Facebook has completed deals with Australia’s three largest news media companies, revealing more of the commercial landscape the country’s new media law has created.  

Facebook’s agreements with News Corp Australia (the biggest online and print publisher), Nine Entertainment Co. (Australia’s No. 2 media company), and Seven West Media mean the social media giant could be on track to avoid penalties that would apply if it doesn’t strike deals with all local media.  

The News Corp deal covers all of its Australian online, print, and SkyNews TV brands. The Nine deal covers the Web sites of the Nine TV network, The Sydney Morning Herald, The Age of Melbourne, and The Australian Financial Review brands. Seven West Media, which was the first big player to agree to Facebook’s terms, covers its Seven TV network and The West Australian brand. Facebook has also signed with a string of smaller operators. 

A brief catch-up

Coming three weeks after Facebook reversed its boycott of most news on its Australian network, the latest deals provide enough information for a robust comparison between Google and Facebook’s commercial arrangements.

The new Australian media bargaining code passed into law on February 24, despite threats from Google and Facebook that they would withdraw key services from the country. The ground-breaking code, whose main components and the final legislation are listed here, has been based on competition rather than copyright law to generate big gains for media companies.  

It is designed to force the Big Tech platforms to offer better commercial terms to the media for use of content (including locked subscription content), as well as access to consumer data and other commercial terms such as technology fees. It followed a three-year inquiry by the Australian antitrust regulator, which found the power of Google and Facebook prevented sustainable business models from emerging to support public interest journalism.

How Facebook makes up its deals

The Facebook deals in Australia are all similar in construction to each other and follow a simple format. They pay for content that will appear in the Facebook News tab for written material and the Facebook Watch tab for premium video.  

This is in contrast to Google’s multi-faceted deals in Australia, which include: 

• Paying for content that appears in Google News Showcase.

• Extra fees for publishers to unlock subscriber content.

• Premium video and audio on YouTube.

• Advertising contracts for Google’s own brand and marketing campaigns.

• Fee discounts on technology licensing, as well as revenue sharing on innovation projects. 

For Nine and News Corp, it is understood that most of their Facebook deal value is derived from the Facebook News tab. For Seven West Media, more of its value comes from Facebook Watch premium video.

Facebook News  

The Facebook News tab, like Google News Showcase, is a product created as a vehicle to present professional journalistic content for which the platform pays. 

Unlike Google’s Showcase, Facebook deploys editors in their local countries to choose the top stories from the content that publishers send to them. Beneath the five top news articles, algorithm selection kicks in to provide the most popular items. This part may include subscription articles, which are locked. Users can choose to enter their login details if they hold subscriptions with any of the brands presented, or they could subscribe on the spot. Users can also personalise the topics that appear in their Facebook News tab. 

The combination of human curation and algorithm is designed to avoid the historic problems of news aggregator selection, which has reinforced opinions for readers stuck within their own so-called filter bubbles. 

Facebook is using Upday to provide the human curation for its News tab. Upday is owned by Axel Springer in Germany and was originally set up to provide a news service for Samsung on its mobile devices. Samsung holds a minority stake in the venture. 

Facebook launched its News tab in the United States first and, in January 2021, expanded it offshore, firstly into the United Kingdom where it is still in a phased rollout. France, Germany, India, and Brazil are following. In those countries, Facebook has offered deals to selected publishers. Only in Australia and only because of its new bargaining law does it appear the social media giant will make Facebook News tab offers to all news media companies.

How Facebook and Google values compare  

All of the deals Facebook and Google have signed in Australia are under confidentiality agreements.  

Yet what has leaked so far is that Google’s big deals cover the range from about US$20 million a year for Seven West Media through to US$35 million a year for Nine Entertainment Co., and to almost double Nine’s number for News Corp. 

Those familiar with the deals describe the Facebook deals as being worth about half, on average, of the Google totals. Some publishers that have struck deals with both the Big Tech giants indicate the Facebook value is closer to one-third of their Google tally, while others are believed to have achieved a number closer to two-thirds of their Google agreement.

In all cases, Google’s deals are bigger deals. 

That size difference is not surprising given Google has been able to draw in more components to help create its value and because of the greater relative perceived value of news content to the overall Google platform.

How this stacks up globally

The implied value of the Facebook deals in Australia is consistent with our earlier observations that the Australian code has already succeeded in delivering total worth across both platforms of more than 10 times that evident in major deals in the United Kingdom or Germany. 

And it is about five times that achieved in Google’s deals in France, which were bolstered by that country’s passing of new copyright law and regulator intervention.

No News Corp global deal

The announcement by News Corp only referred to its Australian division.  

This was in notable contrast to how the company announced its global deal with Google last month, in which it leveraged the new Australian law into a deal across its UK and United States media brands as well.

We can draw two conclusions from the absence of a global Facebook deal with News Corp.

The first is that News Corp’s deal with Facebook to pay for use of The Wall Street Journal and Dow Jones subscriber content in 2019 was a good one. It was good enough to warrant its global CEO Robert Thomson appearing on stage with Facebook’s Mark Zuckerberg to announce it. And certainly it was big enough for News Corp to happily leave the deal in place until renewal time, even if it doesn’t quite deliver on every aspect that the Australian law would support. 

The second conclusion is a potentially profound one for the current news media industry campaign for fair commercial terms.  

As big and as influential as it is, News Corp hasn’t been able to strike a commercial deal in the United Kingdom that it regards as fair and reasonable. Its mighty titles — including The Times of London, The Sunday Times, and The Sun — remain absent from the Facebook News tab two months after its launch. Other platform deals in the United Kingdom are coming in at less than 10% of the value of deals that are being negotiated under the Australian law, but even News Corp cannot apparently achieve those heights of commercial terms in other territories without the backing of tougher laws and direct political intervention.

News UK is clearly hanging out for a much more lucrative offer from Facebook before it signs up, while News Corp Australia — feeling the political pressure from the Australian government to get its deal done to cement the overall success of the controversial code — couldn’t wait any longer. 

Media companies in other countries that have been hoping to strike richer deals with Google and Facebook in light of the Australian contracts but without an equivalent change yet in their law should take careful note.

Final observations

While Google and Facebook have made good progress completing their Australian negotiations, there is still more to do.

For each to avoid the tough forced arbitration and eye-watering fines in Australia, they must reach acceptable terms with all eligible news media companies. 

If they don’t, the Australian government will officially designate them under the code, and they would automatically be subject to all its punitive force. 

While Facebook has made much noise in recent weeks as it insists it must be able to choose which publishers it deals with, in reality, it must now deal with all of them if it wants to stay out of the code’s legal reach. 

Each platform must still negotiate a deal, for example, with a collective of about 150 regional publishers, located largely in small-town Australia and smaller regional cities. These areas are politically sensitive, and these talks are only just starting. The Australian code authorises companies to negotiate with each platform as a bloc if they choose. 

Additionally, it is clear that some publishers are struggling to convert their letter of intent high-level agreements with the platforms into detailed terms of a final contract. This is taking time, and the Google details, in particular, are proving complex once the companies dive beneath the agreed headline deal value. The platforms cannot afford to let any initial agreements fall over during final wording.

Finally, it is clear news media companies that have more of their content locked behind paywalls are receiving greater relative value. That is making it tougher for the likes of The Guardian’s sizable Australian operation (which has a donation model) or the Australian Broadcasting Corporation (the government’s main broadcaster, which is financed directly by taxpayers and not subscription). Neither of these businesses has yet signed with Facebook, and the broadcaster has also not yet inked a deal with Google.

That clock is counting down.

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