Australia’s prime time battle against big tech

Facebook did this because it opposed an Australian law that would force Facebook and Google to pay local media companies for articles and content that would appear on their platforms. Google opposes the law in principle, but it did deals; Facebook stared back.

Zoe Rodriguez, a Sydney-based lawyer who specializes in intellectual property, told Mint: “Facebook is attempting to exert its monopoly power unjustly. Content creators and newspaper proprietors have been advocating for well over a decade for social media and search engines to pay for the use of professionally-produced content."

After Facebook pulled the plug, traffic to Australian news sites fell sharply, by 13%, according to data analysis firm Chartbeat. Incoming traffic to Australian sites fell by nearly a third. Australia claims the law is necessary to force social media companies to pay publishers, and to curb foreign-owned social media platforms’ power. Under the law, the companies are expected to negotiate deals with publishing companies, but if negotiations stall, a third party would decide how much should be paid.

Facebook opposes that on principle, since it says, this creates an incentive for Australian publishers to make what it calls unreasonable demands. Meanwhile, internet purists are aghast: As Sir Tim Berners-Lee, widely considered the father of the world wide web, pointed out, the Australian code would "break" the web: the idea of anyone having to pay for the right to link to someone is against the core principle of the internet.

But within a week, Facebook relented, saying that Australia had made sufficient changes in the law for it to permit the sharing, as it entered into protracted negotiations with Australian media companies. Australia too claimed victory, saying it had taught the global tech giant a lesson.

For now, an uneasy truce

The government said the new code won’t apply if Facebook can arrive at deals with publishers. Facebook says it will not accept any third-party arbitration to set the price. For its part, Facebook said it would invest $1 billion in the news industry over the next three years. But that is small change, almost a rounding error, for a company whose 2020 revenues amounted to $85 billion (up from $1.97 billion in 2010).

Google, which also announced investments of $1 billion, earned $181.69 billion in revenues in 2020 (of which $146 billion were advertising revenues); a decade ago the figure was $29.3 billion. In contrast, American newspapers’ combined revenue in 2019 was $23.44 billion; in 2009, it was $35.37 billion.

Advocates supporting the Australian law point out that for every hundred dollars spent on online advertising, $53 goes to Google, $28 to Facebook, and $19 to the rest. The media business relied on advertising and subscription, with advertising forming the lion’s share, but tech companies “stole" that revenue.

Nonsense, big tech says: they refined search mechanisms and guided traffic to media companies, boosting their audiences, for which the publishers should be grateful.

The world watches with considerable eagerness. If Australia eventually succeeds in taming big tech, other countries will want to imitate Australia. Some European countries have already acted, and except Spain, where Google refused to comply, big tech has worked out deals with governments and local publishers. The Indian Newspaper Society recently asked Google to compensate papers for carrying content online.

James Meese, who teaches media policy and law at RMIT University in Melbourne, told Mint: “Other governments are already attempting to regulate. China is the obvious example, but the UK and the EU have also recently released substantive reforms that promise to change how social media is regulated. The innovation from Australia is the focus on competition, which could be a novel way of approaching the problem."

Of course, the temporary relief large media companies are seeking, may not address structural problems with the industry. If big tech were to pay for content, would the media companies invest in hiring more journalists? Or invest in unrelated businesses? What’s certain is that it is the smaller publishers, reliant on traffic from social media companies, who stand to suffer the most.

It’s evident media companies missed tricks that the digital platforms enabled. People wanted to share stories with friends, and the platforms made it seamless. Publishers were happy with the benefits they got, as they tailored their products for the digital age.

The Australian cricket writer Gideon Haigh, who wrote The Deserted Newsroom (2012), a short book about the state of journalism in digital age, told Mint how early digital newsrooms deployed a lot of ingenuity to maximise the chances of content being shared across platforms. “So here we are a decade later, by which time Facebook is used to its free ride, and you face the difficulty of charging for something to which zero value has previously been imputed. Good luck with that!"

The Australian media market is unique, with its small population restricting circulation growth, making the newspapers rely even more on advertising. Haigh says the powerful public broadcaster, which faces no pressure to earn a rate of return, makes it harder for Rupert Murdoch’s News Corp and Nine Newspapers.

The Australian law benefits those companies, as only media companies that deal in ‘core news’ need to enter into negotiations with digital platforms. How "core news" is defined is the key; many publishers who might provide local or sector-specific news may not qualify, and won’t benefit from the law.

Facebook’s decision to block Australian sites was not only aggressive; it was also blunt. It also removed warnings from weather services, information provided by non-profit agencies, as well as government departments providing information on public health. If Facebook wanted to demonstrate its clout, it did; it also makes the platform vulnerable.

Who owns the content?

