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September 17, 2020updated 30 Sep 2022 9:35am

Australian documents reveal how News Corp, Mail and other publishers plan to battle tech giants on global scale

By William Turvill

News Corp has accused Google of misleading Australian regulators as it seeks to avoid paying publishing companies for their news content, documents filed with Canberra regulators show.

The search giant, which along with Facebook is facing new payment rules for news content in Australia, has also been accused by Mail Online of showing “political bias” in its algorithms.

The accusations are contained within submissions made to the Australian Competition and Consumer Commission’s (ACCC) consultation on whether and how it should compel Google and Facebook to pay for the use of publishers’ content.

As well as lifting the lid on news companies’ concerns and frustrations with the tech giants – dubbed the ‘duopoly’ of the advertising sector – the documents also provide an insight into arguments that publishers like News Corp and DMGT will be making in other countries that are considering introducing similar rules.

Political leaders from several other nations, including the UK, are thought to be closely watching Australia’s attempts to take on the companies, and news publishers expect new regulations to be put in place in other jurisdictions in the coming years.

The status of Australia’s regulations – and what Google and Facebook have said

In April this year, the Australian government asked the ACCC to develop a mandatory code of conduct that would force Google and Facebook to pay for news content in the country. After launching a consultation, the ACCC released its draft code in July (details below).

During the consultation period, both tech giants publicly hit out at Australia’s plans. Facebook claimed to regulators that publishers “gain more from Facebook than we gain from news content,” which it described as “highly substitutable” for its platforms. Google also claimed that publishers derive more benefit from its websites that it does from them. The search giant claimed that in 2019 it “generated approximately AU$10m in revenue – not profit – from clicks on ads against possible news-related queries in Australia”.

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Both companies publicly condemned the draft code after it was released on 31 July. Google published an open letter to Australians telling them to expect “dramatically worse” services if the regulations come into force, while Facebook has threatened to block publishers and users from sharing news content in the country.

News Corp: Google’s calculations ‘border on the absurd’

Rupert Murdoch’s News Corp, which owns a large number of news organisations across the world – including the Wall Street Journal in the US, and the Times and Sun in the UK – took particular issue with Google’s claim that it made AU$10m in revenue from clicks on ads against news queries in Australia last year. It said this is “is likely to be very inaccurate”.

“It is obvious that the figure of $10m is incorrect, and in fact, not even likely to be in the right ‘ball park’ of the total value that Google is likely to obtain from news content,” News Corp Australia said in its 93-page submission to the ACCC.

“Of course, it is difficult for us to quantify as an external third party in the absence of access to internal information from Google, but this itself underscores the difficulties publishers like News Corp Australia have in negotiating with an entity like Google and why minimum standards of disclosure and transparency are required.”

News Corp took issue with several claims Google made to the ACCC, adding that “no faith can be placed in Google’s calculations or estimates as they are plainly wrong, and border on the absurd, including in relation to the indirect value of news content.

“In respect of the indirect value of news content, Google claims that news-related queries account for ‘just over 1% of total queries on Google Search in Australia’.

“News Corp Australia disputes the basis for this claim. On its face, it is an extraordinary figure. It implies that every Australian user of Google Search is undertaking nearly 100 queries every day of the year, which is plainly more than is actually being conducted by Australian internet users. Some statistics suggest that on average, users conduct only three-four searches each day. The effect of Google’s claim is to artificially reduce the significance of news-related queries.”

News Corp also took issue with claims by Google that its investments contribute to “educating and informing Australians [and] strengthening democracy”, saying this ignores “the consequences of digital platforms’ conduct, including atomising news, flattening brands and preventing monetisation by publishers.

“This conduct has undermined the ability of news media businesses to sustain their business models which require investment in the production of news reporting and journalism. The very reason for this code is because it is recognised that Google’s conduct has jeopardised publishers’ ability to sustain, let alone grow, their businesses.”

Mail Online: Google’s algorithms show ‘significant political bias’

Daily Mail Australia, the company behind the nation’s version of Mail Online – which launched in 2014 – also made a submission in support of the new code of conduct.

The Mail said it “shares the ACCC’s view that the considerable ‘bargaining power imbalances’ that exist between news publishers and the digital platforms must be corrected.

“In particular, the code is needed to ensure that news publishers are properly compensated for their content which adds significant direct and indirect monetary value to the digital platforms.

“However, this should NOT be seen as a tax on the platforms to support journalism from which they derive no benefit.”

It added: “The code should be a measure that enables publishers to share more fairly in the revenue their digital content brings the platforms. Not a subsidy for publishers who have adapted poorly to the new digital economy or are producing content that would otherwise be uncommercial.

“It should certainly not be used to keep alive non-digital forms of media that are no longer fit for purpose.”

The Mail’s submission takes a particular interest in challenges publishers face when Google and Facebook change their algorithms.

