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Facebook pulls plug on ‘News Media Bargaining Code’ – what’s next?

by Kim Wingerei | Mar 5, 2024 | Comment & Analysis, Latest Posts

Meta’s Facebook has declared they’ll stop paying Australian media outlets for content when current agreements expire. It’s sparked the ire of Rupert Murdoch’s News Corp and consternation within the Government. Kim Wingerei asks what may happen next.

The announcement by Meta came as the deals done three years ago are expiring over the next few months. In a joint statement, Communications Minister Michelle Rowland and Assistant Treasurer Stephen Jones called it “a dereliction of its commitment to the sustainability of Australian news media.” Michael Miller, Executive Chairman of News Corp, Australia, thundered in an op-ed,

the shockwaves for Australia, our democracy, economy and way of life, are profound.

For Miller, at least, it may be that dire, the payments from Meta (and Google) are important to News Corp’s profits in Australia, with advertising revenue down 9% in the last quarter alone. The rest of us will probably survive.

ABC’s Managing Director, David Anderson, offered a less dramatic but more practical response, saying, “…this funding is used, amongst other things, to support […] 60 journalists.”

Unlike the ABC, though, the commercial mainstream media recipients of the funding – News Corp,  Nine Entertainment and Seven News Media – have never divulged how the revenue from Meta and Google has been used. Given their general decline in revenue and profits, there’s little to indicate it has been invested in staff.

For instance, Nine Entertainment reported 5254 employees at the end of FY2022, and 4753 at the end of FY2023. It is likely that the $50 million or more they receive annually from Meta and Google is used predominantly to prop up their net profit. According to an analyst report from Macquarie Bank, the payments represent 9% of Nine’s net profit.

Facebook refuses to renew Australian news deals

World-leading reform?

The ‘New Media Bargaining Code’ was legislated with much fanfare three years ago. Then Treasurer Josh Frydenberg called it “a world-leading reform,” while mainstream media owners salivated at the prospect of getting a share of the social media giants’ revenue. Seven Media’s Kerry Stokes enthused “the proposed news media bargaining code has resulted in us being able to conclude negotiations that result in fair payment and ensure our digital future.”

It was, however, an unusual bit of law-making. Prefaced by months of posturing from both the Government and from Meta and Google, the final legislation was – allegedly – a result of a meeting between Meta God Mark Zuckerberg and Frydenberg. Australia’s mainstream media companies had long wanted a way to force the social media giants (‘digital platforms’) to pay for the news they produced which was shared on their platforms.

But instead of mandating it, the end result was a code that would only be enforced if the giants refused to pay.

The enforcement mechanism means that the Treasurer can ‘declare’ a digital platform to be designated. If that happens, the designated company would have to negotiate payments in good faith with any media company that wanted to, under the auspices of the Australian Media and Communications Authority (ACMA). If such negotiations fail, the code has provisions for mandatory arbitration.

So far, nobody has been designated. Facebook may well be the first. Incidentally, Google entered into five-year deals, so they have a couple of years to go (except for their deal with News Corp, which was for three years and is up for renewal in the next few months.).

The story so far

The Government will argue that the code has worked because the threat of designation was enough for Meta and Google to enter into payment agreements with more than 30 media companies. Most of the agreements are commercial-in-confidence, so nobody knows for sure the total magnitude of the payments made. Estimates range from $200M to $350M a year, and it is safe to assume that the larger share of that money goes to the ‘big three’ media companies, The Guardian and the ABC.

In a review of the first 18 months of the code’s existence, Treasury declared it a ‘success’. Google had reached ‘at least’ 23 agreements, and Meta 13.

News Media and Digital Platforms Mandatory Bargaining Code

News Media and Digital Platforms Mandatory Bargaining Code deals made (Source: Treasury, Dec. 2022)

It is notable that non-commercial media outlets such as SBS and The Conversation are among those that have made deals with Google and not with Meta.

Facebook declined to negotiate with The Conversation and SBS, as well as many other quality media companies otherwise eligible under the Code.

In theory, that could have been the trigger for the Treasury to designate Meta and force them to negotiate, but it didn’t.

Protection Racket: Digital Media Code a farce as Google and Facebook not “designated”

The quality argument

According to its adherents, the Code was supposed to help protect quality journalism in the digital age and help stem the flow of misinformation from unregulated platforms.

However, the Code offered no provisions for how the money should be used. It was merely assumed that it would be used for those lofty purposes. It may have helped to employ another 60 journalists at the ABC, but other than that, there is no evidence that it has led to the mainstream media companies investing in more staff, better fact checking, quality sub-editing or more investigative journalism.

The main recommendations for improvements to the Code that the Treasury report made were to consider:

  • the extent to which digital platforms make available covered news content of Australian news businesses, and,
  • whether significant bargaining power imbalances exist between these digital platforms and Australian news businesses.

And have another look in four years’ time.

What’s next for Facebook?

The primary purpose of the Code was to “address the power imbalances between the digital platforms and the media companies.” In doing so, it ignored the fact that online media are beneficiaries of online traffic from those platforms. If someone shares the link to a news story on, say, Facebook, that provides click-throughs to the owner of the story – e.g. SMH, The AgeMWM,  etc. Why Facebook should pay for a benefit provided was (and remains) their point of contention.

The digital platforms act as distributors of stories, and all online news sites rely on them to some degree. Facebook’s argument is that posting and sharing links to stories on their pages is voluntary, so why should they pay for it? (Facebook has also discontinued its own dedicated news pages.)

It’s slightly different for Google, which trawls the news sites and use its algorithms to provide relevant search results for its billions of users. But they too could argue that they are providers of traffic to the content producers. As well as collecting advertising dollars on the way through. And that is the real issue for the likes of Nine, News Corp and Seven.

So what if Facebook is designated and forced to enter into negotiations with news sites? Who determines the value of those clicks? All the existing agreements are commercial-in-confidence and thus do not provide much of a guideline. And if Facebook just refuses on the basis that they no longer operate any ‘news pages’ itself, the Government has no real mechanism to ban their existence in Australia. Apart from the outcry it would cause from its 22 million user accounts in Australia, it would amount to a form of censorship.

Beyond that, the maximum penalty for noncompliance under the Act is 6000 penalty units, currently approx. $1.8M, barely a rounding error for a company that generates $US43 billion in cashflow annually.

According to the AFR, Meta is already preparing for the fight by bringing in an army of PR people. In a recent blog-post, it was adamant that “We will not enter into new commercial deals for traditional news content in these countries and will not offer new Facebook products specifically for news publishers in the future.”

And what about Twitter, you say? At least Elon Musk’s reaction to being designated by the Australian Government would be entertaining…

How they killed journalism | The West Report

Kim Wingerei is a businessman turned writer and commentator. He is passionate about free speech, human rights, democracy and the politics of change. Originally from Norway, Kim has lived in Australia for 30 years. Author of ‘Why Democracy is Broken – A Blueprint for Change’.

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