Is Australia’s News Media Legislation Introducing the Right Balance Across Global Digital Platforms?

It has been dubbed Australia’s “News Media Bargaining Code” – a world-first mandatory code of conduct to force tech giants to pay Australian media companies for news results (including links and snippets) searched through their platforms. The proposed legislation is the outcome of the 2017 Australian Competition and Consumer Commission’s (ACCC) Digital Platforms Inquiry. A final report was released in mid-2019. 

The Government’s response to this inquiry established a “roadmap for a program of work and series of reforms to promote competition, enhance consumer protection and support a sustainable Australian media landscape in the digital age” and considered to adhere to the following commitments[1]:

• ACCC to be tasked with monitoring and reporting on the state of competition and consumer protection in digital platform markets.
• Evaluating the perceived bargaining power imbalance concerns between digital platforms and media businesses.
• Launching a staged process to reform media regulation towards an end state of a platform-neutral regulatory framework.
• Ensuring privacy settings empower consumers, protect their data and best serve the Australian economy.

The preliminary position for the Australian Government was for the ACCC and industry to establish the proper mechanisms of a workable framework that will address the Government’s commitments and industry’s concerns. To this extent, it assigned the ACCC the task to facilitate the development of a voluntary code of conduct. After some stakeholder’s interaction, the ACCC advised the Government that businesses were “unlikely to reach voluntary agreement” and subsequent dealings over the introduction of a voluntary framework broke down, prompting the government to look at making the code mandatory. The process of the news code deliberation has involved moving through long public consultation phases as well as establishing a senate committee and multiple public hearings.

On 9 December 2020, the Treasury Laws Amendment (News Media and Digital Platforms Mandatory Bargaining Code) Bill 2020 was introduced to Parliament. The proposed code is enforceable and compels the major digital platforms, namely Google and Facebook, to pay Australian media companies for use of news content. As expected, content creators have been generally supportive of the code, while data platform owners have been strongly opposed. The code also included provisions for enabling certain data rights, algorithm transparency on ranking of news and fines for no compliance - such fines being large enough to ensure giant social media platforms do not simply ignore them. Expected fines can be up to 10% of local turnover, $10M or three times the benefit gained from a breach.

Specific key areas of the new mandatory code are making the giant platforms uncomfortable, claiming further that the code - as it stands - is unworkable. There have also been some alleged threats from the two digital giants against Australia such as scaling back market participation or platform pull out and service shutdowns. The code will initially apply to Facebook NewsFeed and Google Search, with the possibility of other digital offerings being added in the future.

The Australian Government intervention comes amid comparable attempts introduced across the United States, Europe and South America. In analogous terms, past efforts have already been made to address the imbalances caused by the perceived believe that most of the advertising revenue gains have benefited the two tech social media platforms. Governments, policy maker and traditional industry around the world believe that the search and social media giants have used their global reach, tech dominance and access to data across offerings to leverage and take a dominant share of the digital advertising business. Furthermore, the fallout of CV19 has sparked a collapse in advertising revenue leading to regional outlets shutting or scaling back operations. There is also the argument that journalist’s organisation and news publishers used to direct their distribution networks but now most of the distribution is directed through Google and Facebook who take most of the value.

Josh Frydenberg, the Australian Federal Treasurer points out to the "large degree of destruction" caused by the duopoly of digital giants and how this had endangered the survival of traditional media companies – in a recent interview he said: "You can't save all papers and all jobs. We are not seeking to protect traditional media businesses from the rigours of competition or the rigours of the digital world. We are seeking a level playing field”. According to the ACCC, Google and Facebook had about AU$6B of the online advertising market in 2018, and currently somewhere between 8 and 14% of searches on Google come up with news stories. ACCC’s inquiry has also found that for every $100 spent on digital advertising in Australia, $53 goes to Google, $28 to Facebook and only $19 goes to other participants.

Platform giants have already made use of their size, reach and technology strength to effectively push their agenda and ignore smaller jurisdictions. For instance, Spain in 2014 attempted by law to force Google to pay for news going through its aggregator product, Google then responded by shutting down the services there. Likewise, in more recent events, Google after initially balking at paying for news content through months of negotiations, France has now eventually forced Google to make digital copyright payments for online news content under a reformed European Union copyright / neighbouring law – the French framework agreement payment and criteria are somewhat different to the Australian code.

But is Australia’s News Media Bargaining Code the right model to enable content payment?

There is no doubt that introducing a “level playing field” as Mr Frydenberg has indicated or promoting fair payment for original news content does have merits. Even more so if we accept the underlying notion that there should be no free-rides on other’s news writer work, copyright, or production of news – a more relevant question is then to ascertain if the Australian model is the right solution for content payment and / or is there really a need to enact legislation to achieve economic benefits to all parties?

