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We chatted to Google about why they believe the new Code isn’t the answer to media publishers’ declining income woes.

Last Friday, The Senate Economics Legislation Committee released their long-awaited report on the Australian government’s News Media Bargaining Code, giving it the green light and recommending no changes – despite Google and Facebook’s strong and vocal protests over the past month.

The Code, which will force Google and Facebook to pay news outlets for displaying links to Australian news content within their platforms, was introduced last December and is a world first. It is set to be debated in Parliament over the next two weeks, with an approval expected to pass unchallenged after Labor threw their support behind the proposed Code on Tuesday.

The report dismissed the argument that journalism revenue losses were simply the result of being outpaced by new technology, noting that informed and researched news is essential to the increasingly concerning battle against misinformation online.

“The committee agrees that public interest journalism is more than just an ordinary consumer product that has been undermined or ‘disrupted’ by new technology,” says the report. “Rather, public interest journalism is a cornerstone of democracy and its survival is imperative in a society increasingly vulnerable to misleading information that can so easily be spread on the internet.”

Google, on the other hand, have repeatedly insisted that the Code is unworkable, threatening to withdraw from Australia if it is passed in its current form, and declaring that the world-first legislation is “breaking Google Search and the fundamental way the web works.” In a statement from a Google spokesperson provided to Rolling Stone last week, they said:

“Withdrawal is our worst case scenario if the Code remains unworkable and the last thing we want to have happen. We’re willing to pay publishers for value, and we don’t object to a mandatory News Media Bargaining Code – we have proposed a solution that can work under the Code… This involves News Showcase which can operate under the Code and pay publishers – it’s currently doing just that for 450 publications across a dozen countries.”

“We remain committed to reaching a solution for a workable Code, as we have been throughout this whole process.”

Meanwhile, after many months of threats that it may remove Australian news content from its platform if it is forced to adhere to the Code, it seems Facebook have pulled the trigger – today announcing via the platform in a pop up informing users that “the way you share news is changing.”

“In response to the Australian government legislation,” the pop up shown on Facebook apps this morning said, “Facebook restricts the posting of news links and all posts from news Pages in Australia. Globally the posting and sharing of news links from Australian publications is restricted.”

The announcement linked to a landing page explaining their reasoning:

“This is not the outcome we wanted and it’s a step we take reluctantly. The proposed law fundamentally misunderstands the relationship between our platform and publishers who use it to share news content… publishers willingly choose to post news on Facebook, as it allows them to sell more subscriptions, grow their audiences and increase advertising revenue.”

“Last year Facebook generated approximately 5.1 billion free referrals to Australian publishers worth an estimated AU$407 million. Despite some of these discussions, Facebook does not steal, take or copy news content… We hope that in the future the Australian Government will recognise the value we already provide and help us to strengthen, rather than limit, our partnerships with publishers.”

The reality for both sides of this argument, however, is somewhere in the middle. While tech giants like Facebook and Google undoubtedly deliver increased views to news media companies through discovery, they have also gobbled up a huge percentage of advertising revenue over the last decade.

According to the Guardian, “for every $100 of online advertising spend, $53 goes to Google, $28 to Facebook and $19 to everyone else.” That’s a whopping total of 81% of all online ad revenue eroded by the very people refusing to share a part of the revenue built upon content that isn’t their own.

Regardless of which side you’re on, there is no doubt that if this Code is passed into legislation within the next fortnight as expected, then Google is right – it will fundamentally change the way Big Tech does business.

So, is this the start of a new internet era?

The Argument for The News Media Bargaining Code

Most of the arguments for the News Media Bargaining Code revolve around the idea that news headlines, snippets and images pulled into platforms like Facebook, or Google’s search results are not currently covered by copyright – enabling both tech companies to use this content without payment, and generate income surrounding the content via display or search advertising.

But should news snippets, or headlines, be included in copyright law instead of the proposed Code? And even if they were, would that solve the problem?

