BS READS: How Australia's news bargaining code can address media's revenue woes

A new law in Australia that mandates Facebook and Google to pay news publishers might inspire similar legislation in other countries. To what degree will it solve news industry's revenue problem?

Last week, the Australian government passed a law that made it compulsory for Big Tech firms like Facebook and Google to pay news organisations for using links to their work, setting a strong precedent in a long tug-of-war for revenue between the two camps.
 
Google is the de-facto gateway to the internet, and social media (Facebook, et al) is where people come to consume and share. News media has long argued that Google and Facebook have profiteered from news but have passed on little in terms of monetary gains. The Australian new legislation is meant to fix the discrepancy. And global leaders are watching.
 
Australia has reached out to countries including India, Canada, France and the UK to back it up with similar regulations. India's Information and Broadcasting Minister Prakash Javadekar had said on February 25 that "India is watching the development closely."
 
Whether India would benefit from something like this is a debate best had after analysing whether the legislation would "sizeably" benefit news organisations in Australia to begin with.
 
This requires a deep dive into the law itself and specifically the deals Google signed with Seven West Media and Rupert Murdoch's News Corp. It is also essential to look at the relationship between news organisations and internet platforms and how that has evolved.
 
To be sure, both Google and Facebook have been, for some years, investing modest monies into the news ecosystem through initiatives like Google Showcase, Google News Initiative and Facebook NewsFeed. But more on this later.
 
Bargaining code: The fine print
 
In essence, the News Media and Digital Platforms Mandatory Bargaining Code states that "some" internet platforms are "unavoidable trading partners" for news organisations, with the former deriving business value from the latter. It also says, based on a government review, that internet platforms have excess bargaining power – given their control over tech that determines what users see and what articles are shown first.
 
A step deeper: The law makes it mandatory for platforms to strike deals, but does not specify how those deals should be structured. It could be a one-time annual or quarterly payment or based on traffic.
 
The platforms can either strike deals under the process listed or cut deals on their own and inform the regulator. In the event the two camps are not able to arrive at a deal, a government arbitrator could decide the final deal.
 
Further, the Australian government rests the right to decide which internet platforms will have to follow the law. For media firms, those with more than 150,000 Australian dollars ($0.12 million) in annual revenue are eligible.
 
But there's at least one contentious condition. Platforms must apprise news companies about any changes to the back-end tech or algorithms that would affect traffic to the publishers' sites. This has to be done 14 days in advance. The truth is, Facebook and Google constantly make changes to their tech systems and rarely make the changes public, unless they are big.
 
Facebook reluctant, Google in
 
Unlike Google, Facebook had been reluctant to bite the bullet. It said that publishers and users voluntarily post news on Facebook, which is different from Google, where news gets indexed and appears in Google search.
 
The law "fundamentally misunderstands the relationship between our platform and publishers who use it to share news content," Facebook's Australia managing director William Easton wrote in a blog post on February 17. In fact, Facebook helps publishers garner reach and tangible gains.
 
Facebook finally conceded after Australia said it was introducing "further amendments" to the law which would give the social media firm more time to work out deals with news organisations, helping it avoid the mandatory arbitration it's been so against. Experts say it is a tactic to gain more control over the deal process.
 
"It will be interesting to see what kind of deals Facebook makes with news publishers under the Australian law. I don't think it will be anything significant. And in other countries Facebook could just point to its earlier initiatives to show that it supports news media," said a senior media analyst who did not wish to be named because Facebook was a client of his firm.
 
Facebook has committed $400 million to support growth of the news industry globally. It set up a bunch of grants like Report for America in the US, Community News Project in the UK, and a special Pulitzer grant for newsroom doing local stories. It has also given funding to a number of small newsrooms to adopt tech.
 
In 2019, it launched a dedicated News Tab (in some western markets), where it partnered with publications like The Guardian, The Economist and the Independent and paid them to produce special snippet-style stories.
 
Meanwhile, Google has been far more aggressive. In 2020, it committed itself to paying $1 billion over three years to publishers for content that appears in a cross-service "News Showcase" product. News Showcase is live in several European countries and has over 450 news outlets signed up.
 
