation, with other things thrown in. It is the result of the European Union Directive on copyright and neighbouring rights, which must be enacted by each member nation by the end of 2021. While we do not yet have transparency around last month’s French deals, a detailed piece by Frederic Filloux in his excellent Monday Note estimated key publishers would earn €50 million per year, collectively, from Google.
The Australian precedent will not lie in the intellectual property or copyright space but rather within competition law. It is, if you like, a pre-settlement negotiation of an anti-trust case over the monies that have been lost through a power imbalance.
Hence a much bigger value is expected than an exchange based on copyright fees.
The biggest Australian publishers have named their price as lying between US$450 million and US$700 million per year for the industry as a whole. Let’s assume that was a stretch designed for public consumption, and let’s deduct upwards of a generous US$200 million allowance for the value of referred traffic, using Google’s Deloitte study as a guide. The industry would still be betting on a settlement of at least four to five times that of France.
Elsewhere, Facebook and Google are in the throes of making individual offers to publishers to use their content within certain products they run. This is happening in many countries, expressly excluding Australia and France. These are short-term deals — between one and three years — and for much lower amounts than could be extrapolated from either the French or Australian precedents. The platforms are also being very targeted in who they offer it to and what brands and markets would be covered. The Australian code, by contrast, includes all publishers and all brands if they fit the criteria of professional journalism.
Its scale and scope is the reason the digital platforms have fought so hard to stop the Australian code from passing into law and, in doing so, passing into a precedent in practice.
Yet that might be too late for the platforms to avoid. One large publisher is believed to be close to securing a multi-country, northern hemisphere deal that leverages the imputed value of the Australian code.
What’s been added to the final Australian code
It’s worth a recap of the changes in the final version for those who have been following this at home:
Two-way value exchange. Platforms can now include in their offer their estimated value of referred traffic to the media companies. Publishers will still base their ask on their estimate of the value they generate for the platform by adding recency and relevance through the platform’s re-use of their professionally created content.
The inclusion of the content of Australia’s two public broadcasters is new. They were originally excluded because they have fixed revenue sources from the government and have not been impacted the same way by platform power. Omitting them from coverage, however, would have distorted the market for media companies’ content. Most importantly, the government realised it needed to include them in the code to secure political support of the centre-left parties in the Australian Parliament.
What’s been removed in the final update
Only Google Search and Facebook NewsFeed are included “at this stage,” following the removal of YouTube and Instagram from the code’s respective platform portfolio definitions.
Twitter hasn’t been included because it’s deemed very low on the market power stakes. Instagram’s exclusion has raised eyebrows, especially considering this year’s Reuters Institute Digital News report which predicted Instagram would surpass Twitter as a news source soon following its doubling as a news source in the past two years.
Apple remains outside the code but within scope of another piece of significant work by the regulator, the Australian Competition and Consumer Commission (ACCC). It, like several other regulators around the world, is investigating Apple’s power within its App Store.
The platforms have also won concessions around a range of housekeeping issues, including on some data sharing requirements and a halving of the previous 28-day notification requirement of any changes to Google and Facebook algorithms which may hurt publishers.
How it’s been received
For those who have had the misfortune of not being able to visit Australia this year since its borders closed, you won’t have seen the extensive, relentless marketing campaign and private lobbying by Google and Facebook to ditch the code. Yet you may have seen its impact elsewhere as the digital giants both decided (separately!) to take their corporate campaigns on the road to remind the global citizenry how much good the platforms have done for society to offset any stray messaging on how much damage they might also have done to journalism and liberal democracy.
Both platforms were waiting to digest the full wording of the Australian code before issuing another expected strong rebuttal. But given their recent ferocious comments, one would assume they will be happy with the inclusion of the two-way value exchange and other concessions while still apoplectic about being hit hard during negotiation.
There are strong signs, however, that the platforms are now resigned to this passing into law.
The most strident reaction of the day was instead left to the media company Nine, the owner of the largest TV network, of one of the biggest streaming platforms and of the classic media brands of The Sydney Morning Herald, The Age in Melbourne, and The Australian Financial Review. Once a close corporate partner of Google, a Nine spokesperson shot off a missile that seemed certain to cross the Pacific to land on a couple of doorsteps on the U.S. West Coast.
“The continued concessions to the digital platforms only entrenches both their monopoly power and the significantly unfair imbalance in regulation,” the Nine statement said. “These companies pay little or no tax, contribute little and often negatively to our culture, and employ no creative teams.
“The notion they receive regulatory recognition with the so-called two-way value exchange, for something they already have a commercial model to monetise, seriously undermines the fundamental problem the ACCC identified in the beginning of this process — that is an abuse of monopoly power, which fundamentally harms the future sustainability of media in Australia.”
Broadly, news media industry executives welcomed the final package. Privately, they told this author they were most pleased the strong-arm tactic of final offer arbitration had been retained by the government in the face of the intense lobbying from the U.S. giants.
Over at News Corp Australia, the nation’s biggest producer of professional journalism, executive chairman Michael Miller issued a statement that appeared one step closer to declaring victory after a “decade-long campaign to rebalance the relationship.”
“As a result of their lobbying, the tech platforms have won concessions, and there should be nothing stopping them now from reaching fair commercial agreements,” Miller said. “Ultimately, this code will benefit Australian consumers by helping sustain Australian news from Australian media companies.”
The Australian code will be publicly reviewed by an Australian parliamentary committee, but its passage is now assured to create a global precedent for platforms paying for re-use of professionally created content.
The Senate committee will review it over the (southern) summer parliamentary break, and while there may be some further tweaks through that process, it will go to a vote in early February. That may appear fast, but keep in mind the draft code took six months to construct and has been public for a further six months. And the code itself followed a wide-ranging two-year inquiry by the competition regulator into the relationship between digital platforms and public interest journalism.
The moderate conservative government has pushed this process and timetable aggressively, and the legislation is certain to pass. The centre left opposition Labor party — rarely a big fan of big media companies — has now committed to the code. Its treasury spokesman Jim Chalmers said it would “support, in principle, efforts to ensure that the playing field is levelled between the tech platforms and the news media organisations.”
Australian regulators and lawmakers alike are in no doubt they have the world’s attention with this ground-breaking code.