The Great Media Balancing Act

Image credit: iStockphoto/zapatisthack

While Donald Trump rails against the “Big Tech” companies of Facebook and Google as he begrudgingly exits the White House, the Australian Government has — less sensationally — announced a world-first regulatory framework.

Under the new code, announced last week, Facebook and Google will have to pay Australian media publishers for their content.

They can either negotiate directly with the publisher and strike separate agreements or refer to the code.

If they fail to reach an agreement, there is the option of deferring to an independent arbitrator, and they also face maximum fines of AUD 10 million if they fail to comply.

The new media balance

The code, which has been watered down from earlier proposals after opposition from the tech giants, is a significant attempt to strike a medium between the big platforms benefitting from free content taken from media organizations and the undeniable power of distribution delivered by the platforms.

Part of the problem with so-called Big Tech is that it has grown faster than the regulators could keep pace.

The tech companies have grown and created a new digital economy, which created new rules and norms as it expanded, driven by the market and opportunity of any strategic plan.

Ten years ago, no one could have predicted that Facebook would also include Instagram and have a burgeoning marketplace business, while Google would own YouTube. 

Nor could many people — in the Government sector at least — have envisaged the smartphone’s rapid evolution into a device that would increasingly replace many of the laptop computer functions and become an essential appendage for billions around the world.

So here we are, in 2020, and Google and Facebook are global behemoths of data and information infiltrating almost every aspect of economic activity, including disseminating news and information (some of it fake, but that is another issue).

The conundrum

One question yet to be fully answered is the conundrum of whether they are publishers themselves or utilities in the same way as more old-fashioned telcos were in the 1990s. Remember what happened to them? They were broken up and then made increasingly irrelevant by the tech companies.

The Australian regulation leans towards the idea that the tech companies are utilities providing an infrastructure upon which services are being delivered, in this case by the news and media companies.

They are the 21st-century digital equivalents of companies providing electricity infrastructure or water and sewage. The model is similar to how small companies gain access to infrastructure in the telecoms and energy sectors.

The tech companies themselves claim to be platforms and not publishers. Part of their reasoning for this is to avoid any liability for defamation, so they can’t be surprised that the regulators would one day blow the whistle and say they can’t have it both ways.

Given this view, the news and information being carried still ethically belong to the originators. It is unfair for the platforms to profit from distributing them without paying any kind of fee.

A look at Australian online advertising trends confirms the extent to which the media companies are missing out.

Last year, for example, Google was paid AUD 4.3 billion by Australian advertisers while paying AUD 58.7 million in local tax. Facebook took in AUD 674 million from local advertisers and paid AUD 16.8 million in local tax.

When you look at these figures, it is easy to see some justification in the complaints, and this is also evidence that these companies have taken advantage of the lag in regulation.

These companies enjoy fat revenue streams, employ very few people in Australia, and create absolutely no local content themselves while claiming to be global companies as a way of minimizing tax.

It’s a playing field skewed very much in one direction which demands evening up – if only a little.

Suppose things were to continue as they are. In that case, the media companies’ content producing ability risks drying up as revenues dwindle, not to mention the extent to which local journalism would continue to wither away.

Mutual dependency

As News Corporation’s Australian chief Michael Miller says, the news organizations and the tech companies are tied in a mutual dependency cycle.

The platforms push eyeballs towards the media companies’ content, but the media content also drives eyeballs to the platforms.

So far, Google has shown more willingness to play by the new code than Facebook.

Part of this could be that YouTube has been excluded from the code after negotiation, although Facebook’s Instagram has also been taken off the table, which hasn’t softened its attitude.

The Australian “negotiate and arbitrate” model might not be perfect, but it has a realistic chance of becoming law as the Opposition Labor Party has indicated likely support.

The tech giants might whine and complain, and they have a lot of muscle to throw around. But the reality is that they have already pushed some significant compromises.

For example, some media companies, like Nine Entertainment that publishes major newspapers such as The Age and Sydney Morning Herald, are annoyed that the deals will take into account the benefit news outlets enjoy from having their content amplified by the platforms. This condition might limit their compensation.

News Corporation, which is involved in a continued assault on public broadcaster the Australian Broadcasting Corporation (ABC), doesn’t like that the ABC — a major content producer in its own right — will also receive revenue.

Then there are supporters of the ABC, who are worried that the Government will use the fact that the ABC has a new revenue stream to cut funding.

Regulation is so often a compromise, and this model is certainly that.

It might also just work and be a precedent for other countries around the world to follow.

Image credit: iStockphoto/zapatisthack