Let’s take a look at movies and music. Pirating was at its peak during the ‘90s and ‘00s as the advent of the internet allowed people to share illegal, copyrighted content via free download sites like Limewire. Now we have paid services like Netflix, Disney Plus, Spotify, and Apple Music, which provide a similar service whilst still paying creators. (Look, it’s not as profitable for creators as it used to be, but at least they’re drawing revenue in some form.)

Some people would argue that, in essence, Google and Facebook are acting like a big, legitimised Limewire. They’re providing others’ content for free, and wrapping it in ads that generate billions of dollars of revenue. Ads that would have previously been hosted on news media sites.

Sure, media companies could pull their sites from Google or Facebook. But let’s be honest here – Google holds an overwhelmingly large share of search in Australia. This means that media companies are left wielding little bargaining power over tech giants like Google and Facebook, whose huge market dominance means that they create the rules. The media is between a rock and a hard place here; pull their content to make a point, and they get less money. Continue as Google and Facebook currently demand, and they also get less money.

Claims from Big Tech that Australia’s Media Bargaining Code are inherently contradictory to the idea of the ‘free internet’ are conveniently missing the fact that the very ‘free internet’ they speak of is making the tech giants a lot of money. The argument of free and unimpeded access to all internet content also directly contravenes their own threats to remove news from Australian pages if they are made to adhere to the Code.

Beyond that, they both take advantage of targeted data from users who interact with news articles – data that directly benefits both Facebook and Google, making them even more dominant in the advertising space.

So why not just pursue changes to copyright legislation, so that it includes snippets of news, like in Germany or France? Well, it didn’t work out very well for German publishers. After the law was passed, Google refused to engage with the copyright collective representing publishers. To date, publishers in Germany have recovered little income from the legislation, and legal challenges are ongoing.

Similarly in France, Google attempted to avoid paying media companies for over a year, after copyright law was adjusted in 2019. This week, agreements were finalised in France for Google to pay a group of publishers up to a reported $98 million over three years, under a series of individual digital copyright deals that independent publishers say has left them in the dark.

This is not a new battle for the search giant. In Spain back in 2014, Google removed Spanish News sites from search worldwide when the courts ruled in favour of news companies.

Then there are the public optics of ongoing legal battles, and terse negotiations. Despite vocal opponents of the code within the tech industry, a recent survey showed 60% of Aussies supported regulation of Google and Facebook by the government. Meanwhile, Google’s attempts to sway public opinion with its recent pop up, leading to a video by Mel Silva, Managing Director for Google Australia, have largely fallen on deaf ears – in part due to the comparatively small amount of tax Google pays in Australia.

In 2019, it paid the public purse only around $100 million in tax from $4.8 billion in revenue. If my billionaire maths serves me correctly, that’s a tax rate of only 2%. This is mainly because of Google’s long-standing assertion that it doesn’t ‘really’ do business in Australia – booking the lion’s share of its ad revenue through the Singapore office, and declaring the Sydney HQ as an ‘agent’. Meanwhile, companies on similar income rates like BHP Iron Ore ($4.7 billion total income, $867 million tax paid) delivered almost eight times that into the public coffers.

It’s hard to imagine the public being sympathetic to an international conglomerate who is using tricky logic to justify a reduction in paying tax. However, it’s also worth noting that News Corp – perhaps the most vocal supporter of the News Media Bargaining Code – paid zero in tax that same year – so $100 million less than Google.

For the record, Nine – another vocal supporter of the legislation – paid $47 million on a $2.5 billion total income, about the same rate as Google. Seven West Media clocked $23 million tax on $1.8 billion total income (1.3%), Fairfax paid $1.6 million on $449 million in total income (0.35%), while Ten Network Holdings declared $337 million total income and paid zero tax also.

The Argument Against the News Media Bargaining Code

Allegations of tax chicanery aside, one of the main arguments against the Code emerging amongst the public is that media companies can make their own money via paywalls and advertising on their sites – which is very true. The problem is that this money is being increasingly sucked up by advertising giants like Google and Facebook, and the public have proven to dislike paywalls.

