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October 14, 2021updated 30 Sep 2022 10:40am

Comment: Why Australia’s dishonest News Media Code is a bad way to tax Google and Facebook

By Hal Crawford

Hal Crawford is a media analyst and former news director based in Sydney. You can sign up to his substack newsletter and podcast here.

An extraordinary thing happened early in 2021 when the Australian government managed to bully Google and Facebook into paying news publishers for news content.

While the world has learned one valuable lesson – that the global giants can be corralled through legislative reform – the Australian experience is actually a terrible global precedent because it is based on misrepresentation and delusion.

By “playing dirty” in order to squeeze out some income in the short term, the Australian government and media industry has stored up trouble in the long term.

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To explain why, it’s necessary to investigate the layers of this unwholesome cake. Let’s begin with the surface.

The News Media and Digital Platforms Mandatory Bargaining Code is an odd thing.

You may be surprised to learn that this piece of legislation, which passed into Australian law in February, has never been used.

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The Code requires designated digital platforms to make deals with news publishers. The Code dictates that money must flow from the platforms to the publishers in exchange for news content that appears on the platforms as links and snippets (i.e. not subject to copyright under Australian law). There are a number of other important rules in the Code – such as advance warning of algorithm changes that could impact news traffic – but at the heart there is the requirement to pay for news links.

Neither Facebook, Google, nor any other digital platforms are mentioned by name, and until a platform is “designated” it is not subject to the Code. The Australian Treasurer holds the power to designate platforms, and so far he has designated no one. Instead, he has withheld the threat while first Google and then Facebook have busily done deals with Australian publishers. These deals are not public.

You can see already that this is an unusual situation. If the government believes in the Code, it should be operational so that its benefits can be realised. Instead it is the threat of the law being used that is its function, and the actual bargaining is left to the private parties.

Moving deeper into the murk, it is unclear what criteria the government is using to determine whether these private deals are satisfactory or not, and at what point the threat of designation will be used. The deals are confidential and there is no indication in the Code of how news content should be valued: in effect, this is a game without rules being played out of sight.

It seems probable that designation is actually in the hands of Australia’s most powerful commercial news organisations, News Corp, Nine, and Seven West Media. It was these companies that campaigned heavily for legislation in the first place, and that struck rich deals with Google and Facebook quickly. There was also a significant deal for national broadcaster the ABC, and smaller deals for second-tier news media. My estimate is more than AU$200m per annum in total for Australian news providers in cash and in-kind payments.

The Australian deals are at least an order of magnitude better than anyone else in the world has been able to manage per capita. See William Turvill’s Press Gazette investigation for more detail.

Read more: Google News Shh-owcase investigation

So what’s the problem?

At its heart, the Code – and the process surrounding it – is inauthentic, or to use a word I prefer, dishonest. It is this dishonesty that lies behind the opacity of purpose and process, and has the potential of compromising news reporting on digital platforms in Australia.

The deals struck in the shadow of the Code are supposedly to pay for news content, but actually they are payments made to avoid designation and the disastrous precedent of payment for links. They don’t put a new and higher value on news, or usher in a world where news companies can demand fair payment for their content. Instead they merely recognise that local political influence is important, a lesson the platforms will now have learned thoroughly.

If you doubt this, consider the position of a new player entering the Australian market. What hope would this organisation have of striking a good deal with Google and Facebook? Unless it can somehow bend the ear of the Treasurer, there is no need for the platforms to deal with it at all. Some smaller operators in Australia have already found themselves in this position, with The Conversation and multicultural public broadcaster SBS unable to strike deals with Facebook.

The Australian situation entrenches players with existing political influence. It does not require that money be spent on public interest journalism. There is no oversight and the normal rules of economic exchange have been abandoned. Because this is closer to a shakedown than commerce, there is no incentive for platforms to negotiate in good faith.

In three years, when most of the current deals expire, Australian news companies will find the platforms playing the hardest hardball they can muster. Unless news has managed to ramp up the political pressure, the deals will be a lot less lucrative.

News companies in Australia have benefited from conflating a justified concern about digital platforms not contributing sufficiently to the societies in which they operate, and the delusion that these platforms are somehow specifically cheating news media. They ignore the fact that no one else gets paid to be linked to, and that the entire internet wouldn’t work if they did. The news industry’s argument seems to boil down to simply being paid to exist. But while news in aggregate is functionally vital, news in particular is a base commodity.

One solution could be to effectively locally tax Facebook, Google, and other global digital companies, and to return this money to consolidated national revenue. News can then be supported out of the public purse according to transparent criteria. This is a better answer to the existing market failure in news than the patchy Australian deals.

The problem with the current situation is that the ends don’t justify the means. Already the approach has created a great deal of resentment and ill-will: in smaller players who have missed out on deals, in news media outside Australia who feel short-changed, and within the digital platforms themselves. For an industry that often styles itself a defender of democracy and champion of transparency, the News Media Bargaining Code represents a cautionary tale rather than a model to be emulated.

Photo credit: Reuters/ Dado Ruvic

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