Australia's bad bargain with platforms

Today let’s talk about a conflict threatening to accelerate the splintering of the internet in profound new ways: Australia’s plan to force Google and Facebook to pay news publishers millions of dollars for the right to display links to news content on their apps and websites. The News Media Bargaining Code has been in development for more than a year now, and after various changes it is finally expected to be considered in Parliament this week.

If the code goes into effect, Facebook says it might stop allowing Australian users to post links at all. Google says it might pull out of Australia altogether. And while both companies are negotiating furiously to avoid such an outcome — and apparently making some progress — the episode has provided a template for other countries looking to reset the balance of power between platforms and parliaments.

Daniel Van Boom and Richard Nieva have a thorough, even-handed look at the state of affairs in CNET:

Entering the House of Representatives last December, the News Media Bargaining Code bill was designed by Australia's competition watchdog, the ACCC, to force Google and Facebook to negotiate with publishers. It would require Google and local publishers to reach an agreement within three months of becoming law, or a government-appointed panel will decide the compensation. It also would require that Google inform publishers of changes to its algorithm before they take effect. […]

The clash between Google and Canberra will ripple far away from Australia's pristine beaches. Countries around the world are reckoning with the havoc Google, Facebook and other tech companies have wreaked on their media landscapes. A Canadian minister has backed Australia's proposed Media Code and called for Google and Facebook to pay publishers in his country. Alex Saliba, a member of European Parliament, told CNET that he wants to include similar measures in upcoming EU legislation. Competitors are watching too. Microsoft, Google's chief search engine rival, has urged similar regulations in the US. 

(For a more critical take from last August, read Ben Thompson.)

My good-faith effort to represent the publishers’ case goes something like this. For years now, Google and Facebook have benefited from being able to package and display links to journalism from publishers around the world. At the same time, the companies built a duopoly in digital advertising, bleeding publishers of revenue and leading to tens of thousands of journalism layoffs around the world. The Australian bill seeks to restore balance to this equation by forcing the platforms to compensate publishers directly for their work.

There are good reasons to want all sides to come to an agreement here. Google and Facebook both benefit from having high-quality news sources on their platforms. Journalism makes Google more useful as a search engine, and Facebook as a place to get updates on current events and discuss them with friends. The more high-quality news is on the platform, and the more that the platforms promote it, the less room there is for misinformation, conspiracy theories, and every other harm we talk about it around here.

For years now, my preference has been to see the platforms pay publishers something like the carriage fees that telecoms pay for the right to host cable channels. These fees would be voluntary but substantial, and could potentially come with rights to lightly modify or otherwise repackage the content. Platforms have gradually come around to this way of thinking: Facebook launched a News tab in 2019, for which it pays publishers for the right to include their stories; and last year Google announced News Showcase, a similar effort to which it has committed $1 billion.

The problem with these arrangements, from Australia’s perspective, is that they rely on the platforms’ goodwill rather than the force of law. And so the Australian Competition & Consumer Commission has proposed an alternative. Rather than voluntary payments made at the platforms’ discretion, Australia will require platforms to negotiate for fees with publishers. If they don’t reach an agreement on the price, the case gets kicked to binding arbitration.

Platforms hate the idea of binding arbitration. If a platform proposes paying a publisher $1 million, and the publisher proposes $10 million, what are the odds that the local arbitration board accepts the offer of the American tech giant? Worse, because the arbiter is not allowed to negotiate, and can only pick one of the two offers, it incentivizes Australian publishers to ask for the moon.

Now imagine almost every country on earth adopting similar rules, forcing platforms to pay whatever individual countries say is fair, to every eligible publisher, regardless of the measurable value of that publisher’s content to the platform.

Moreover, the code would require publishers to disclose changes in news ranking algorithms to publishers 28 days in advance — unless, per a new amendment, the change is the “urgent public interest.” It would be the first time any industry was given an advance look at ranking changes, and it’s not clear to me how journalism would benefit.

And so it’s no wonder that Google and Facebook are at least thinking about pulling the plug.

Particularly because, from their perspective, they drive a lot of revenue to the same publishers who are now shaking them down. The move to suggest links underneath the search box in Google’s app has driven a firehose of traffic and advertising dollars to publishers; a viral Facebook story can generate similar value. (Facebook admittedly used to drive a lot more value to publishers, before it de-emphasized news in the News Feed in 2016.)

Perhaps your reaction to this state of affairs is: boo-hoo, poor platforms! And certainly no one is arguing that Google and Facebook can’t afford to share a lot more revenue with publishers than they do today.

But there’s something missing from almost every article I have read about the bargaining code, and that’s how it will actually benefit journalism. In fact, based on my reading of the code, there’s no requirement that any subsidy given from the platforms to the publishers be spent on news gathering at all.

