Having just read Robert Whitehead’s excellently written blog post about the Australian Competition and Consumer Commission (ACCC) report on the effect of digital platforms on competition in the media and advertising services markets, I wanted to propose one method of reducing the revenue challenge faced by content creators, specifically local journalists.

I have not yet read the full report, which is an impressive 623 pages, so I am drawing heavily on the executive summary. However, my initial impression is that the report does an impressive job summarising the relevant issues and providing recommendations on how to address many problems caused by the dominant market power of digital platforms.

One concern the report documents (in chapter six) is the changing revenue streams for media businesses. It notes the dramatic reduction in advertising revenue for media companies that has reduced the funding available for local journalism. An analysis of reporting related to public interest journalism found a significant fall in the coverage of local governments in Australia. Coverage lost from existing media companies in this area was not replaced by new digital-native entrants, which are most interested in large, national audiences.

Recommendations from the report designed to address this problem include grants for local journalism, which would provide funding for this coverage to be produced. While this is an option to consider, there is an alternative solution that could provide revenue to fund the content directly: content producers receiving a fee from digital platforms that link to their content or publish it online.

Recommendations in Chapter 6 of Australian Competition and Consumer Commission (ACCC) report:

  • Recommendation 9: Stable and adequate funding for the public broadcasters 
  • Recommendation 10: Grants for local journalism
  • Recommendation 11: Tax settings to encourage philanthropic support for journalism

Radio and television channels pay royalties to artists whose material they broadcast. Cable systems pay retransmission fees to local television stations to include their channels in their video products. Streaming music services pay licensing fees to songwriters and performers. Digital platforms could pay content producers for access to their content.

The question of how much the digital platforms should pay for access to articles could be determined by a market for this content. A platform for article syndication that used a well-defined and carefully measured metric of content consumption would help inform the market of content’s economic value.

Independent third parties can verify consumption metrics. Nielsen provides this service in the broadcast industry, and the Alliance for Audited Media (AAM) and Audit Bureau of Circulation (ABC) has validated subscription sales in the news media and magazine industries for decades.

One possible market structure could have content producers post articles on a content exchange, and publishers, including platforms, could pick the content they wish to publish. This is similar to how content syndication works today. Content producers could be compensated on a per-publication basis, by consumption, or as a share of subscription or advertising revenue produced by that content.

There could be different syndication fees for alternative forms of content publication that did not pass through a content exchange, including user-generated linking to content on social media platforms, Instant Articles, news aggregators, or Twitter posts. Search results may not be subject to fees but curated news feeds could be.

The Associated Press is the largest content syndication organisation today. Other content providers such as The New York Times and The Washington Post also offer their content for syndication, but these providers are small relative to the AP. None of these organisations have the ability to track the consumption of their content once it leaves their organisation, and therefore they cannot charge for it on a per-article basis.

The AP had revenue of US$510 million in 2017: 83% of that revenue came from content licensing, 23% of its revenue came from newspapers, and 48% from television. It is likely a more robust and liquid market for content access could grow the revenue from syndicated content far beyond this level.

An independent quality score could be used to rank content, such as Frederic Filloux’s Deepnews.ai project. Consumption of individual articles by known users, paying subscribers, and unique anonymous users can be validated using tools such as Mather Economics’ Listener tool. Fraudulent traffic could be excluded. This data capture toolset can also measure the advertising inventory and revenue generated by an article’s content consumption.

A relevant business case is the music industry, which moved from physical distribution in the form of compact disks to digital streaming services. Spotify, in a company filing, shared that average per-stream payouts (each time a song is streamed to a user) are between US$0.006 and US$0.0084. Rolling Stone says these figures are similar for Apple Music, YouTube Music, Deezer, and other streaming services.

The structure of music royalties in the United States is presented in the diagram below. There is a lot that could be improved with this system, but it enables compensation of content rights’ holders by platforms that distribute their work. A licensing structure could be designed for digital content access and publication via digital platforms.

Content revenue could be generated in a manner similar to online music services.
Content revenue could be generated in a manner similar to online music services.

Consider this example from a local Australian newspaper:

A recent news article published by a local newspaper in Australia had 57,534 pageviews. Of these, 34,462 were referred from Facebook (based on data from Listener.) These articles were consumed on the newspaper site by a visitor from Facebook, and a “referral fee” could be paid by Facebook for access to this content for users of the platform. Applying the average revenue-per-stream figure from Spotify (US$0.0072) to this article’s Facebook referral traffic yields a potential access fee value of US$248.13.

Separate fees could be negotiated for different types of digital access or publication. Many of the users from Facebook are “one-and-done” visitors that will not come to the site again and are unlikely to subscribe.

A question for local newspapers is whether a loss of traffic from digital platforms due to the content charges would cost them more advertising revenue than they would receive in content revenue. Newspapers could decide what price to offer content access to digital platforms to maximise total revenue, or newspapers could decide what content platforms could access at no cost, much as they are deciding what content should be reserved for digital subscribers today.

A government grant for local journalism is, in essence, a subsidy for digital platforms that distribute local journalism for free. The government could tax these platforms to fund the grants, but there are several issues associated with this plan. Who will decide what journalism to fund? What is the equitable tax amount? How will journalistic quality and success be measured? Will platforms be pressured not to carry certain stories, or will journalists decide not to investigate sensitive issues?

Admittedly, this is a very complex issue, and there is much more to research and analyse before such a framework could be established. The spirit of this proposal is to design a market for content access that works for today’s digital content distribution models. An ideal market framework could support the exchange of content between news media organisations as well as between news media and digital platforms. The final shape of that market will require input from all stakeholders.

It is clear one cause of the economic issues facing local journalists is that digital platforms are leveraging local journalism content to grow traffic on their sites without directly compensating the producers of this content. The disconnection of the entity bearing the cost of production from the full monetisation of the content is the problem, and a market-based solution should be designed to solve it.

This is true in Australia and the rest of the world.