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    Catching Up on the Big Tech vs. News Media Showdown in Australia

    Ali Gordon | Industry Analysis | 27th May 2021
    Catching Up on the Big Tech vs. News Media Showdown in Australia

    Among the dozens of dramatic reports that have crowded the opening act of 2021 came an unprecedented move by big tech against news media in Australia: Facebook made good on prior threats to ban users from sharing news on the platform if the Australian government advanced legislation mandating they pay for journalism content. 

    Not only could users not share news, but no one in the country could even view or read news, including numerous COVID-19 reports and public health updates. The timeline of events marked a pivotal moment in the short history of digital journalism.

    What Triggered Big Tech?

    To communities outside Australia, the nationwide blackout may have registered as little more than a headline in morning or evening news feeds, but for Facebook, it was a full scale protest. While Facebook was the only platform in the country to ban news content from local and international media, they were not the only big tech company to be triggered by the situation down under. Google also threatened to pull its search engine and services from the country entirely, and it spent the days leading up to the legislation burying Australian news sites in search engine results.

    The tension came in response to a new law allegedly intended to balance the power between big tech and mega media corporations. While it would primarily impact Google and Facebook at this point, it was designed to be able to extend to other digital platforms if needed in the future. Microsoft agreed with the legislation - no doubt for the potential competitive benefits for its own search engine if Google exited the country in revolt. John Porter explained the legislation for The Verge

    The News Media Bargaining Code requires Facebook and Google to pay a negotiated fee to link to or use news content, and includes a mandatory arbitration process if an agreement on fees can’t be reached. It also asks tech companies to give advance notice to news organizations about upcoming algorithm changes. It’s the threat of arbitration that both Google and Facebook had hoped to avoid, a process whereby an independent body decides the value of news content in news feeds and search results...[The Australian Competition and Consumer Commission] argues the law is necessary after its 18-month inquiry found tech giants were taking a disproportionately large share of online advertising revenue, which it believes comes at the expense of media organizations.”

    The concern was, in part, that significant losses for both tech companies would be incurred by an arbitration in which they would stand at a disadvantage to large media corporations. 

     

    Two Peas in Different Pods: Big Tech Relationships with News Media

    While Google ultimately signed multi-million dollar deals with news organizations ahead of the legislation passing, Facebook did not. Google had already pledged $1 billion to news publishers globally over the next three years, while profiting over $4 billion from Australian advertising markets alone in the year it made this pledge. However, even after the new deal in Australia, economists projected the amounts for media corporations in the country were still far less than the $600 million per year they had hoped to net from Google. 

    Facebook, on the other hand, went full on offensive, just before the legislation passed. The company argued the proposed law would incorrectly conflate the relationship between news media corporations and Google with their own relationships with these corporations. 

    Specifically, Facebook did not see itself benefiting from news content in the same ways Google has, and, therefore, found the proposed law and arbitration mandate to undermine the relationship. The social media giant argued their relationship benefits publishers in ways that may not be true in news media relationships with Google: 

    “This discussion has focused on US technology companies and how they benefit from news content on their services…[But] our platforms have fundamentally different relationships with news. Google Search is inextricably intertwined with news and publishers do not voluntarily provide their content. On the other hand, publishers willingly choose to post news on Facebook, as it allows them to sell more subscriptions, grow their audiences and increase advertising revenue…

    [The] value exchange between Facebook and publishers runs in favor of the publishers...Last year Facebook generated approximately 5.1 billion free referrals to Australian publishers worth an estimated AU$407 million. For Facebook, the business gain from news is minimal. News makes up less than 4% of the content people see in their News Feed.”

    Facebook’s protest worked, and the company ultimately negotiated legislation amendments and agreed to a 3-year deal with Australia’s largest news conglomerate. Like Google, the company has also committed $1 Billion to news corporations around the world to be paid over the next three years.

     

    A Test Case for Journalism and Technology Policy Worldwide

    The Australian case signifies substantive changes ahead for journalism markets worldwide, especially as news consolidation accelerates and individual digital subscriptions revenue benefiting technology, news media, and advertising companies grows.

    Although the payments may not be as large as news media organizations originally wanted, the total value of these deals have increased global value and benefitted both big tech and large media corporations. The role of governments in enforcing digital journalism laws that pass - and the role of news media organizations and technology platforms in changing those laws to protect brand revenue - is yet to be seen. The growing value of first party data for a variety of companies involved, including publishers, will also likely impact these relationships and policies over time. 

    Tensions initially boiled over in Australia ahead of the rest of the world, but similar laws and negotiations are being discussed or are currently under review in the United States (see our discussion of the Maryland Digital Advertising Tax) and European Union. This test case foreshadows the future of relationships and digital policy for news media conglomerates and technology platforms worldwide.