What’s more, the code’s eligibility requirement will deprive small publishers from getting paid at all, meaning that the primary beneficiary of all this wrangling is likely to be … Rupert Murdoch of News Corp. Which earned $261 million in profits last quarter.

At this point in negotiations, it seems unlikely that Australia will scrap its platform shakedown. But I hope that, in its aftermath, Parliament pays close attention to its effects. Does it result in publishers hiring a significant number of new journalists? Will new publications be founded, and thrive? Or will these subsidies simply pad out profits for the richest news organizations in the country, drive further consolidation in the industry, and contribute very little back in the way of actual journalism?

I hope it’s the former — and also can’t imagine that it will be.

As bad as this code is, though, there is an important sense in which platforms helped to bring it on themselves. For years, Facebook and Google responded to the decline of traditional journalism with tentative half-measures — Instant Articles, the pivot to video, AMP, and whatever the hell the Google News Initiative is. What these measures all have in common, despite being relatively inexpensive, is that they have been utterly ineffective in even stemming the tide of lost journalism jobs.

Last year, 16,000 journalism jobs were eliminated in the United States alone. While I don’t think that problem is Google’s, or Facebook’s, to solve, the companies continue to invest in journalism projects as if they have an important role to play. And meanwhile, the publishing industry continues to contract, with a fresh round of media layoffs arriving every few weeks.

I appreciate that more countries are now taking an interest in how to shore up their ailing media companies. But it seems to me that any legislation ought to begin with the aim of creating sustainable media jobs, rather than simply parceling out payments to the country’s biggest publishers. For starters, Australia could invest directly in nonprofit public media, which has consistently been shown to have significant civic benefits.

Or it could head down its current path, which is aimed at reducing the power of the tech giants, but — like so much regulation now under consideration around the world — will likely only entrench them further. For journalism to become more sustainable in the long run, it can’t rely on handouts from the biggest tech companies of the moment to the biggest publishers of the moment.

And that’s why I half hope that Google and Facebook call Australia’s bluff, and pull their news links from the platforms. I’ve never been in love with the idea of Google or Facebook being a primary news destination for most people, anyway. And while a retreat from that world would have some real costs in the short term, any withdrawal would also likely be temporary.

In the meantime, both lawmakers and publishers might learn where the value really lies in the exchange between news sites and platforms. I suspect it won’t be where Parliament thinks it is.

Corrections: This post originally said Sean Hannity and Tucker Carlson work for News Corp.; in fact, they work for Fox Corp., which spun out of News Corp. in 2019. It also misstated how arbitration will work under the code: the arbiter is allowed to pick one of the two offers, not set a price in between them.

Given I haven’t written you since Thursday, I suspect many of you have seen a good number of these links — and so I wrote them in an abbreviated style today, in hopes of making the newsletter both faster and easier to read. To be clear, it’s the same number of links as usual — just shorter. I’ve been thinking more about the best way to include links in the newsletter lately, and whether it shouldn’t be more concise, or maybe just more fun, than it currently is. If you have strong thoughts, just hit reply!

Governing

Parler is back. ‣ Reddit CEO Steve Huffman is expected to appear at a House hearing this week over GameStop mania. ‣ Mark Zuckerberg and Sundar Pichai are expected to testify about the Capitol attack next month. ‣ Twitter suspended Project Veritas. ‣ Twitter will label accounts for heads of state ‣ The North Dakota bill that would force Apple to permit third-party app stores got voted down. ‣ Minneapolis banned facial recognition. ‣ How China could use Clubhouse data to track dissidents. ‣ Maryland is leading a new charge among states to tax tech giants. ‣ Amazon sued New York’s attorney general. ‣

Facebook limited the reach of posts for the military in Myanmar. ‣ France wants changes made to the Digital Services Act. ‣ France fined Google 1.1 million euros over “misleading” hotel rankings. ‣ ByteDance is trying to sell its Indian assets. ‣ Russia is considering Elon Musk’s offer to interview Vladimir Putin on Clubhouse. ‣ You definitely want to use this Clubhouse bio generator.

Industry

The Oversight Board overturns another Facebook decision on free-speech grounds. ‣ The inside story of the Oversight Board’s creation. ‣ A Facebook smartwatch is coming. ‣ Spotify goes remote-first. ‣ The increasingly personal fight between Tim Cook and Mark Zuckerberg. ‣ Google’s apps are updating on iOS again. ‣ A look at the challenges of content moderation for podcasts. ‣ Clubhouse’s opportunity may be bigger than podcasts. ‣ LinkedIn (!) launches a program for creators.

Those good tweets

Talk to me

Send me tips, comments, questions, and amendments to the bargaining code: casey@platformer.news.