By Gavin Ellis

There is an emerging dichotomy in the attitude of governments on either side of the Tasman toward social media companies. New Zealand treats these transnationals with kid gloves while Australia is pulling on the boxing gloves.

The contrast is intriguing, given that this country has good cause to regard social media as pariah in the aftermath of the deplorable role they played in the 2019 mosque attacks.  However, the Christchurch call initiative that grew out of the tragedy was a model of decorum and diplomacy. Calls this year for government to redirect its social media spending to local media companies reeling from economic effects of the COVID-19 lockdown fell on deaf ears and politicians continue to see social media as a preferred means of direct engagement with the electorate. All this is in spite of the fact the transnationals have decimated local media and pocket the bulk of New Zealand’s annual billion-dollar digital advertising revenue while paying minimal tax on it.

Australia, on the other hand, has served notice on the likes of Facebook and Google that the free ride they have had in that country is over. The Morrison government, through the Australian Competition and Consumer Commission (the equivalent of the New Zealand Commerce Commission), has signalled its determination to level the playing field that has previously seen platforms such as Google and Facebook paying – at best – lip service to Australian media company calls for compensation for news items appropriated by social media. A draft mandatory code is due to be released for public consultation before the end of July. It aims to address what has been perceived to be a power imbalance between Australia’s media companies and the social media conglomerates, who have been unable to agree on payment for content generated by the news organisations.

The ACCC initially called for a voluntary code after an 18-month enquiry into the activities of the social media platforms in Australia found they had significantly disrupted what ACCC chairman Rod Sims described as the “media-journalism business model”. Its 600-page final report[i] left no doubt that the social media platforms had so dominated the Australian market that they needed to be controlled: “Policy makers should consider the extent to which important decisions about the dissemination of information, the collection of personal data and business’ interaction with consumers online, should be left to the discretion of certain large digital platforms, given their substantial market power, pervasiveness and inherent profit motive (including their need for very strong profit growth).”

The report noted a significant imbalance in the platforms’ relationship with news media organisations that had been unable to individually negotiate terms over the use of their content. That imbalance has been responsible for the foundering of the ACCC’s voluntary code governing such things as revenue sharing. Federal treasurer Josh Frydenberg said in April that, on the fundamental issue of payment for content, there was no meaningful progress and, in the words of the ACCC, ‘no expectation of any even being made’. This led the government to move from a voluntary to a mandatory code and the prospect of large fines for non-compliance.

The ACCC has now released a 59-point concept paper that includes questions on how ‘news’ should be defined to determine the type of content covered by the code. It also asks how the system might “ensure that both news media business and digital platforms can easily and objectively identify the content subject to the code”. The feedback will help to inform the code, but the Australian government appears to be in no mood to soften its approach or determination to reach a swift conclusion. It expects the mandatory code to be in place by the end of this year.

New Zealand media would benefit significantly from this country joining the Australian initiative. A joint initiative would have a greater chance of success than any attempt by this small country to challenge the multinationals alone. The size of those corporations can be gauged by comparing the combined revenue of Facebook and Google – $NZ188 billion last year – with New Zealand’s gross national product of just over $NZ200 billion.

The New Zealand government has not dismissed the Australian initiative but nor has it displayed great enthusiasm. A spokesman for Communications Minister Kris Faafoi was reported as saying the Australian solution was being considered as part of short and long term strategies. He added: “This is probably more of the longer-term approach. But it is fair to say that it is part of what’s being discussed as part of a range of options.”[ii] The comment suggests neither enthusiasm nor urgency.

The Australian initiative had its beginning well before the COVID-19 pandemic but the severe effect it has had on commercial media cashflows has brought a sense of urgency accentuated by the powerful media lobby led by Rupert Murdoch’s News Corp. That group’s Australian executive chairman, Michael Miller has made repeated calls for social media platforms to pay for content. In April he told Guardian Australia that, although COVID-19 had not created the financial crisis facing the media, it had “brought it to a head”. He added: “The unfairness of the digital playing field, along with Australia’s draconian tangle of legislation and regulation means local companies can’t compete with international platforms.”[iii]

A mandatory contribution for news media content on social media platforms would inject millions of dollars into the media industry. Online advertising revenue in Australia last year was $A9.33 billion and Google alone reported revenue of $A4.3 billion. The chairman of Nine Entertainment (owner of the former Fairfax newspapers), Peter Costello, believes media revenue from the platforms under a mandatory code could be worth $A600 million a year, while Miller has said it could be as high as $A1 billion.

New Zealand digital advertising revenue amounted to $NZ1.26 billion in 2019, according to the Interactive Advertising Bureau, with search engines and social media accounting for more than 70 per cent of that total. On the same basis as the Australian media calculations, application of the code in this country could generate between $NZ80 million and $NZ126 million. A fund of that magnitude would fundamentally alter the fortunes of journalism in this country. The impact would be diminished if part – perhaps a large part – of the fund was used to replace current expenditure on state-owned media and NZ On Air. That could be seen as an attractive proposition by a government wrestling with massive COVID-19 debt.