This has resulted in endless media closures and rapid shrinking of the media market, which in turn creates a non-competitive media environment. In the same way that the government steps in to regulate monopolies existing within other industries, it is trying to do the same here – so that we can make it financially viable for a rich tapestry of media companies to exist.

Google’s absorption of the traditional news media revenue stream is all-consuming. Arguments that this is simply a symptom of technological advancement are incorrect. One argument this writer saw on LinkedIn this week was that it is no different to other tech businesses, like Uber swallowing taxi revenues – that news companies must accept and innovate.

However, if one were to truly compare using this analogy, it would be the equivalent of Uber stealing a taxi driver’s keys, picking up a passenger, taking their payment, then returning the car to the taxi driver. Google is not providing their own news content in competition with news sites, but rather using news sites’ own content to sell Google’s ads – in direct competition with the news sites themselves.

The other most popular argument against the Code comes in the form of anti-big-media sentiment, in particular the response to News Corp and Nine’s assertion that they should be paid between $600 million and $1 billion as part of their agreement with the tech companies.

It’s true that smaller media companies are at a disadvantage with the legislation in its current form. Broadsheet Media have argued that because media companies like themselves don’t produce primarily news (as defined by the code as an eligible recipient of payment), their news content wouldn’t be remunerated, leaving them exposed.

“A significantly dire potential is that a major media organisation could launch a stand-alone direct competitor to a small publisher, such as Broadsheet, which would be, in part, financed via remuneration for the competitive Covered News Content,” Broadsheet Media says.

“A competing publication with support from the Code will threaten both audience and revenue of the independent publishers not covered by the Code. Such an outcome would likely have a material negative financial impact on competing small independent publishers, potentially threatening their viability.”

Meanwhile, large media companies like News Corp – who have been very vocal in supporting the legislation – would be covered by the code as they produce what the code defines as primarily news. (Initially, public broadcasters the ABC and SBS were not included in the Code, but after pressure from the Labor and the Greens, they were added to a final version.

This narrow definition within the Code itself could encourage the very thing that the legislation seeks to avoid: monopolies. Here, large players become even larger, and push out the smaller media companies from potential negotiations who don’t fall under the limited umbrella definition. It goes against the very idea of a free media environment that allows all publishers to have equal opportunity.

It is true, also, that even Big Tech deserves equal opportunity – and it has certainly not escaped this reporter that the Code only seems to address the issue of payment in regards to two companies – namely Google and Facebook. (However, there is scope for other platforms to be added in the future if there is “sufficient evidence to establish that they give rise to a bargaining power imbalance.”

Whilst that makes sense in the current environment, where Google and Facebook command the lion’s share of market dominance, what happens if Google pulls out of Australia? Aren’t we just back at square one with Bing, or some other search engine? Wouldn’t it make sense to include a more generic definition of who should adhere to this code, rather than singling out two specific corporations?

Meanwhile, Google argues their issue isn’t the Code itself, but rather points to sections it believes is unfair. One of those is the final offer arbitration method, a solution that the Code offers in the case of neither party coming to an agreement, where a third party will deliver a ‘final offer’ that both must agree to.

Last week’s Senate Economics Legislation Committee report also acknowledged that this could become an issue, despite their recommendation of no changes to the current Code, saying: “The committee accepts that there remains the possibility that not all risks have been taken into account, and that further refinement may be needed to the arbitration mechanism and other parts of the code so that they work in an optimum manner.”

Instead, Google would prefer to pursue individual agreements under its Google News Showcase product – and has, in fact, been inking deals with various media companies in the hope that its actions will sway the government against making the Code law. The government itself has hinted that it would consider amendments to the Code if such agreements showed progress.

Showcase allows consumers to read behind-the-paywall content hosted on the Google News app in exchange for agreed-upon payments to publishers. So far Google has signed a few smaller media companies to the code, however they seem to be stepping up their game as the Code approval looms. The most recent announcement has seen the first major news company, Seven West Media, nab a deal worth $30 million per year, just this week.

