Why are tech giants opposing a ‘news media bargaining code’?
What is the news media bargaining code and why are tech giants pushing back against it?
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Global tech giants Google and Facebook are fighting the Australian government and media outlets over whether they should pay to have news on their platforms.
For almost three years, the government has been trying to understand how much market power these two companies have and how that affects businesses such as media companies in Australia.
More than a third of Australians read news on Facebook and people routinely find the latest news via Google, whether they’re searching for it or have it recommended to them by apps on their phone. News outlets believe their content is valuable for users of Google and Facebook and a key reason why people use these platforms – and that the tech giants don't pay them enough for using this content.
Tech giants also argue news sites voluntarily post their content to these platforms.Credit:Bloomberg
In an attempt to balance the playing field between news media companies and Google and Facebook, the government announced plans earlier in 2020 to introduce a compulsory "news media bargaining code" that would force tech giants to share revenue with news organisations.
But the tech giants are pushing back. They argue they should not have to pay for news because they send publishers free traffic. They also argue news sites voluntarily post their content to these platforms. Facebook says it will drop all local, national and international news from its Australian platforms if the code becomes law – which would have major implications for the way millions of Australians stay informed.
Google, which has a 96 per cent share of the online search market in Australia, has warned consumers the new code will damage its services.
So why the argy-bargy? What does the draft code say? And what does it mean for consumers who access news via these platforms in Australia?
How did this start?
As the world has moved online, traditional media companies have been hemorrhaging print advertising and classifieds revenue, costing thousands of jobs and threatening the sustainability of journalism. At the same time, the likes of YouTube (a video-sharing platform owned by Google), Google Search, Facebook and its photo-sharing platform Instagram have flourished — thanks to digital advertising targeted at individual users. The targeting is based on vast troves of data gained from tracking people’s purchases, browsing, interactions and physical location.
The situation has evolved so that digital platforms together now attract more Australian advertising revenue than the Australian media companies combined and they've become extremely powerful globally. Social media companies want people to spend as much time as possible on the platforms and news gives users a reason to stay.
For their part, media outlets are, to a degree, dependent on the tech companies (with their massive audiences) to get their content seen far more broadly than on their own sites. And the tech giants have a big impact on who sees what news due to their complicated algorithms that kick into action when, for example, you search for something on Google or scroll through your feed on Facebook. (An algorithm is a set of rules plugged into a computer so it can perform tasks such as, say, prioritising which stories are displayed most prominently.)
In 2017, following a push from former senator Nick Xenophon, the federal government directed the Australian Competition and Consumer Commission to inquire into the market power of the tech giants. After the inquiry finished, in 2019, the ACCC was charged with developing a voluntary code of conduct for the media and tech companies in an attempt to tackle the power imbalance in the relationship. Under the code, Google and Facebook would be forced to share revenue with the media outlets.
Fast-forward to April and, not satisfied with negotiations on the voluntary code, the government instructed the ACCC to develop a mandatory model. Many media companies were by then facing a deepening revenue crisis because of COVID-19. The government said it was important for Australia’s democracy that public interest journalism was protected and properly funded. At the end of July, the regulator unveiled the draft code, giving companies a month to provide feedback before the laws were finalised.
Around this time, users of Facebook and Instagram noticed unusual alerts flagging updated terms of service that allowed the platforms to remove content to avoid "adverse legal or regulatory impacts". On Google Search and YouTube, Australians have been told their free access to the services is "at risk".
What’s in the draft code?
The draft code proposes that media companies can ask to negotiate with Google and Facebook over any issue related to the inclusion of their news on the platforms. If the companies do not reach agreement in a three-month negotiating period, an independent arbitrator is brought in and makes a binding decision on payment. The arbitrator would have to consider three factors: direct and indirect benefits of the news content for the platform, the cost of producing the content and the appropriateness of the financial burden for the platform.
The code also mandates minimum standards for the treatment of news on Facebook and Google’s platforms, requiring them to:
- Tell media companies 28 days in advance of algorithmic changes that will affect presentation of ranking or news. (These kinds of changes can significantly affect where stories appear and how many people see them, but explaining them is difficult even for the tech giants as algorithm tweaks can have unpredictable consequences. The code does not prevent platforms from making the changes, nor require them to explain nor to provide the whole algorithms to media.)
