Two government actions oceans apart have, at least temporarily, shifted the balance of power between news publishers and tech giants Google and Facebook. In both countries — France (legislation passed) and Australia (legislation pending) — authorities have ordered digital giants to negotiate in good faith to pay for content that appears in their various products. 

Platform response: A new lens on value exchange 

This week, though, Facebook submitted its response to the Australian Competition and Consumer Commission (ACCC), which mandated the negotiations. The most stunning conclusion the company made was this: “Notwithstanding reductions in news content over the last two years,” Facebook has seen “an increase in people engaging on our services and increased revenues, suggesting both that news content is highly substitutable with other content for our users and that news does not drive significant long-term commercial value for our business.” 

Facebook further posited that the “core issue at the heart of this policy debate” is “determining the value exchange between digital platforms and news publishers in Australia, while setting aside the fact that we are competing for advertising dollars. In other words, who benefits (or suffers) more commercially when a publisher decides to share news content on online platforms … news organisations or platforms?” 

Google also responded to the mandate with a May blog post by Mel Silva, managing director and vice president of Google Australia, in which she compared Google to a newsagent’s poster in a window, saying:

• Google engaged with the voluntary process initially set out by the ACCC.
• Google makes little to no money from news publisher content.
• Google sends audiences to publishers that can be converted into relationships, money, and subscriptions.
• Google will continue to work closely with news media, the ACCC, and the government. 

A brief history of the legal situation

Here’s how the tensions have unfolded to date: 

The recent legal moves represent news publishers’ and government efforts to stand up to the immense power of the digital platforms that bring them wide distribution and big audiences. Until now, that has not translated into the remuneration many deem essential to the survival of an autonomous but globally cash-strapped industry. 

In late April, shortly after the French government mandated Google negotiate with news publishers over remuneration, Reuters reported that both Google and Facebook will be “forced” to share advertising revenue with “local media firms” in Australia. According to the report, Josh Frydenberg, the treasurer of Australia, said the move comes “after talks with Facebook and Alphabet failed to yield a voluntary code.”

But, according to The Guardian, “in early April, News Corp Australasia Executive Chairman Michael Miller indicated the voluntary process ordered by the government last year was not working when he said he met with the digital platforms but had not even got to “first base” in discussions.” He urged the government to institute a mandatory code.

The mandate came at a time when News Corp has suspended printing at dozens of community newspapers and laid off scores of workers. “COVID-19 did not create the crisis in the media but brought it to a head,” Miller said.

The straits of the media industry in Australia, as elsewhere, have become so dire because of advertising shortfalls that in April, the Australian government unveiled a support package for local media businesses, Reuters reported. The package included an A$50 million public-interest news gathering programme as well as a 12-month waiver of the spectrum [radio communications] tax for commercial television and radio broadcasters.

Will Easton, managing director of Facebook Australia and New Zealand, countered Frydenberg’s claim in an e-mail response to INMA’s query: “We’re disappointed by the government’s announcement, especially as we’ve worked hard to meet their agreed deadline.” 

Easton’s April statement continued:

“COVID-19 has impacted every business and industry across the country, including publishers, which is why we announced a new, global investment to support news organisations at a time when advertising revenue is declining. We believe that strong innovation and more transparency around the distribution of news content is critical to building a sustainable news ecosystem. We’ve invested millions of dollars locally to support Australian publishers through content arrangements, partnerships, and training for the industry and hope the code will protect the interests of millions of Australians and small businesses that use our services every day.”

Like Facebook, Google says its efforts to “be a collaborative partner to the newspaper industry” have helped the industry grow business through ads and subscription services, and by driving traffic that increases audiences. 

The company also believes it has been negotiating in good faith already: Google’s Silva told Australia’s Financial Review she was “shocked” by federal government claims that Google had been dragging its feet.

“I think had we submitted the report and then had a response that it wasn’t really good enough, then that would have been a bit different. But to shift [the goalposts] before the delivery of that substantive report was a surprise,” she said. “I think a lot of the media coverage last week was around ‘pay pay pay,’ but the conversations that we had, in line with the government’s recommendations, were around value exchange.” 

“Since February,” another Google spokesperson said, “we have engaged with more than 25 Australian publishers to get their input on a voluntary code and worked to the timetable and process set out by the ACCC. We have sought to work constructively with [the] industry, the ACCC, and government to develop a code of conduct, and we will continue to do so in the revised process set out by the government today.” 

What’s at stake and what’s next

Neither Australia nor France is walking an untrodden path, and the response from both companies was not unpredictable. Australia’s action follows an 18-month federal inquiry into digital platforms and comes at a time when news publishing companies are seeing COVID-19 declines in ad revenues.

However, said News Corp’s Miller, “I think they were very much weakened by the impact of the digital platforms. It’s been a one-two blow: digital platforms and then corona… . The unfairness of the digital playing field, along with Australia’s draconian tangle of legislation and regulation, means local companies can’t compete with international platforms.”

As in other countries, Google and Facebook wield enormous economic power. For example, Reuters continues, Australia’s online advertising market, worth nearly A$9 billion annually, has grown more than eight-fold since 2005. Frydenberg said:

For every A$100 spent by advertisers in Australia on online advertising, excluding classifieds, A$47 goes to Google, A$24 to Facebook, and A$29 to other participants. In Australia, this market is worth almost A$9 billion a year and has grown more than eight-fold since 2005. …[M]ore than 98% of online searches on mobile devices are with Google, while Facebook has approximately 17 million users who are connected to its platform for at least half an hour a day.

The initial plan, which came out of the inquiry’s report, was for the platforms and news publishers to come up with a voluntary code by November. 

In his statement, Frydenberg described the goals of the original charter:

• Protect consumers.
• Improve transparency.
• Address the power imbalance between the parties. 

After talks were perceived to have stalled, the government asked its competition watch dog, the ACCC, “to frame a mandatory code of conduct between media outlets and digital platforms” by July, with final text to follow shortly after. 

According to The Guardian, “negotiations stalled over three key issues — the media’s access to data and notification of ranking changes, but mostly over “Google and Facebook’s stonewalling on payment for content, the ACCC told the government.” The new code will not be made public, according to The Guardian.

In describing the outline of the mandatory code, Frydenberg addressed key concerns that could, once addressed, give news publishing companies a future tinged with more certainty and sustainability.

1. Negotiate in good faith on how news media companies will be paid for content.
2. Advise news media in advance of algorithm changes that would affect content rankings.
3. Favour original source news content in search page results.
4. Share data with media companies.

The mandatory code will have penalties and binding dispute resolution mechanisms between news businesses and digital platforms — including Instagram and Twitter, according to The Guardian. The code, in draft form, will be ready for comments by the end of July, with final text to be legislated soon after, according to the opinion piece Frydenberg published in The Australian, where the announcement was made.

Banner image courtesy of Gerd Altmann from Pixabay.

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