In June 2019, the website revealed its traffic from Google had been cut in half following changes to its search algorithms, which alter the prominence of different news stories.

Daily Mail Australia said: “At present search and social media algorithms are a black box: news media businesses are given very little information about why changes are made, what effect those changes will have on their businesses, or even when changes will be made.”

It added: “The code must also force the platforms to be transparent in the working of their algorithms.

“Currently they are utterly opaque, subject to capricious change without notice and – in the case of Google – show obvious signs of significant political bias, evidence of which DMA will be happy to share.

“The platforms should either be forced to make their algorithms transparent or justify fully for the changes they make to publishers’ traffic. This will become even more crucial if the code takes effect. They should also provide at least one month’s notice of any significant change and brief publishers on the rationale behind them.”

Should original content be favoured? Areas of contention for publishers

Most news publishing companies agree that Google and Facebook should be compelled to pay more for news content that benefits their websites.

But rival publisher submissions to the ACCC show that there are major areas where the views of different companies differ.

One such area of contention surrounds original content. The ACCC consultation asked whether the code should ensure that original news content is prioritised in algorithm rankings on Google and Facebook.

News Corp was strongly in favour of this. “Breaking news and investigative journalism is necessarily in the public interest and is indispensable to the proper functioning of a democracy,” it said.

“Yet…  it is difficult for consumers to identify the original source of news stories on digital platforms.

“If digital platforms continue to allow original news content to be sidelined in favour of copycat articles, particularly when the original content is behind a paywall, the incentive for news media businesses to invest in this type of news product will likely be reduced.”

Daily Mail Australia disagreed that any “allowance be made for ‘originality’ or ‘quality’ of content.

“Originality will always be a bone of contention for journalists, who naturally feel ownership of their stories. However audience data over many years shows that audiences do not distinguish between ‘original’ and other news content.

“Likewise ‘quality’ in journalism is entirely subjective, therefore impossible to assess. In any case some of the best and most courageous journalism is produced by titles which would generally be considered ‘tabloid’.”

Another area where publishers – including News Corp and the Mail – clash is over how payment negotiations with the tech platforms should be conducted.

News Corp’s submission states that it is “fundamental” that individual publishers are allowed to conduct bilateral negotiations with the tech giants “to reflect the uniqueness of news media publishers’ different business models, and their likely different attitudes to value”.

The Mail acknowledged in its submission that bilateral talks are “highly likely”, and suggested these should be allowed, but with conditions attached.

It said: “Our understanding is the platforms recognise they are now under pressure to pay for content in many jurisdictions, and rather than fight a series of expensive battles around the world, may wish to resolve the issue with individual news media businesses on a global basis.

“They should be free to do so, but with one proviso. It will not serve the purposes of competition and a good deal for consumers if the platforms are able to buy off the two dominant players in Australia and leave other players with no bargaining power.

“Therefore, no news media business should be obliged to accept terms which are less advantageous than those won by either Nine or News. We agree that all parties should be required to negotiate in good faith.”

BBC and Bauer want slices of the pie

Several other Australian companies made submissions to the ACCC. Big international news companies including the BBC and Bauer also made submissions.

The BBC set out arguments for why it, as an international media company, should be allowed to benefit from the new regulations.

It said: “In our view, the code ought not be applied in a selective way which has a detrimental financial impact on publishers excluded from the code as this would impair the ability of organisations like BBC Global News to invest in content for Australian audiences.”

Magazine publisher Bauer, which has a large business in Australia, also made submissions on why it should be a beneficiary company, called on the ACCC to “ensure that the code’s existence does not place Australian news media businesses at a competitive disadvantage to news media businesses in other jurisdictions.

“Google and Facebook are critical to the financial viability of Australian news media businesses. To the extent that the existence of the code caused Google or Facebook to overtly or implicitly preference foreign news media businesses – operating without the benefit of the code – over Australian news media businesses, the consequence for those Australian news media businesses would be severe.”

What the draft code says

The ACCC published details of its draft code on 31 July. It opened a new consultation on the code, meaning it could potentially be subject to further changes, and it plans to finalise the regulations soon.

The body says the code will enable Australian media to bargain with Google and Facebook “to quickly secure fair payment for news content”.

The aim of the legislation is to address the “acute bargaining power imbalances between Australian news business and Google and Facebook”. The problem, says the ACCC, is that publishers have had “no option but to deal with platforms,” and have previously had little ability to negotiate with them over payment for content.

Under the code, news businesses – individually or collectively – notify the tech giants that they want to negotiate under the code. The parties then have three months to strike a deal, and if they are unable to do so they go to “final offer arbitration”. In these circumstances, each party lodges a content payment offer with the arbitrator, which then has 45 minutes to choose one of the offers.

The draft code also states that Google and Facebook must give publishers 28 days’ notice of any algorithmic changes that will affect their traffic.

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