- Appropriately recognise “original” news content. Some media companies have complained that their expensive-to-produce original reporting or content is on an even footing with quick copies, summaries or “churns” from rivals on digital platforms.
- Provide media companies with information that explains how tech giants use data collected from media companies’ readers. This is designed to “resolve an information asymmetry” between the platform-holders and the media companies, and does not require the tech giants to make any user information available to media companies.
- Provide tools that allow news media businesses to moderate or turn off comments on their stories. In certain circumstances, media companies can be found legally responsible for the contents of these comments but currently they have to manually delete comments after the fact or remove stories from the service entirely.
- Allow news media companies to prevent their news being included on a given platform at all.
Currently, the code would capture only the platforms run by Google and Facebook but could be expanded to include other digital platforms that amass significant market power.
There is a large number of media companies that will be eligible to receive money under the code — News Corp Australia and Nine Entertainment Co (owner of this masthead) are among them. Eligibility is based on the amount of revenue a company makes, type of content they publish, size of local audiences and standards they uphold.
As a result, publishers such as AFL Media, NRL Media and The New Daily could be excluded. The Australian Women's Weekly and New Idea would also be ineligible as they do not fall under the definition of news media. The ABC and SBS may also be ineligible under the final code, but that is a decision for the government. The government said the ABC and SBS would not be able to receive payments under the code but could be provided with other components such as advanced notice of algorithm changes. Other political parties are urging the government to change their mind and include the ABC and SBS in payments.
What do Google and Facebook say about the draft code?
The tech giants say that the proposed code is heavy-handed and extremely one-sided, that it threatens services in Australia, that it misunderstands the dynamics of the internet and that it is, ultimately, harmful to media outlets.
Google was first out of the gates in August, issuing an open letter to Australians and placing alerts on its search home page and YouTube. The company said the new code would damage services, could force it to hand over customers’ personal data to "big media companies" and would provide the news businesses with an unfair advantage to improve their prominence in Google search results. It also said the arbitration process that the code would introduce left them open to "enormous and unreasonable demands" for compensation. (The ACCC has said the arbitration has to take into account the financial burden for the digital platforms and will not wipe out their profits.) Google has since published a number of different blog posts on its website about the impact the code could have on small business and ways that it could be changed so that the tech giant can abide by it.
In September, Facebook entered the fray. It said it would be forced to prevent all news content from being shared on its platform in Australia should the code become law. Facebook said media companies gain revenue and a larger audience from distributing their content on Facebook while it derives a "negligible" benefit. It said news businesses would demand payment "far beyond" real commercial value and publishers would get an unfair advantage over other types of content on the internet by having advance notice of algorithm changes; and they would get unprecedented access to Facebook’s sensitive data, gathered from audience habits.
In an advertisement featuring comedian Greta Lee Jackson, Google likened the code to a bus driver being forced to pay restaurant bills for delivering customers.
A key reason for the aggressive response is the tech companies’ concern that Australia's regulations might provide a precedent for other governments, such as the United States, which are watching closely and have been in contact with the ACCC. If the code inspired similar actions elsewhere, the platforms could start seeing a noticeable impact on their business models.
What do regulators and the government say?
Rod Sims, chair of the ACCC, has said the tech giants’ claims are misleading, ill-timed and misconceived. He has attempted to set the record straight on several facts. The ACCC has said the companies would not be required to share user data with media companies and has noted that Facebook already pays some publishers for content under existing deals. (Google has also announced plans to pay publishers for content.) "The code simply aims to bring fairness and transparency to Facebook and Google’s relationships with Australian news media businesses," the watchdog says.
Treasurer Josh Frydenberg says the government will not respond to "coercion or heavy-handed threats". He says the reforms are about Australia’s national interest and will make the media landscape more sustainable.
Communications Minister Paul Fletcher has also observed the irony of Google, with a market capitalisation of $US1.1 trillion, labelling Australian media companies "big". Nine Entertainment Co, which owns this masthead, has a market capitalisation of $2.81 billion; Seven West Media's is $177.5 million; News Corp, which is listed in the US, has a market capitalisation there of $US8.89 billion.