However if their hope was to lure mega-media company Nine/Fairfax, they may be waiting a while. “This is what monopolies do, they put an offer, in the form of Google Showcase, but not offer to negotiate. It has to be all on their terms and that is not an approach we will participate in. We support the legislation the government is proposing as the best way to secure a fair payment for our content,” a Nine Entertainment spokesperson said.

Google refuted to Rolling Stone the idea that they are ‘blackmailing’ Australian publishers , or that they have been purposely removing certain news outlets from search results, or that their threat to withdraw from Australia goes against the very idea of a free, accessible search engine for all.

Speaking to Rolling Stone last week, a Google spokesperson said, in response: “The small, short-term experiments we are currently running are part of our preparations for the Code, which among other things, may require us to demonstrate the impact of news on our platform. It is demonstrably incorrect to claim this has prevented Australians from reaching news sources.”

“Google helps users discover news stories (and recipes, fashion, product reviews, sports, etc), which ultimately helps news publishers grow their audiences, but we are far from the only way Australians get their news.”

Meanwhile, Facebook launched their newest product, Facebook News, in the UK last month after agreements last year confirmed that the social media network would begin paying news media for their content. The deal is reportedly set to pay publishers millions, in an agreement that experts suggest is a bid to avoid government regulation similar to Australia’s News Media Bargaining Code.

But while Facebook argues that the Code doesn’t give adequate weight to how much traffic they provide to news media – and the value of that traffic – Facebook also hasn’t acknowledged how much value news media provide back, in the form of intricate user data that allows them to sell hyper-targeted ads based on political preferences, interests, and more.

Breaking the Internet

Google says the Code in its current form will fundamentally break the way the internet works, citing recent criticisms of the Code from Tim Berners-Lee, the inventor of the world wide web and Scott Farquhar, co-founder of Australian tech company Atlassian.

So are there wide-reaching consequences for legislating payment in exchange for all links, anywhere, internet-wide? Is it possible that this Code could be used as a precedence to pursue payment for any links delivered within search and social platforms, outside of news media, and potentially extend into broader copyright law? It’s a long bow, but it could happen. However one quick cut to the current News Media Bargaining Code could remove the reference to links (but not snippets and images) for example, and this would not be such an issue.

What is more likely is that Google withdraws from Australia, following Facebook’s lead, and all we’re left with is an echo chamber of social media drivel. Now that news media has been removed, what’s left in our Facebook feeds? To be honest, this is much more concerning.

It’s a very real possibility that today’s removal of legitimate news media from local Facebook feeds could aid in the rise of misinformation delivered with increasing rapidity from unofficial news sources and questionable influencers.

Anyone baulking at the seriousness of such an echo chamber need only look back to the social media-fuelled Trump victory in 2016, and how it lead, four years later, to a storm on the Capitol – allegedly planned on Facebook after Trump and his followers perpetuated the false narrative that Biden’s win was fraudulent.

Facebook’s retreat may even drive more people to other social media alternatives – in particular, the growing right-wing voices who have flocked to Parler, a social network purported to be “the last bastion of free speech” that has popped up online again after Amazon removed the site from their hosting platform. The problem here is that free speech is an entirely different thing to respecting dangerous inaccuracies. At least Facebook is attempting to curb the spread of misinformation.

In the end, if the News Media Bargaining Code is passed in its current form, and Google follows Facebook with their threats to withdraw from the Australian market, there is no doubt this will create a ripple effect across the globe.

Has Facebook done Australian media a favour, driving consumers direct to site, thereby increasing their interaction with news media outside of the platform? (There’s no doubt that Facebook will have lost a lot of interaction, data and active user time today, as news readers and avid commenters flock to news sites themselves to express their opinions on whatever op-ed is flaring up online today.)

Will this usher in a new internet era, heralding the end of Big Tech’s dominance over the world wide web? Or will the Australian government back down in this latest game of billionaire chicken?

I suppose in two weeks we’ll see.

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