Cough it up: ACCC demands Google and Facebook share spoils with Australian media
Ironically it was not Facebook or Google that killed the highly profitable glory days of newspaper publishing in Australia. News organisations and Fairfax (now Nine) in particular were digitally disrupted in the first decade of the 2000s when various online startups pinched the classifieds markets from under their noses – the lucrative stream of advertising revenue known as the ‘rivers of gold’.
Credit:Paul Rovere
The second leg of news media digital disruption emerged in the following decade when the large platforms Facebook and Google interposed themselves between publishers and their audiences and established a stranglehold over online advertising.
This time around and against the backdrop of a struggling media industry, the government has decided there is something it can do about this. It has seized on the imbalance in negotiating clout between digital giants and the way-smaller Australian news media players.
At the directive of the government the regulator with the sharpest teeth, the Australian Competition and Consumer Commission, has devised a mandatory code to ensure that the news organisations that pay for the creation of content get a share of the revenue that digital platforms derive from that content.
It isn’t the first time the ACCC has bowled it up to the big platform players, Google and Facebook, so it must understand how hard they will fight back.
Taming these giants who boast revenues that are larger than the output of entire economies won’t be easy.
Already countries outside Australia including France and Spain have tried unsuccessfully to protect local publishers from Google and Facebook leaching revenue from media content creators.
But the platforms have prevailed in what has been a jurisdictional game of Whack-A-Mole.
Only hours after the release of the draft code Google took its first swing at the Government, accusing it of using, ‘heavy handed intervention (that) threatens to impede Australia’s digital economy and impacts the services we can deliver to Australians’.
The possibility Google and Facebook will turn to the courts to overturn legislation is not hard to envisage.
In a commercial sense the impact of the code on Google and Facebook is minor. But the digital giants can’t afford to have other countries follow Australia.
The large question that remains unanswered is how much money the news media can hope to capture from the digital platforms.
At its heart the ACCC code is pretty simple. News media publishers can negotiate either together or separately with Google and Facebook to determine what is, in effect, a yearly tolling fee based on the revenue the platforms derive from the content produced and funded by news media.
Smaller media players will be able to negotiate as a pack and the larger ones like Nine Entertainment and Rupert Murdoch’s News Corporation can slug out with Google and Facebook independently.
It is a win for all news media content creators but it is worth noting that the government has chosen the architecture of the code that was pushed by News Corporation – a decision considered to be a nod to Murdoch’s influence and political leanings.
If the two parties (the news media and the platform) can’t agree an arbitrator decides which party wins. And it is binary – the arbitrator doesn’t pick a point between the two parties’ claims, rather he or she decides which one is more reasonable. This was designed to discourage wilder ambit claims and bring the two sides closer to commercial reality.
The ACCC code will also prescribe minimum non-negotiable standards governing non-payment related issues between the platforms and news media businesses. For example digital platforms are required to give news media businesses 28 days’ notice of algorithm changes likely to materially affect referral traffic to news, algorithm changes designed to affect ranking of news behind paywalls, and substantial changes to the display and presentation of news, and advertising directly associated with news.
The ACCC has been thorough in its attempts to close any of the gates, and include tripwires to catch digital players attempting to avoid compensating news media outlets.
For example, the platforms can’t discriminate in favour of media organisations that don’t participate in the code or against those that do. The platforms will not be able to push news from international providers ahead of Australian players or artificially lower the ranking of a news media business’s content in search results or a social media feed.
The large question that remains unanswered is how much money the news media can hope to capture from the digital platforms.
In recent dispatches Google has claimed it makes only $10 million a year in advertising revenue from Australian media stories, an amount that the ACCC’s chairman Rod Sims says takes no account of the broader appeal and traffic that local news brings to the Google site.
At the other end of the spectrum, News Corporation Australasia’s executive chairman Michael Miller says the platforms should pay the media $1 billion a year. Nine’s chairman, Peter Costello nominated a more conservative figure of $600 million.
Meanwhile, a breach of the code has the potential to attract a penalty of up to 10 per cent of revenue. The combined revenue of Google and Facebook in Australia is estimated at around $6 billion. In other words, multiple breaches could get very expensive.
The potential for News Corp and Nine to receive a platform-derived injection of revenue didn’t excite the market on Friday, with the media companies share prices down about 1.9 per cent and 3.9 per cent respectively on Friday.
The code won’t have any impact on Google and Facebook’s shares either, at least in the short term. Unless and until other, bigger countries follow Australia’s lead.
“We would expect Google and Facebook to navigate this process very carefully, given the direct financial impact and – perhaps more importantly – the potential global precedent” Macquarie’s media analyst said in a note to investors.
Elizabeth Knight comments on companies, markets and the economy.
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