Google reported $4.3 billion in Australian advertising revenue and Facebook recorded $674 million last year. Nine Entertainment Co reported total revenue (not just from advertising) of $2.1 billion, Seven West Media reported $1.2 billion and News Corp Australia $1.005 billion.
Media companies, which have lobbied for years for some kind of compensation from the tech giants, say Google and Facebook are exhibiting the exact problem the code would seek to tackle: the immense market power of the global tech titans.
Fletcher has noted the final draft of the code will consider the opinions of the tech companies.
What do tech and media watchers say?
The tech giants’ “bullying behaviour”, as Bridget Fair, chief executive of commercial broadcasting lobby group Free TV Australia, has characterised it, “is exactly the reason that the ACCC concluded that the mandatory code was the only reasonable way to even up the bargaining power between Facebook, Google and Australian news media businesses".
Stephen Scheeler, former head of Facebook in Australia, says the company should pay for news content and the threats are clearly a "negotiating tactic, to an extent, to say 'here are the bad things that could happen if we don’t get what we want'".
But others in the tech community view the proposed regulation harshly. Mike Cannon-Brookes, founder of software company Atlassian, questions the fairness and rationale of the regulation and says Facebook’s actions are "the only logical move". Tech and media analyst Ben Thompson says the code is a “shakedown” that relies on absurd justifications.
An alternative model suggested by some advocates and commentators is a more straightforward tax on the digital platforms, proceeds of which would then be dished out to publishers. But multinational companies have proven adept at shielding themselves from tax obligations through complex profit-shifting arrangements. There might also be concerns about the government having the direct power to allocate the funds.
What happens if Facebook follows through on its threat?
Some 39 per cent of Australians use Facebook for news, according to the University of Canberra’s 2020 Digital News Report. The company says it has sent 2.3 billion “clicks” from its news feed back to Australian news websites in the first five months of this year, traffic that Facebook estimates was worth $200 million to the publishers. It also says catching up on news is just a small part of what people do on Facebook. Still, the company has already decided to hold back from Australia its product called Facebook News, a dedicated hub for journalism that pays publishers for content.
Facebook’s threat has also triggered concerns that misinformation would go unchallenged by fact-based reporting from reputable sources. Facebook faces serious concerns about proliferation of misinformation and conspiracy theories on its platform. A spokeswoman for Nine Entertainment Co says Facebook’s threats demonstrate its market power but also fail to recognise the "importance of reliable news content to balance the fake news that proliferates on their platform". But Facebook says it remains committed to combating misinformation through fact-checking and directing people to authoritative sources of content.
In response to other countries' attempts at regulation, Google has wound back local news content. In Spain, the company removed its "Google News" feature and Spanish publishers from the service. In France, which has pursued regulation under copyright law, Google has reduced French media content from search results to avoid licence payments. The country's competition regulator has sought to force the company to negotiate with publishers.
The ACCC, meanwhile, had sought to prevent tech companies similarly boycotting Australian media companies by inserting anti-discrimination provisions in the proposed laws. But Facebook could circumvent the penalties by abandoning news altogether, including from international outlets. For its part, Google has said it would have to undertake a "mass culling of content globally" to avoid being caught by the anti-discrimination rules. This suggests we could all be denied access to their search engine – but many are sceptical Google will follow through on this threat, voiced privately to politicians.
The ACCC intends for the code to be made law in 2020.Sims has previously said that there will be amendments to the code but they will be minor. That means it is unlikely the final code would change the position of the tech giants. Facebook and Google’s concerns are so extensive that it would require the competition regulator to start again, and that is not something it will do.
After Facebook’s announcement, it started telling news organisations that it wasn't threatening users but was notifying them of an inevitable change. If the code is as unworkable as Facebook has expressed, it is likely they will progress with plans to shut down news. Google has not been explicit about ditching any services publicly – but has said all options are on the table so have not ruled it out. Google and Facebook are telling journalists and publishers that they will follow through if the code goes ahead.
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