A week of commercial deals and government negotiations has resulted in a series of amendments to the legislation aimed at making Google and Facebook pay news publishers. The finely-tuned tool that was passed by the Australian parliament may in fact never be used, but the prospect of arbitration appears to have maneuvered the digital platforms into new agreements to fund journalism in Australia, with much attention on the smaller and regional publishers that are most at risk.

After three years of slow burn, major developments around Australia’s News Media Bargaining Code exploded over the course of a single week. 

First, Google signed deals with Australia’s three biggest commercial news organizations, including its most vocal critic, News Corp. Then Facebook switched off news in Australia. In the process, it inadvertently deactivated posts by hospitals, community groups and a host of other non-news accounts, uniting its many critics in condemnation of this “tech titan.”  

A few days later, a prominent member of the Australian Parliament was calling for Facebook to be regulated as both utility and publisher. But an apology from Facebook was then followed by an announcement that the government was prepared to amend the legislation and Facebook was prepared to restore news. Facebook’s VP Global News Partnerships, Campbell Brown, said the agreement with the Australian government “will allow us to support the publishers we choose to, including small and local publishers.”

Is the final form of the News Media Bargaining Code a fatal compromise, or is it a reasonable attempt to regulate digital platforms? And will it distribute the benefits across the media sector, as Facebook now suggests, or will it help to shore up the position of larger publishers like News Corp?

How Will the Scheme Work?

The News Media Bargaining Code is a legislative scheme that enables qualifying news media businesses to register with a government regulator and acquire certain entitlements in respect to “designated” digital platforms, including an entitlement to be given 14 days’ notice of algorithmic changes that are likely to have a significant effect on their referral traffic. 

In addition, news providers can trigger a statutory bargaining process designed to remunerate them for news content that is “made available” on the digital platform’s service. If bargaining is unsuccessful, the news provider can elect to move to arbitration. The “final offer arbitration” model—requiring the arbitrator to accept one of the two bids on offer rather than to arrive at their own assessment of appropriate remuneration—has been vigorously opposed by both Google and Facebook, but was made more acceptable to the platforms this week through the inclusion of a compulsory mediation stage.    

The scheme is built around the “significant bargaining power imbalance” between Google and Facebook on the one hand and news media organizations on the other. This, in turn, is based upon previous findings by the Australian Competition and Consumer Commission (ACCC) in its Digital Platforms Inquiry, an 18-month review that found both Google and Facebook have market power in certain markets and that for news providers, the digital platforms are unavoidable business partners.

In developing the News Media Bargaining Code, the ACCC has pointed to the indirect value of news—the way it enhances the environment offered by digital platforms and encourages engagement, interaction, and sharing of data, all of which the platforms can monetize. 

This indirect value, or at least the extent of it, is disputed by Google and Facebook, and Google has strenuously argued against the application of the scheme to Google Search. The deals announced over the last week allow both platforms to sidestep the issue of indirect value through alternative arrangements with news businesses. For the most part, the agreements with Google involve the presentation of news stories in the form of Google News Showcase, a product launched in 2020 which sees Google pay publishers for news content appearing on Google News Showcase and for allowing users to access content behind paywalls. Similarly, it appears the deals with Facebook are based on the appearance of news in the Facebook News tab. 

In the last week, it became clear that for both Google and Facebook, a successful outcome of negotiations with the Australian government depended on these side agreements providing a way of avoiding the application of the legislation altogether. This will happen if they can avoid being “designated” under the Code.

What If the Code Never Actually Kicks in?

The Code will not automatically apply to either Google or Facebook. Designating the applicable services is a separate and subsequent step taken by the relevant Australian government minister: Treasurer Josh Frydenberg. One of the amendments announced by Frydenberg on Tuesday (February 23) was that his decision to designate a platform will now take into account “whether a digital platform has made a significant contribution to the sustainability of the Australian news industry through reaching commercial agreements with news media businesses.” 

How this test will be applied remains to be seen, but it supports the view expressed by a representative from his Department, cited in the report of the Senate inquiry considering the Code that “the mandatory arbitration aspect of the Code may never be invoked, yet its presence provides the impetus for agreements to be reached.” This is despite earlier comments from a Google representative, that Google News Showcase could be designated under the Code. 

For Facebook, Facebook News seems to provide a similar way out of the direct application of the legislation, although its fleeting decision to remove news altogether showed that it had another option.

The Critical Difference Between Google and Facebook

Despite Google and Facebook now using essentially the same method to avoid the application of the legislation—separate deals with publishers—the events of the last week show an important difference between the two platforms. 

Just as Google told an Australian Senate inquiry examining the proposed legislation that it may need to leave the market if the law is passed, Microsoft stepped forward. Rarely has Bing, with its 5 percent market share, received so much public attention. Microsoft President Brad Smith issued a news release saying Microsoft supported the News Media Bargaining Code and “while other tech companies may sometimes threaten to leave Australia, Microsoft will never make such a threat.”

For Facebook, there is no Bing. And early in the morning of February 18, down went Australia’s news providers. Facebook apologized for the collateral damage it caused to non-news providers and now, following the agreement with the Australian Government, news will be restored. But the likely impact on genuine news sites was foreseeable. Just one example of the power of Facebook is provided by Junkee Media, a digital-only news outlet:

“…approximately 75 percent of Junkee Media’s traffic is driven through search and social, and almost all of that traffic comes from either Facebook or Google. A small tweak to Facebook or Google’s algorithm can have an outsized effect on our ability to drive traffic, and therefore revenue.”

