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NEW YORK : With 2.7 billion users around the world, if Facebook were a country, it would be the world’s most populous. With a user spending an average of 58 minutes a day on Facebook, the amount of time spent on the site adds up to 326 million eight-hour days globally, only slightly less than the entire American population of 329 million.

With reach comes power and, inevitably, responsibility. While Facebook says it has its own code of conduct (which it does) and its own policies for regulating content (which too it does, though how it implements those has been debatable), its mission statement—about moving fast, being bold, and empowering people—conceals the grip it has on what people talk about, where they go on the internet and what they buy.

The dominance is phenomenal. Through cleverly designed algorithms, tech companies like Facebook and Alphabet (Google’s parent) use their enormous size to guide traffic to paths advertisers want, and they understand and identify user preferences by harvesting the data.

Advertisers find these platforms to be efficient and cost-effective; users find them convenient. Users have become captive, and so are the sites that rely on Facebook and Google to attract them—that includes most vendors, including media companies.

The go-between, the middleman, has become the global arbiter and keeps getting more powerful. Such power can, and does, restrict competition, which can stifle innovation. But when a company like Facebook has grown so large and when governments are still trying to figure out how to apply laws to a company that operates beyond sovereign frontiers, who will bell the cat?

Enter Australia, which has proposed legislation to rein in the internet giants. The Australian law follows a draft news media bargaining code that Australia’s Competition and Consumer Commission had unveiled in July, aiming to reshape how ad revenues are allocated and shared.

The commission examined that even if tech companies like Facebook and Google may not be colluding, the way they use their duopolistic power distorts the market. In Australia, Google, with its 95% market share in search and 96% market share in search advertising, and Facebook’s 80% share of social media and 51% share of display advertising, dominate the market with clear implications for competition and bargaining power.

Australian politicians and media companies point to their newspapers—how they are suffering and consumer choice is being reduced. Australian print publishers have lost 54% of their ad revenue, mainly classified ads, because online marketplaces, including Google and Facebook, have replaced newspapers as the consumer’s go-to place.

Enfeebling of newspapers has meant that journalists are losing jobs, and weaker media has had a debilitating effect on what might be described as ‘public interest journalism’, with a steep drop of 26-42% in the number of articles on local governments and courts, health and science.

The global impact

Australia is not the only country to be concerned. The Federal Trade Commission in the US, which oversees anti-monopoly laws (known as antitrust laws), is also examining launching judicial proceedings against Facebook, according to The Wall Street Journal. The FTC hasn’t yet decided and may not charge the company after completing its investigations, but the possibility remains.

Among the issues the FTC is examining is Facebook’s acquisitions of potential competitors and how it manages its platform with companies that develop apps. It is too early to know what the outcome could be—it could be a massive fine, changed business practices or breaking up the company, and the process will be long and certain to be litigated.

Separately, the French government, alarmed over declining revenues at publishing companies, is subsidizing consumers who subscribe to newspapers and magazines.

The UK’s Cairncross Review in 2019 concluded that public intervention to secure the future of journalism may be the only available remedy, and the opacity of the market for online advertising requires regulatory investigation, if not intervention, and called for voluntary codes and fairer competition. The European Union too has proposed a digital services act which would make competition fairer and e-commerce better regulated.

The Indian media industry has contracted due to the pandemic, but much of regulatory interest in India has been on the spread of hate speech through social media. The impact of tech companies on the media business has received less scrutiny, but is of greater importance, since weakened media has an adverse impact on democracy.

According to Margaret Sullivan, who has been a media critic at The Wall Street Journal and The New York Times, and who has recently published Ghosting the News: Local Journalism and the Crisis of American Democracy, globally some 2,000 local newspapers have closed down. The trend began in 2004, and has worsened during the pandemic. She recalls how Warren Buffet, the investor, onetime fan of local newspapers, observed recently: local newspapers were once a monopoly, then a franchise, “and are now toast".

There are broader implications for democracies, Sullivan points out. Who will do the routine, crucial and sometimes tedious reporting of courts, civic issues, trade unions and public health that informs citizens about how their society is governed? That work is not necessarily glamorous, not always avidly read, doesn’t boost ratings, and lures fewer clicks and eyeballs.

And yet, for democracies, that question is of even greater relevance. Can freedom of expression survive without a vibrant, financially viable press?

All eyes on Australia

The Australian legislation would require tech companies to make the algorithms they deploy to become more transparent and renegotiate revenue-sharing models with beleaguered media companies. Opaque algorithms do favour some search outcomes over others, in effect favouring some companies over others, which is discriminatory.

