Industry responds to mandatory payment code for tech platforms: ‘This is a watershed moment to benefit all Australians’

After an 18-month investigation, a 624-page report and further months of consultation and review, the Australian Competition and Consumer Commission (ACCC) finally handed down its recommendations for a mandatory payment code between the big tech platforms (primarily Google and Facebook) and news media publishers.

In a nutshell – publishers will be able to bargain with the tech giants to secure what they consider as ample funding for their work. The three-month negotiation period will be overseen by a regulator and if a decision cannot be reached then one will be made in arbitration.

The driving force behind the payment code is the apparently unfair relationship between the tech platforms and publishers, which largely benefits the former while resulting in the closure of newsrooms across the country. This is disputed by Google and Facebook – they claim the relationship is already a symbiotic one and that the publishers are greatly overestimating the importance of their content to the success of the tech platforms.

Facebook and Google would be forced to reach agreements with publishers over the worth of news under the new draft code

Essentially – with Google and Facebook acting as the conduit between readers and stories, the publishers have lost advertising revenue. And they want it back. But not all publishers will be allowed to access the new funds. SBS and ABC are government-funded and therefore not eligible, says treasurer Josh Frydenberg, and a set of guidelines provided by the ACCC includes hoops such as publishers producing ‘core news’ (journalism on publicly significant issues; journalism that engages Australians in public debate and informs democratic decision making; and journalism relating to community and local events), adherence to professional standards and editorial independence. Sports broadcasts, entertainment content, academic and review content and talkback radio will not be eligible for any payment.

The industry responds

News Corp Australiasia boss Michael Miller was delighted by the announcement, telling the media it was a ‘world-first’ and saying he was keen to get into the ring with the tech platforms.

News Corp boss Miller welcomed the code, calling it a ‘world-first’

“While other countries are talking about the tech giants’ unfair and damaging behaviour, the Australian Government and the ACCC are taking world-first action. I congratulate them for their leadership,” he says.

“The tech platforms’ days of free-riding on other peoples’ content are ending. They derive immense benefit from using news content created by others and it is time for them to stop denying this fundamental truth.

“The ACCC’s draft Code of Conduct is a watershed moment; it can force the platforms to play by the same rules other companies willingly follow and it ultimately means they will no longer be able to use their power to walk away from negotiations with news creators.

“This code has the potential to benefit all Australians by securing the future for the people and companies who serve real communities with real news.

“I look forward to entering into negotiations with the platforms as soon as possible.”

Nine, arguably the company most likely to benefit from the exchange along with News Corp, also welcomed the decision, saying it would provide a more equal future for the industry.

“Nine welcomes the fact that the ACCC and the Government continue to push the agenda forward by recognising the importance of the regulatory and bargaining imbalances that exist between Australian media organisations and the dominant global digital platforms.

“We are confident that following this important step in the process we are positioned to achieve an outcome which will ensure significant long term benefits to our news organisation.”

Nine and News Corp were the two companies most vocal about how much revenue was being lost due to the interference of the tech giants. Miller said a bill of up to $1bn could be on the table, while Nine chairman Peter Costello estimated it could be $600m. This has been hotly contested by Google Australia boss Mel Silva.

The industry union though feels the code hasn’t gone far enough and says it isn’t yet sure the smaller players will benefit from the ruling. MEAA media president Marcus Strom says the body is currently reviewing the code and its likely outcome for smaller publishers.

“For nearly two decades Google and Facebook have built enormous fortunes off the back of aggregating content that others have made and others have paid for. It is a business model that has literally destroyed newsrooms around the world,” says Strom.

“It is time that free lunch comes to an end.

“MEAA and many media organisations have been calling for recognition of the compensation issue for many years. Finally, those calls have been heard – albeit after great resistance from the digital platforms.

“This draft code is a great first step. It is underpinned by the ACCC’s acknowledgement that ‘a strong and independent media landscape is essential to a well-functioning democracy’. It acknowledges the clear bargaining imbalance between the digital behemoths and Australian news media companies.

“However, there are still issues that must be addressed and included in the code. We are concerned, for instance, that many of the new regional media outlets formed this year during the COVID-19 crisis could be excluded – and these innovative outlets are the organisations that need the most support.”

MEAA’s Strom isn’t sure the code is the silver bullet the industry needs

According to the Public Interest Journalism Initiative (PIJI) more than 200 newsrooms have closed temporarily or for good since January 2019. In 2020 alone, more than 100 newspaper mastheads have been suspended or closed. Another 1,000 editorial jobs are likely to go, according to the MEAA, in the next six months.