Small monies
 
Google's News Showcase is much further along than Facebook's plans for news. Though the deals singed under News Showcase are private in most cases, Bloomberg Opinion columnist Alex Webb pointed out that payments were not significant and Google's goal was to cultivate relationships with news organisations and readers directly.
 
"Major publishers in Germany are receiving a flat fee of just a few million euros every year from Google — between 1 per cent and 2 per cent of their annual revenue. Given that the search giant can account for more than a quarter of their traffic, it's a drop in the ocean. Facebook is paying similar amounts in the UK," wrote Webb in an 18 January column.
 
Google is also using the Showcase route in Australia. Seven West Media, Nine Entertainment, News Corp and Guardian Australia are some of the more than 50 publications in the country that have signed up for Showcase, reports suggest.
 
The financial terms in any of the transactions are not made public, but reports peg the deal with Seven West Media, one of the biggest media networks in Australia, at 30 million Australian dollars ($23 million) a year. For reference, the sum is a mere 1.8 per cent of Seven West's 2020 revenue of $1.2 billion.
 

In the case of News Corp, the two sides announced that they would also collaborate on a subscription platform, share advertising revenue and invest in video journalism on YouTube. News Corp went so far as to call the payment from Google "significant".
 
"The unconfirmed figures in the range of A$30 million mentioned in news reports are small when compared to Australia's roughly A$10 billion digital advertising market," writes David Fickling, a senior media columnist.
 
"By giving up the fight over Australian news, Google and Facebook are able to focus their efforts on maintaining their monopolistic positions in the far larger markets for online information, and data about everyone who uses the web," wrote Fickling.
 
Social media as traffic channel
 
Over several past years, social media has become an important channel to gain new readers. News is widely shared on Facebook, Twitter, even Instagram, and most importantly through WhatsApp. For different publications, the share of traffic that comes from each of these channels is different.
 
That is also why publications focus on different social media platforms depending on their target readers. In India, The Ken and The Morning Context – both upcoming subscription-only long-form publishers – aggressively market their stories on Twitter, which is where their primary audience (CXOs, analysts, business folks) exist. On the other hand, Splainer, which does explained pieces, is tilted towards Instagram.
 
All major national publications like The Times of India, The Hindu, The India Express, as well as Business Standard, push content across all major internet platforms. "At one point, it was Facebook; but now most of the traffic comes from WhatsApp and lately our Telegram channel is also gaining steam," said a social media executive with a leading business newspaper.
 
What is not in control of the publishers is the traffic it receives from Google, or ‘direct traffic.' Multiple media executives confirm that Google is the largest source from where readers land on to new articles and websites.
 
"India is quite a different market (compared to Australia). A lot of our newspapers don't generate a lot of revenue from digital news at the moment," said Jehil Thakkar, partner (media), Deloitte. "I think it will become more common around the world and there will be specific country-to-country deals. For India, however, I think it will need very strong sponsorship from the government."
 
That said, there are multiple arguments against the theory that internet platforms have destroyed the news business.
 
"A lot of Google and FB ad revenue doesn't actually come from things that used to be in newspapers. Many of their advertisers are SMEs that rarely advertised before, while many actual newspaper advertisers moved to things that don't look like ads at all," noted prominent internet analyst Benedict Evan. Also, "very little of the traffic on Google or Facebook comes from news, and very little advertising (and less with much value) appears next to news search results."
 
Last week, The Indian Newspaper Society put out a note saying that Google should share 85 per cent of its ad revenue with Indian newspaper firms. "It's problematic if everything is framed as us vs them, poor domestic firms vs big bad US tech, or the new-wave tech colonialism, new age East India Company metaphors," argued Prasanto Roy, a technology policy consultant and former head of Nasscom's internet council.
 
"The ad model is broken. Many global papers have gone past it and are overwhelmingly subscription-based, with outstanding reporting and features. Too much of Indian media has held on to the broken advertising model and to print, and their dependence on Google traffic," said Roy.