We know that models for content payment already exist. Decades ago, similar disruptions were faced by the music industry when they lost control of distribution through the advent of radio and recording. Bespoke regimes have been developed which are currently helping account for content payment across other industries such as IP database rights, broadcast EPG positioning, cable TV re-transmission and others. The point is that other models like perhaps performing rights organisation models (PROs) or collecting society have evolved out of the need to have an organised body for the licensing and managing copyrighted works.

Take Spotify for example, according to 2018 listing documents, since 2006 Spotify has paid around US$9.76 billion in royalties to artists, music labels and publishers. In fact, if you are interested in starting a new career as a singer or song writer, you may be happy to know that you can expect to make between $3 and $5 per 1,000 streams on Spotify per month.

It is of absolute significance to understand that the Australian news code has been developed around a “negotiate-arbitrate” model to help regulate the imbalance of bargaining power where issues of concern are resolved either through negotiation or through arbitration. What this means is that an independent arbiter will be used to determine the final payment if the two parties are unable to reach an agreement. This independent arbitrator would need to factor in a “two-way value exchange” before reaching their final decision. The regime is meant to be an effecting legislative framework model, governed by principles of economic benefit and applicable to a range of circumstances where market power is exercised. But situations of uneven bargaining power are also applicable here and there should be concern for those market participants who may not be able to access negotiate-arbitrate regulation due to costly processes, large transaction costs or high threshold criteria. Under a negotiate-arbitrate scenario, competition in the market could impact say smaller players – who in the medium to long term - may be forced out of business, triggering an unintended outcome to the new ACCC proposed legislation code.

Note also that the Code only applies to news media companies with annual revenues greater than AU$150,000, that is in either the most recent financial year or in three out of the five most recent financial years. Once registered for the code, all eligible news media organisations can then engage in negotiations, either individually or collectively. This threshold is a requirement to become a registered media business. This level also indicates that businesses under the threshold cannot be registered and cannot collectively bargain. Let us remind ourselves that one of the greater befits of the internet is that is has democratised news access and news creation – as with Spotify now you can become a song writer at any time, the internet allows us to express opinions and potentially also grants the ability to become a journalist, be this through freelance or otherwise. This new breed of journalists likewise may not have revenues significant enough to participate in the Code, and so are potentially also left out. Furthermore, through a brief assessment of previous Australian experiences in the use of negotiate-arbitrate regulation across other industries, i.e., aviation and telecommunications, it shows that such process may potentially lock parties into endless cycles of negotiation and arbitration – diminishing its effectiveness. It is evident then that some companies could miss out just at a time when they may need protection the most, oblivious perhaps they could have been better protected under a say a different model, i.e., collecting society. A new question should then be asked – what small news media outlet would in the right mind want to arbitrate with several internet giants?

These concerns are factual and they are already making noise through the current legislation lobbying process. During a second day of public hearing received on 1 February 2021, Mr Adam Portelli, Director of the Media Entertainment and Arts Alliance (MEAA) warned of the danger on the two-way value principle – here is brief summary of the hearing – page 6:

...Senator McALLISTER: Thanks very much, Mr Portelli. Could you explain to me MEAA's concerns about the two-way value exchange principle and your view that it will diminish the code's effective operation?

Mr Portelli: Yes. From our perspective, it seems it has the potential, we say, to weaken the system and overly complicate the way in which value is determined. We're not aware of a practical way that the tech companies would be able to quantify that revenue. It appears to us like another step in the digital giants' dragging this process out and minimising their financial obligations. We saw the first iteration of this system, the first draft, whereby it's a one-way model, as being simpler, fairer and likely to give newsrooms and the Australian public what they needed, which was fair compensation for news content as carried by big tech.

Senator McALLISTER: So your essential concern is that it is too amorphous and risks undermining satisfactory conclusion of arrangements.

Mr Portelli: That's correct....

And, on the AU$150,000 threshold, Senator McAllister asked:

Senator McALLISTER: I have a final question. You've indicated that you think some sort of tithe or multilateral levy in support of regional news and public interest journalism is necessary. You've also indicated that you think the revenue threshold is too high at $150,000 per annum. What is your preferred threshold as an alternative to the $150,000?

It feels here a need to highlight a potential use case of PROs or collecting society models that could be used for licensing or managing copyrighted works and through which remuneration can flow back to owners without a need of heavily structured, costly, or recurring negotiations.

In our ever-increasing digital world, we know that there is fundamental transformation and change underway and everyone has a unique opportunity to shape the way how this change can be helpful, inclusive and human-centered. Through this lens legislators can also be better guided in their understanding of how digital distribution platforms are impacting the way society exchanges and consumes value and information.