Lost in the discussion about sharing content freely on the internet is the deeper question of copyright. Rodriguez says the Australian law is on sound grounds. “Facebook and others have been operating as if there is no law in this area—the law of intellectual property has always existed and the internet is not some law-free zone!"

Indeed, the social media companies are claiming to be the highways of the Internet—they allow data to flow, and they direct traffic to readers, connecting producers (media companies) with consumers. Big tech would like to be thanked for developing technologies, including algorithms, that enable efficient choices.

Media companies disagree: they claim that social media firms are stealing the ad revenue that should have gone to the media companies, but the social media barged in and made off with the gains.

There is some truth in both views. News production is expensive, and by letting advertising migrate to the Internet—and by giving away content for free—media companies devalued their own product. But social media platforms do provide a valuable forum for advertisers who want to target specific consumers, and the advertisers can access them more easily and quickly due to the algorithmically-determined feeds and supercharged search engines.

Many publishers redesigned their businesses to attract more links and clicks on social media, because it was inexpensive and productive to attract readers from those platforms. Indeed, some publishers decimated their copy-desks and editors and hired search engine optimisers and creators of social media memes to lure new audiences, letting form take over from content. (Some Australian media companies relied on the platforms for 75% of their traffic).

For Facebook, news isn’t that crucial. News represents 4-5% of the content on the platform, so it may see little incentive to pay publishers. For Google, though, news is crucial to improve its search results and make them relevant. That explains why Google has been more willing to negotiate than is Facebook.

Facebook is banking on the fact that readers don’t want to pay for the news they have been receiving for free—why should a foreign company subsidise Australian media companies?

And yet social media platforms need credible content to increase engagement. Without professionally produced news links, the platform will host the conspiratorial, the banal, or the trivial. “It makes the crazies who’ve inhabited Facebook and used it to perpetuate this and other nonsense, unbalanced by any proper editorial process that is the domain of traditional journalism. The platform is dangerous," said Rodriguez.

Facebook needs content, argues New York-based academic Sree Sreenivasan, visiting professor at Stony Brook University School of Journalism: “The last thing Facebook needs is less quality content on its platform. It also took far too long for publishers to understand the value of subscriptions, and that was a painful lesson learned."

However, James Meese of RMIT University in Melbourne, wants to separate the debate on the quality of content on social media and the economic question of who should pay for it. He told Mint: “If society wants Facebook to carry news because it is critical infrastructure, we should not invent a convoluted regulatory code. We should be honest about it and regulate with that in mind."

IN CONCLUSION

In the end, the drama—the platform without Australian content—lasted less than a week. But the reprieve is temporary, and won’t solve Australia’s media crisis. Veteran journalist Nic Stuart told Mint: “Smaller, specialist publications are being frozen out. The mass media companies (News Corp and the Nine Network) are doing deals that will see their product boosted. They feel it is better to get some money for your product rather than none. Producers of real journalism don’t win from this deal."

The danger that the compromise favours the big over the small is real. Jeff Jarvis, the media expert who is an open web exponent and teaches at the City University of New York, wrote in the Australian publication, Crikey: “Let us be clear that no matter what happens in this political drama, Rupert Murdoch—as ever—wins."

Of the 10 metropolitan daily newspapers and two national dailies in Australia, eleven are owned by the big three media companies, and six of those are owned by News Corp, which also controls Foxtel, the pay TV provider. Nine Entertainment owns three metro TV networks and radio stations, as Derek Wilding of the University of Technology Sydney wrote recently on the blog, Promarket, published by the Stigler Center at the University of Chicago.

There will be other concerns, including conflicts of interest. Tama Leaver, professor of Internet Studies at Curtin University in Perth, told Mint: “In the future, since Google and Facebook command 85% of the digital advertising dollars in Australia, Australian news organisations are going to have to strike deals with big tech giants, but the danger here is that they will become even more reliant on Facebook and Google, which makes it harder to report fairly about these platforms in the future."

Newer financial models will be needed. Micropayments is one such, although it may create perverse outcomes, such as stories that are sensational or prurient get bigger play to attract more clicks. To ensure quality, innovative thinking will be needed. In the long run, RMIT’s Meese says, securing revenue from tax, and giving a statutory body power to directly fund public interest journalism along with targeted funding for business transformation could be more viable approaches for a sustainable media environment.

Another solution, Rodriguez argues, is collective management of licensing. Where there are many low-value transactions and it is difficult for the creator to enter into agreements for each use, a collective solution may be the way forward. Digital record-keeping makes it easier.

These issues resonate beyond Australia. A deal that protects the weakened yet powerful media from big tech, without creating the ecosystem where the small can thrive, will undermine democracy.

Salil Tripathi is a writer based in New York