Google’s policies, for example, include demoting specific news sites if they do not make their content available for free to the search company. In 2014 Google stopped offering its news portal in Spain after a local law required it to pay content generators. Google’s design makes it harder for media companies to draw traffic directly, as sites get loaded faster on mobile platforms if they are stored on cache servers, which places Google at an advantage (although it improves user experience).

Tech companies aren’t happy with Australia’s proposed changes. Google has warned Australian consumers that their choices will diminish and Facebook has threatened Australian users that they may no longer be able to share content through their platform—in effect making their critics’ point, that the companies are de facto gatekeepers of the internet.

While Facebook and Google do share ad revenues with the media companies, it does not cover the costs of producing news. Besides, they pay based on clicks, which creates an incentive for media companies to publish more eyecatching stories. Ratings-obsession can be a perverse incentive—think of what passes for television news in India, for example.

News gathering is not cheap. Marcus Brauchli, former editor of The Wall Street Journal and The Washington Post, now managing partner at North Base Media, a company that invests in media and technology in growth markets, told me that the cost of creating an exclusive news article is vastly larger than the incremental cost a tech company has in distributing a chunk of it and monetizing the data through advertising.

Reporting, acquiring and verifying information, cross-checking facts, printing and publishing the stories (or disseminating it through other means) costs money. Technology can and has reduced some costs, but technology isn’t cheap either.

Until recently, media companies sold their products at a fraction of what it cost them to produce, essentially by charging advertisers who got access to the media companies’ audiences. Good newspapers ensured credibility by not letting advertisers influence content. But editors also reminded journalists that they were able to report far-flung conflicts and investigate stories for months because of weekend supermarket ads. For publishers, as an old Fleet Street aphorism said, news was the stuff between the ads.

The internet destroyed that cosy equilibrium, as classified ads deserted publications and search engine algorithms made it easier for advertisers to reach audiences directly with greater precision, because data platforms allowed them to bypass media companies. Media companies began giving away their content for free, but advertisers didn’t return. Technological change hastened the decline.

Technology also made sharing content easier, and to do it quickly, which creates the illusion that journalism itself is simple. Cool software lets almost anyone to ‘create’ programmes that look like professional news broadcasts or resemble media websites. Tech algorithms too sharpen bubbles, as people gravitate more towards content they already agree with or feel strongly about. Facebook, Twitter, Google and other intermediaries have made the process brutally efficient. One unintended consequence is erosion of media credibility.

The way ahead

If the Australian legislation is successful, it can reshape how readers consume news media, even if it may lead to further fragmentation of the internet, with tech companies withholding specific sites and content from specific markets to avoid paying content creators.

To some extent, the internet’s fragmentation has begun—China’s firewall is formidable, the US has intervened by compelling the sale of TikTok’s US operations, Turkey has restricted many popular social media sites and India has not only banned more than 150 Chinese apps, it is also among the leading countries that require tech companies to take down content its government does not like.

Curiously, while ad revenues have fallen, people are spending more time online. Brauchli believes there is greater hunger for information. The amount of time spent online has gone up by a third in America alone, he says. Some of it may be for entertainment, as people under lockdown watch more Netflix films, but more people are subscribing to news media products too.

While content may not be sufficient to bring back audiences, it is certainly necessary. The challenge for journalists is to understand the dynamic and create more engaging content.

Raju Narisetti, who was Mint’s founding editor and is now publisher at McKinsey in New York, wants journalists to think more realistically. “Journalists are perhaps the only professionals working in an organized industry who historically and collectively show such an unprecedented level of disdain for their audiences, by dismissing the needs of their paying customers.Why should anyone ‘pay’ with their time and money for a product that they don’t want, need or like?" he said.

Technology has allowed consumers to become more promiscuous. They can move from one newspaper to another with each click. Respecting user preferences does not mean dumbing down content. Journalists should learn “to grab a larger share of the time—and wallets—of potential audiences", said Narisetti.

Some newspapers are reinventing themselves. The New York Times’ digital-only subscription rose to $450 million with 6.5 million paying subscribers, and its digital readership has grown from half a million to 5.7 million since 2012. Many Indian newspapers, Mint included, have instituted paywalls.

The pressure is real. But just about 59% of the world’s population uses the internet actively, which means two out of five people aren’t online yet. That’s the untapped opportunity.

Cutting the middleman to size may offer immediate relief but won’t fix longer term problems. For that, media companies will have to focus on content. When content is king again, tech companies will revert to being middlemen serving the media, and not rent collectors for whom media companies have become suppliers.

Salil Tripathi is a writer based in New York.

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