Google and Facebook draft laws – yes, a tawdry government mates deal for News and Nine

by | Dec 16, 2020 | Business

After a year of reports, submissions and public inquiries – and much posturing on all sides – the Government has finally delivered the draft legislation designed to bring Google and Facebook to heel. But who is holding the leash? Kim Wingerei reports. 

The legislation introduced into Parliament this week is designed to force Google and Facebook to share some of their online advertising revenue with Australian media companies. According to both Rod Sims of the Australian Competition and Consumer Commission (ACCC) and Treasurer John Frydenberg, the ideal outcome is for the media companies to come to a commercial agreement; but if they can’t, the umpire will step in and force an arbitrated outcome.

It all started a year ago when Nine Entertainment Co and News Corp did what so many corporations do when the “hidden hand of the market” slaps them down; they run to the government for help. They complained to the ACCC that the big, bad global behemoths were stealing their advertising revenue! “All we want to do is provide quality journalism and we can no longer afford to,” they cried.

And they’re right.  The advertising dollars have shifted from newspapers (and, to a lesser degree, from TV screens and radio) to online, where Facebook and Google dominate with 54% of a  market worth $9.3 billion in 2019.

Nine and News say that Facebook and Google are using their content to attract visitors and that the media companies should be paid for what that they have produced at great cost. It’s a simple and compelling argument and the ACCC concurred.

But what the final commercial outcome will look like is not yet clear – the main parties are hundreds of millions apart as we reported a few months ago. Google and Facebook have since lobbied hard in public and no doubt behind the scenes. Their argument has always been that they drive traffic to the media websites and that this, too, has monetary value.

As a major concession to the Internet giants, the draft legislation recognises that and allows for it to be taken into account in the arbitration process. Not in a way that will reverse the direction of the money flowing from Google and Facebook, but in a potential reduction of those amounts.

Nine Entertainment is very unhappy, saying that:

“…the continued concessions to the digital platforms only entrenches both their monopoly power and the significantly unfair imbalance in regulation.”

News Corp, on the other hand, seems fine with it. The company is reportedly close to a global deal with Google and Facebook, which may explain why it is not just “fine”, but doesn’t care much about the legislation at all.

The proposed legislative structure is one of individual arbitration between parties or between a group of media companies and the Internet giants. The ACCC (via ACMA) will only step in if a negotiated outcome cannot be agreed. The first deal that is struck will set a precedent that will be hard for others not to follow.

The independent media sector has argued that the Government should facilitate negotiations on its behalf, but that has not been included in the legislation. As the cost of arbitration has to be borne by each party, it is unlikely that many will be able to enter into the scheme individually and will just have to take what, if anything, is on offer.

Another barrier is the minimum annual revenue of $150,000 required to be able to participate in the scheme. It leaves out the majority of independent media operators, including those in the regions not owned by News Corp or Antony Catalano’s ACM.

An important change from the original draft legislation is that the ABC and SBS are now specifically included. The Government probably knows that without their inclusion the bill would not pass a Senate vote.

The ABC news site is the No. 1 news website in Australia, in front of News.com.au and nine.com.au. Of the top 10, News and Nine combined have just under a 60% share.

The reality is that all online media, including this site, rely heavily on Google and Facebook for visitors. And aye, there’s the imbalance that Frydenberg refers to when releasing the bill to Parliament:

“…the substantial market power that has arisen through the growth of digital platforms, their impact on competition in media and advertising markets and their implications for news media businesses, advertisers and consumers.”

And although the inquiry was ostensibly set up “to protect public interest journalism”, there is little in the legislation that directly tackles that. It’s all about the money and, incidentally, consumers of media get nary a mention.

The only non-monetary issue the legislation addresses is a set of clauses to compel Google and Facebook to give prior notice (28 days) of algorithm changes. This was put in place to avoid online media being disadvantaged by sudden changes to how the digital platforms rated and ranked their content. It is the issue they have most vehemently opposed and lobbied against, with Facebook threatening to omit news content from its platform (in Australia).

Their lobbying has been effective and the legislation now includes a carve-out to prohibit the disclosure of “trade secrets”. The algorithms are part of Google and Facebook’s core intellectual property and are heavily guarded. The definition of “trade secrets” has the potential to keep armies of IP lawyers in their Porsches for years to come.