A Closer Look at the Google Deals 

Whatever role Microsoft’s intervention might have served, Google has now sealed deals with a range of Australian news providers, including with the three largest commercial media providers —Seven West Media, Nine Entertainment, and News Corp. Reports on the Seven West deal indicated it was worth $30m per year, and that it also involved YouTube. The deal with Nine Entertainment was said to be worth more than $30 million annually for news on Google News Showcase. And the News Corp deal, said to be part of an international arrangement, involves “significant payments” for a three-year agreement under which News Corp content from 26 Australian publications would appear on Google News Showcase. An agreement has since been reached with Guardian Australia.

Before all this, Google said it had struck deals with smaller news providers, among them regional and digital-only news outlets, including Junkee Media

But some of the smaller players have also warned of the risk the News Media Bargaining Code presents for media diversity, arguing that the larger players are likely to strengthen their position at the expense of smaller players for whom the platform payments are unlikely to comprise a substantial and sustainable financial benefit. Bruce Ellen, President of the trade association Country Press Australia, told the Senate Inquiry on the Code:

“The legislation needs to enhance media diversity and create financial support for Australia’s small to medium regional and suburban news publishers and not result in providing significant funding, and ultimately further market share, to News Corp and Nine.” 

Diversity in a Different Disguise

In the same week that Google struck a deal with News Corp Australia, the publisher’s CEO, Michael Miller, claimed the Australian media industry is “a picture of diversity, not of monopoly.”

This is not the same picture seen by Country Press Australia or by other smaller and regional publishers. The desire to be seen as supporting this sector was also clearly a key concern on the part of Facebook’s Campbell Brown. Without knowing the nature of the deals Facebook will make with publishers, or much of the detail of the deals Google has made, it’s hard to gauge their likely effects on the financial sustainability of journalism and on media diversity. But the claim from Miller that Australia is a “picture of diversity” is hard to accept. 

Across Australia’s eight state and territory capital cities, there are 10 metropolitan daily newspapers and two national dailies. Sydney and Melbourne each have two daily newspapers; the other capital cities have one. Eleven of the 12 newspapers are owned by the big three, six of these by News Corp. News Corp also controls Australia’s only pay TV provider, Foxtel, which in turn owns the SVoD service Binge. Nine Entertainment and Seven West also own two of the three metropolitan TV networks, and Nine also owns SVoD Stan as well as some leading talkback radio stations. 

Australia’s established media companies make up eight of the top 10 digital news sites (the others being international news outlets, The Daily Mail, and The Guardian). At a local level, the Bundaberg Regional Council gave the following account in a written submission to the Senate Inquiry on the Code:

“In the Bundaberg Region over the past three years, two newspapers have closed (Guardian and NewsMail), the WIN TV local news service has ceased and the remaining TV news services (Seven and Nine) have shed half their staff. Neither of the two local commercial radio stations have journalists based in the Bundaberg Region.”

Bundaberg Council has itself stepped into this void and created a “community news service” called Bundaberg Now. This departure from independent professional journalism merits separate consideration, but it underlines the problems in funding regional journalism and of prioritizing the interests of larger providers over smaller operators. The need for diversity is not answered by the presence in the Australian market of local digital outlets of international news organizations. 

Policy Adjustments

Recognizing the need to act to support smaller news providers does not mean the deals Google has made with News, Nine, and Seven West shouldn’t have happened. We need these larger commercial news providers and it’s right to say that Google and Facebook should contribute to the sustainability of the media environment in which they operate. 

Was a mandatory bargaining model enforced by competition law the right way to go about that? There are differing views. Australia chose not to use copyright law or media regulation, and it seems the outcome of using competition law will be a pragmatic response under which Google and Facebook license the use of some content, meaning the mandatory bargaining framework isn’t used. While it’s possible that the platforms, particularly Google, may have reached agreements with publishers in the absence of the News Media Bargaining Code, those agreements are almost certainly better and more timely than they would have been in the absence of the Code—and it’s quite possible than some publishers would not have seen a deal without it. 

For at least some news organizations, this is a good outcome: it keeps Google and Facebook in the market and sees them contributing to the funding of journalism. But one report has suggested 90 percent of the revenue from the new agreements will go to the largest news organizations, and we’ve yet to see whether the deals made with smaller players will be sufficient to address the additional challenges presented by smaller and regional markets, Besides this, the smallest news outlets—e.g., digital-only starts-ups—have always been excluded from the scheme. 

In addition, the Code doesn’t solve the underlying problem of the failure of journalism’s advertising-funded business model. It does, however, give more time to work on that problem, and to develop alternative approaches like tax rebates offered to consumers or tax offsets offered to news producers. Our government has, in the past, steered away from tax incentives, but it has made some grants for public interest newsgathering and has recently floated the idea of kick-starting a fund for public interest journalism by injecting earnings from the sale of radiofrequency spectrum reclaimed from commercial TV. 

So for Australia, the best approach from here on would be to accept the Code we have and to keep working on the parallel problems for smaller and regional publishers. More broadly, this scheme might not be the right solution for other jurisdictions, but it does represent another step in international efforts to bring digital platforms into the regulatory framework. 

Disclaimer: Derek Wilding receives research grant funding from the Australian Research Council. The Centre for Media Transition has received project funding from industry sources including News Corp Australia, Facebook Australia, Google News Initiative, and First Draft News.