The bargain that Big Tech is striking with Big Media

Sometime last year, the Australian Competition and Consumer Commission said that it would require large digital platforms to share revenues with Australian news media businesses in an attempt to address the bargaining power imbalance that has resulted in news content appearing at less than favourable terms on platforms like Google and Facebook.

Last week, this exercise arrived at a rather surprising denouement. News Corp, Australia’s largest news media organization and arguably the strongest proponent of the new law, announced that it was entering into a multi-year partnership with Google to provide trusted journalism from its news sites in return for significant payments by Google. This alignment was all the more surprising because, until then, Google had been a vocal opponent of the new law. Soon thereafter, Facebook announced that, rather than enter into any such arrangement, it was going to prevent publishers and Australians at large from sharing or viewing any Australian or international news content. If the diametrically opposite response of the two platforms seems strange, it is because their business imperatives are not immediately obvious.

Facebook is a platform on which users share content of their choice with their friends and family. News accounts for less than 4% of all content on the Facebook newsfeed. If Facebook were to comply with the requirements of the new Australian law, it would, in its own words, be penalized “for content it didn’t take or ask for.” It is worth mentioning here that Australian publishers received close to 5.1 billion free referrals from Facebook last year—worth, in total, an estimated $322 million (US). This suggests that Australian publishers need Facebook far more than Facebook needs Australian publishers. Viewed in this light, Facebook’s decision isn’t in the least bit surprising.

Google, on the other hand, is primarily a search business. Its search engine needs to have the ability, where relevant, to include news in its results. If the Australian law became a reality, Google would have little option but to negotiate the best arrangement it could with publishers like News Corp, or else risk having the quality of its search offering in Australia be drastically impaired.

As tempted as I am to get into the weeds of the Australian law, I believe it is more important to assess the broader consequences of this particular approach to re-ordering the relationship between content providers and the digital platforms in order to assess the impact it will have on the way we consume content. There is no doubt that if digital platforms can successfully be coerced into media bargaining arrangements in Australia, this approach will be adopted by governments around the world, and, sooner than later, will find its way to India as well. Before that happens, we need to figure out whether this is good for us.

Before the internet, news reached readers through distribution channels that were largely under the control of big media corporations. We had fewer news sources to choose from and the newspapers we read covered a broad range of topics superficially. Digital platforms democratized access by decoupling content from distribution. While this meant that news media companies lost control over their end consumer, it gave readers greater access to a wider range of highly specialized news sources.

While this was welcome, it brought with it its own challenges. With an overabundance of sources, relevant content became hard to find. We knew there was good content out there, but had no clue where to go to find it. Digital platforms solved this problem for us by building algorithms that were designed to serve up content most relevant to our needs. They perfected the art of extracting signals from the noise, and by doing so, they perform an invaluable role in the digital ecosystem. It is because of this that independent content creators can reach relevant audiences today without the munificence of big media corporations. Entire industries emerged from it: Blogs, podcasts, vlogs and e-newsletters.

All this has resulted in an unprecedented proliferation of content that consumers have, on balance, benefited from. That said, none of this has come without unsavoury side-effects. The fact that anyone who creates content will find an audience that is interested in it has resulted in greater polarization of society than ever before. It has resulted in the creation of echo chambers that has made public discourse far less civil. But, perhaps most significantly, it has resulted in the inevitable deconstruction of the news industry as we once knew it.

The Australian media bargaining approach attempts to address this last issue by offering the traditional news industry a subsidy paid for by the revenues of intermediary digital platforms. It does so without recognizing that by doing this, it will make it that much harder for small independent news providers to earn revenue or maintain the high search rankings they need to reach their audiences. This, in turn, will result in the eventual contraction of choice—potentially to the point where we will find the front page of search results filled entirely with content only from those providers with which digital platforms have struck media bargaining agreements.

Shortly before this column went to press, Microsoft publicly sided with Google and Facebook sought to resume negotiations. From these responses, it appears that digital platforms are willing to pay the price.

Rahul Matthan is a partner at Trilegal and also has a podcast by the name Ex Machina. His Twitter handle is @matthan