At the behest of the faltering mainstream media companies the government (via the ACCC) set out to force Google and Facebook to pay for the use of Australian-produced media content. But while the media landscape has irrevocably changed over the past two decades, media laws and regulation have not. As a result we find ourselves at the mercy of global giants with exceptionally deep pockets holding (almost) all the cards.

Facebook and Google will not worry much about tens or even a few hundreds of millions of dollars to be paid for content. They face much bigger regulatory challenges in the US and the EU, but for now, they will continue to grow, adapt, divide and conquer.

Meanwhile, News Corp, Nine and much of the mainstream media will continue their slow and inevitable decline with business models that are no longer working. We can only hope that from the ashes of the printing presses, declining subscriber numbers and the dried-up “rivers of gold”, a vibrant and diverse online media sector will continue to thrive and grow even stronger.

We’re working on it.

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ABOUT THE AUTHOR

Kim Wingerei

Kim Wingerei

Kim Wingerei is a businessman turned writer and commentator. He is passionate about free speech, human rights, democracy and the politics of change. Originally from Norway, Kim has lived in Australia for 30 years. Author of ‘Why Democracy is Broken – A Blueprint for Change’. 

4 Comments

  1. Avatar

    So you’re going with the “rivers of gold drying up” theory, instead of the reality of them running fine, just hived-off from “news”, that they no longer need to subsidize? Those rivers are still running into the same pockets (mostly), just not being distributed into the pockets of journalists any more. That has nothing to do with the “global giants”, except that they pricked the bubble of advertising-supported publishing by pointing out that, given the choice, people will actively seek out the advertising that matters to them.

  2. Avatar

    “Meanwhile, News Corp, Nine and much of the mainstream media will continue their slow and inevitable decline with business models that are no longer working”.

    News Corp and Nine Entertainment’s newspapers are doomed anyway since they are now only the propaganda tools of the Liberal Party and right wing IPA-Murdoch-Liberal ideology. Their main interest is news with much omission and fakery to keep Morrison and the Libs/Coalition in office. The bias is palpable. Labor and the other parties, particularly the Greens, are kept out of these newspapers unless it is a negative story. It’s like there is only one party for Australia that should appear in the news and that is the Libs and their coalition mates the Nationals. They supply us with permanent pro-Liberal commentators, and make sure we forget the important issues that make this current crony-supporting government the worst in history.

  3. Avatar

    Not just the expectation of a few consoldiated players to be subsidised and/or supported by digital platforms, government and consumers…. however, this proposed law has been commissioned by those same powerful players with commercial or financial outcomes expected.

    Meanwhile in the real world not compromised by NewsCorp, IPA and the national government LNP, in article from EuroNews ‘Digital Services Act: Brussels vows to ‘put order into chaos’ of digital world with new tech laws’ 15 Dec ’20 (Digital Markets/Services Act.):

    ‘”The two proposals serve one purpose: to make sure that we, as users, have access to a wide choice of safe products and services online,” Margrethe Vestager, Executive Vice-President for a Europe fit for the Digital Age, said in a statement.

    “And that businesses operating in Europe can freely and fairly compete online just as they do offline. This is one world. We should be able to do our shopping in a safe manner and trust the news we read. Because what is illegal offline is equally illegal online,” she added.

    In Australia we have suppose libertarians who despise the EU for its regulatory frameworks, supporting competition and all players, especially round trade, financial transfers, taxation and money laundering; yet have the luxury of being able to game a national govt., i.e. ours, then niche law being drafted catering to their own commercial interests…..

  4. Avatar

    “Nine and News say that Facebook and Google are using their content to
    attract visitors and that the media companies should be paid for what
    that they have produced at great cost. It’s a simple and compelling
    argument and the ACCC concurred.”
    It is not a compelling argument. It lacks logic and no-one has an explanation for it.
    Let the market find its own level. Ensure that copyright laws give, for example, News Ltd the right to disallow links to stories in the Australian so that they can negotiate a fee with Google News. No need for any arbitration. If Google and News don’t make a deal then there are no links to the Australian on Google News and no harm is done to the public interest.
    Now, if we think, regardless of how journalistic enterprises are faring, that online advertising is particularly profitable, let’s tax it directly and put the proceeds into general revenue. It does not matter what in particular is done with this extra revenue, but if a case is made to support journalism in some sensible way it is poetic justice if some proportion of it is used for that.

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