“The closure of so many regional newspapers in recent months demonstrates how precarious the battle for survival is for smaller media outlets. Regional media should benefit from the proposed code. We will need to review this issue in consultation with regional media outlets and our members,” says Strom.

PIJI is calling for strict guidelines to be brought in as part of the code, including large penalties of up to $10m for any breaches.

The tech platform denial

Unsurprisingly, Google has rebuffed the suggestions put forward by the ACCC. Silva says the business is “greatly disappointed” in the code, and called it “heavy-handed”.

“Our hope was that the code would be forward thinking and the process would create incentives for both publishers and digital platforms to negotiate and innovate for a better future – so we are deeply disappointed and concerned the draft code does not achieve this. Instead, the government’s heavy handed intervention threatens to impede Australia’s digital economy and impacts the services we can deliver to Australians,” she says.

In fact, according to Silva, Australian news publishers already benefit from $218m worth of free clicks each year. Silva hinted at a bigger issue – that businesses and investors looking to work with Australia in the future may be concerned by the Australian Government’s intervention and question the dedication to the country’s digital future.

“It sets up a perverse disincentive to innovate in the media sector and does nothing to solve the fundamental challenges of creating a business model fit for the digital age,” says Silva.

Silva is disappointed with the outcome

Silva’s comments speak to a bigger concern for the industry – what if Google isn’t bluffing? It claims the publishers need it more than it needs them, and if that proves to be correct the response to the code could be devastating for the industry. Should Google crackdown on publishers’ access to its platforms, or enforce changes to its algorithm which provide even less stability than the industry is currently facing, the result could be catastrophic. Likewise, the ACCC’s code suggests publishers should work together to gain bargaining power over the tech platforms. The ACCC says this is what the publishers did in pushing for the code in the first place. But that theory requires everyone to play ball – should there be outliers who are willing to work directly with the tech platforms outside of the agreed structure, the power imbalance could slip even further.

“We urge policymakers to ensure that the final Code is grounded in commercial reality so that it operates in the interests of Australian consumers, preserves the shared benefits created by the web, and does not favour the interests of large publishers at the expense of small publishers,” says Silva, leaning on the industry’s insecurities and providing more fuel to the fire.

Facebook hasn’t made its intentions regarding the code clear yet. ANZ managing director Will Easton said the business was reviewing the proposal. But Facebook has been vocal in the past about the benefit it provides publishers, including through its various funding programs for newsrooms and it’s unlikely the social media business will throw its support wholeheartedly behind the ACCC’s draft.

Who will benefit?

Free TV, the industry body representing commercial free-to-air broadcast, welcomed the code, saying it supported the important principle that news is worth paying for.

“The reason this legislation is necessary is because neither Google or Facebook were prepared to genuinely negotiate a reasonable payment for their use of our news content on key services such as Google Search, Facebook Newsfeed or Instagram,” says CEO Bridget Fair.

“We are pleased that the ACCC has recognised that without an external driver to reach agreement or to break a deadlock, the digital platforms are unlikely to change their approach to making fair payment for news.”

Commercial Radio Australia (CRA) took a similar stance, with CEO Joan Warner calling it an important step towards fairer negotiations.

CRA’s Warner

“The draft code has the potential to address some of the serious issues raised by the commercial radio industry, such as revenue sharing and greater transparency of algorithms,” she says.

“We will carefully examine the details and the implications for broadcasters during the consultation process.”

It isn’t yet clear how much radio and television broadcasters will actually benefit from the code. At this stage, the primary focus seems to be on digital news publishers, but both Free TV and CRA put forward their perspectives during the deliberation period, including the argument that their content is often co-opted by digital platforms and used for easy viral news stories. It seems possible that the code won’t address this concern – especially as it clearly dismisses reality TV, entertainment content and talkback radio.

The deliberation process is likely to take between six months and a year, with all concerned parties encouraged to provide feedback to the ACCC over the code. ACCC boss Rod Sims says payments could begin flowing as early as six months after the code is adopted.

On Friday, Sims pointed to the billions in revenue both Facebook and Google had between them in Australia and said that even if Google does take the step of turning off Google News in Australia, as it did in Spain when faced with regulations, it would still be caught by the code.

By the time a final code is ready to be released, Australia will be staring down the barrel of another election and it’s likely more newsrooms will have closed, or at least shrunk. Whether the code will be able to turn hopes around for regional journalism, public interest reporting or news media, in general, is hard to tell – but without some serious changes, the outlook is bleak.