However, the windfall cannot be taken for granted on either side of the Tasman. Guardian Australia, when it reported the federal government’s latest initiative, noted that there had been unsuccessful attempts to make Google and Facebook pay for news media content in Europe. Spain made it compulsory for digital platforms to pay news publishers for content but Google chose to simply withdraw Google News from that country – though not news media search results that were not covered by the ruling. The European Union made the first few sentences and the headlines of news media content subject to copyright law and France was the first to reflect that in national law. Google threatened to stop displaying French news and simply switched to showing headlines and links only, not text snippets – and refused to pay.[iv]

The success of the Australian move will hinge on how watertight it can make the wording of the code. It must be prepared for the social media companies to fight hard to avoid what they will see as a disastrous precedent.

Facebook and Google have long argued that they have no liability for payment. They base this argument on a number of points.

Firstly, they see themselves as common carriers in the same category as telecommunications companies that simply provide the means by which people communicate and have no responsibility for the content of those communications.

Secondly, they characterise news content as public goods. Frank and Bernanke[v]  define public goods as goods and services that are, in varying degrees, nonrival and nonexcludable. A nonrival good is one whose consumption by one person does not diminish its availability to others. A cheeseburger cannot be a nonrival good but the protection you receive from the police will be. A good is nonexcludable if it is difficult to exclude non-payers from consuming it. And Frank and Bernanke instance free-to-air broadcasts as an example. Social media see the presence of news content on publicly-accessible digital platforms as a licence to appropriate it as ‘public goods’. And, in practical terms, there is nothing to stop them. Even paywalled content can produce accessible headlines and snippets

Thirdly, the platforms point to the fact that news media themselves have a heavy presence on social media platforms which they use to extend their reach. Therefore, there is a quid pro quo.

Finally, they argue that social media link back to content on the media’s own platforms.

Media companies contend these arguments are flawed and some rely on definitions which, like the content on social media, have been conveniently appropriated from other (often pre-digital) environments.

Common carrier status, according to McQuail[vi], relates to communication services (such as mail, telephone and telegraph) that are purely for distribution and there is only very marginal regulation of content for that reason. Media companies point out that social media operate business models that attach commercial value to the content they carry on behalf of users and they are able to exercise some control – to their financial advantage – over the mix of news people see each day.

The definition that economists give to public goods is based in part on the fact that they are nonexcludable if it is difficult to charge for them. Media companies’ own use of technology convinces them that the sophisticated use of algorithms and analytics by social media platforms can, indeed, calculate charges for appropriated content, if they have the will to do so.

News media may appear to have weakened their own argument by ‘sleeping with the enemy’ but, paradoxically, they are simply trying to follow the content that has been taken from them. And their use of social media platforms represents only a portion of the benefit those platforms derive from such content. Many users venture no further than the ‘snippet’ attached to a headline, but that snippet can attract programmatic advertising that benefits the platform – with no click-through to the creator of the original material.

In a blog posted to Google’s website, its Australian managing director Melanie Silva compared news articles showing up in Google searches to newsagents simply displaying billboards of newspaper headlines.[vii] This drew an immediate response from the CEO of NewsMediaWorks (the news publishers’ industry body), Peter Miller: “Google contends that news publishers have long paid newsagents – traditional retailers – to distribute newspapers, acknowledging the value of acquiring audiences. Google also contends that it sends readers to newspaper sites for free. This really misses the point. While both newsagents and Google have built their businesses off the back of news, only newsagents pay for the publications and content they distribute.”[viii]

Before the end of the year we should know which view will prevail. Perhaps we will also know whether New Zealand has joined an Australian initiative that it could not succeed in implementing on its own.

Footnotes

[i] ACCC Digital Platforms Inquiry Final Report June 2019 Accessed at https://www.accc.gov.au/system/files/Digital%20platforms%20inquiry%20-%20final%20report.pdf

[ii] https://www.stuff.co.nz/national/121126351/government-mulls-australian-plan-to-make-big-tech-like-google-and-facebook-pay-for-journalism)

[iii] https://www.theguardian.com/media/2020/apr/02/media-deal-with-facebook-and-google-more-urgent-with-coronavirus-taking-jobs-says-regulator).

[iv] https://www.theguardian.com/media/2020/apr/21/google-and-facebook-need-news-and-the-media-needs-them-but-which-need-is-the-greater

[v] Frank, Robert & Ben Bernanke, Principles of Economics. Boston, McGraw-Hill Irwin 2001 p. 378.

[vi] McQuail, Denis, McQuail’s Mass Communication Theory. London, Sage 2010 p. 236-7.

[vii] https://australia.googleblog.com/2020/05/responding-to-revised-publisher-code.html

[viii] https://www.theaustralian.com.au/business/media/google-no-newsagent-says-newsmediaworks-peter-miller/news-story/f5ce44b20d138e7f8b2d4dff891d3af8


Dr. Gavin Ellis is a media researcher and commentator. His work appears on www.whiteknightnews.com.

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