Withdrawal ‘isn’t a threat; it’s a worst-case scenario’: Google and Facebook respond to senate committee queries

“The withdrawal of Search from Australia isn’t a threat; it’s a worst-case scenario that we’re working hard to avoid,” Google asserted in response to questions it faced from senators in recent committee hearings and took on notice (meaning it committed to responding later in writing).

In the documents, the tech company said that with “straightforward” amendments, the News Media Bargaining Code would become a workable tool under which Google could pay publishers through its News Showcase program, launched a week ago, without paying for links.

But Google also noted that publishers’ feedback to Showcase’s financial terms has been “varied”, with some pushing up their counter-offers after seeing the draft code.

“At this stage, we are still understanding the implications of removing Search on our other services,” wrote head of government affairs and public policy, Lucinda Longcroft.

“We hope that News Showcase could work within the code, acting as the vehicle for us to pay Australian news businesses to license their editorial expertise and provide beyond-paywall access to news content.

“While we have active discussions underway, negotiating deals with publishers has proved challenging as the draft code’s unworkable arbitration model is heavily skewed in favour of publishers and incentivises them to wait for arbitration instead of entering into commercial arrangements.”

Google News Showcase, through which outlets are paid a monthly fee for three years, launched with seven publishers – and 25 mastheads – on board, including Australian Community Media, Private Media, Schwartz Media, Solstice Media, and The Conversation.

While these news businesses pointed out the benefits of signing up to the program, including putting usually paywalled content in front of new readers to attract traffic and subscribers, Nine promised it would not participate, stating: “This is what monopolies do, they put an offer, in the form of Google Showcase, but not offer to negotiate. It has to be all on their terms and that is not an approach we will participate in.”

In its written responses to questions posed during two senate committee hearings and taken on notice, Google admitted that while partners are happy, it has received mixed feedback on the payment terms. It said it has been paying the launch partners 25% of their monthly fee since they signed on, “as per out obligations under the contracts”.

“Feedback on the contract terms has also been positive, with only minor ‘redlines’ on all progressed deals. Feedback on financial terms has varied. Signed partners were satisfied with the negotiated terms and disappointed to see the product go on hold as a result of the pendency of the code.

“Other news publishers have made unrealistic counter offers (and even significantly increased their counter-offers to commercially infeasible levels), after seeing a draft code with arbitration clauses heavily biased in favour of publishers.”

The launch of Google News Showcase in this market indicated a softening of what Australian Competition and Consumer Commission chair Rod Sims referred to as “brinksmanship”, but The Sydney Morning Herald reported on Monday that Google is contractually entitled to terminate the deals if the code is not modified and becomes law.

Google also addressed questions from senators which referred to the tech company’s contribution to eroding news revenues, countering that “the global trends affecting publishers started well before Google existed”.

“An investigation of Australian media industry economics by analysts at AlphaBeta found that between 2002 and 2018, newspaper revenues fell from $4.4 billion to $3.0 billion,” it said.

“However, 92% of that decline was due to the loss of classified ads, which a prominent publisher [News Corp’s Rupert Murdoch] once described as the ‘rivers of gold’ that cross-subsidised Australian newspaper journalism. Classifieds contributed $1.5 billion of newspaper revenues in 2002, but just $0.2 billion by 2018.”

Classified revenue is still flowing to News Corp and Nine, Google submitted, through and Domain

But total classified revenues grew during those 16 years, Google added, from $1.6 billion to $1.9 billion, most of it flowing to Nine’s Domain, News Corp’s, online job boards such as seek, online car classifieds services like Carsales, and marketplaces including Ebay and Gumtree.

According to Google’s submissions, has 31% of classified ad share, and Domain has a 9% share.

“So, a large portion of the classified revenue that previously funded journalism at news businesses still flows to the same media business owners, but no longer subsidises journalism in the way that it used to,” it added. “This change has not been caused by Google.”

Junkee, the ABC, Treasury, and Facebook also responded to questions taken on notice. One senator asked Facebook a question about how advertising revenue is linked to users’ data through targeted ads, in the context of recent documentaries like The Great Hack and The Social Dilemma which offer a scathing critique of Facebook’s practises and business model.

In response, the social media platform wrote: “It is not correct to suggest that this business model drives usage at all costs or is incompatible with privacy.”

Facebook has said it will remove news content from its news feed should the code go ahead.

The senate committee’s report following the recent rounds of hearings will be released today, with a vote on the bill to follow.


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