Australia's Media Bargaining Laws and the political economy of digital media

Lisbeth Latham

On February 18, Facebook initiated a block of all Australian news media content being posted to the platform and blocking all Australian accounts viewing news posts globally. The blocking, which resulted in much more than media content and pages being removed from the platform, was in response to the lower house passing the Treasury Laws Amendment (News Media and Digital Platforms Mandatory Bargaining Code) Bill 2020. This legislation is aimed at requiring Facebook and Google negotiating with Australian media companies for the presence of their content within Facebook’s timelines or in Google’s search engine. This legislation has been justified on the basis that both of the tech companies are enriching themselves off the sharing of the content produced by companies like NewsCorp and Nine Entertainment, and Seven West Media and that it is this enrichment that is responsible for the parlous state of legacy media companies. However, this justification however does not reflect reality, moreover, the panic and outrage at Facebook’s response underline the real relationship between the organisations.

Globally legacy media, that is media companies that predate the emergence of digital media technology, have been experiencing significant financial difficulties calling into question their viability - and resulting in repeated waves of rationalisation of journalists, photographers, and sub-editors and a shift to an increasing reliance on freelancers in generating content.

Historically newspapers and television stations have primarily relied on providing free or subsidised content to consumers. This allowed them to build up audiences, which they sell access to in the form of advertising - it was primarily via advertising sales that they made profits.

This model was at times disrupted via things such as cable networks which relied entirely on user subscriptions for profits rather than advertising - with the absence of advertising and the exclusive availability of specialist content being the primary selling points.

With the emergence of the internet, and subsequent innovations of the mechanisms through which content could be delivered over the web this model has broken down. This has been primarily for two reasons - the growth in media dispersed audiences, particularly via old mediums such as newspapers and broadcast TV - reducing the capacity for companies to generate income via the sale of advertising - this has also been a consequence of these companies cannibalising this income themselves by establishing their own competing platforms for advertising services that were traditionally dominated particularly by print media. Secondly, legacy media has struggled with finding effective mechanisms to monetise their online presence in order to replace their historical revenue streams - this has been due to both a reduced ability to generate advertising via website visits and efforts at trying to get consumers to pay for content being uneven - given the diversity of media, particularly news available.

In this context, the Morrison government, with the support of the major Australian media corporations proposed the Media Bargaining Code. These laws: 

• make it unlawful for digital platforms that do not pay up to provide links to Australian news;
• give big news outlets quasi-monopoly bargaining power allow deals to be made without the need for authorisation by a regulator concerned about the public interest; 
• provide a regulatory stop-gap should that not happen;

This has been justified on the basis that Facebook and Google generate income from this which is rightfully the media companies. Both Google and Facebook have argued that they don’t directly generate revenue from these mechanisms and that instead, their platforms help to generate income for Australian media companies by providing traffic to their sites which the companies can then seek to monetise that traffic in whatever way they want and are able to.

One of the key challenges for digital platform companies such as Facebook has how to translate their millions of users into revenue and thus profits. In the early period of Facebook’s existence, when it was seeking investment, it’s value was premised primarily on the notion that it would be able to be monetised, not that it was actually profitable at that time. Indeed Facebook, despite being founded in 2004, did not make a profit until 2008 and it was only with the initial public offering of shares in 2012 that it began to reach its full monetising efforts, which is also the point that some would say it began to decline as a particularly useful social media platform.

Facebook makes money out of a number of mechanisms - the primary source is the selling its users, all 1.69 billion of them in 2020, to other businesses - this can be in the form of selling user data or selling access to users via advertising and sponsored content - in 2019 it averaged US$8.52 in revenue per individual user. What gives Facebook power is that people use the platform, if that should decline then so would its power, however, like the legacy media, it might still have sufficient residual power to seek to either diversify or invest in those platforms that emerge to compete and challenge it. As social media emerged older media companies sought to invest to protect themselves. News Corporation bought MySpace for US$580 million in 2005 betting that it would be a dominant platform and that it would be able to be monetised, however, it was rapidly outstripped by Facebook and other platforms and is now little more than a punchline to jokes - which News Corp unloaded in 2011 for just US$35 million.

Facebook’s decision to block news posts from Australia essentially accepted the Morrison government demand that if the news was to be paid for, they would simply stop it from being shared. It was a mechanism by which it could act in the interests of its shareholders by removing the possibility of having to pay companies for the content shared on the platform - making the assumption that this would be more than any loss of income resulting from the blocking of content. Moreover, it was an effective exercise in demonstrating that Facebook needs Australian news content far less than Australian news content needs Facebook. This action caused outrage on two levels the first was that News agencies were outraged - despite Facebook having stopped the practice they were claiming it was making money from rather than paying for said practice - demonstrating that this was primarily about securing money rather than concerns about “theft of content”. The second was that Facebook’s action caught up far more than news, no matter how ill-defined that might be in the legislation, this included the Bureau of Meteorology, health agencies, and satire sites. While some of the anger at this action was legitimate and justified it was also at times overblown, with claims that Facebook was censoring - there was some merit to this with pages being Facebook pages deleted, but with the limiting of sharing - all of that content still existed and was accessible. The much broader blocks and bans - whether deliberate or the consequence of poor coding the algorithm - did not help Facebook’s PR - but needs to be addressed separately from the question of whether the Media Bargaining Code is a good idea.

Given that the claims that Facebook generates money from news companies’ content are thin what is the point of the legislation? It appears to be an attempt by the Australian government to redirect revenue from Facebook to struggling Australian legacy media with little real grounds and to the detriment of media diversity, as has been argued by a number of independent media outlets, with Crikey’s Bernard Keane describing the legislation as “an extortion racket at the behest of the Murdochs on the widely reviled big tech companies”. Joshua Gans, writing in The Conversation, argued that the Code is deliberately aimed at keeping small media organisations out and handing over money to large media corporations. So what position should we take regarding the laws and Facebook? First, it should be clear that these laws are bad and make very little sense, the justifications are at best ill-conceived and at worst demagogic. Second, while it is understandable that people want to hold Facebook, a large and powerful multinational that pays limited tax in any jurisdiction, accountable. However, this legislation does not do that however - it just gives money to other rich unaccountable companies that also don’t pay taxes in order to boost their profits. <

Facebook and all other companies should be made to pay taxes, and the loopholes which allow it and other multinationals to avoid tax by using tax havens as their headquarters should be closed. This money should be used to fund public services including journalism through the ABC, SBS, and community radio, even to commercial media but on terms to create jobs and journalism capacity rather than just a sop to corporate profits, however, I would not hold my breath on the Morrison government doing this. We also need to challenge the power of Facebook - the main way to do this is to just stop using it - that is how it generates power - if people stop using the platform it will wither away - just as the legacy media is currently.

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