To save journalism, flawed regulation is better than none

By Margaret Simons

Facebooks’ decision to ban Australian news media sites clearly came out of the blue for many Australians – which is not surprising. Not many people click on news about market regulation, which means the lead-up to the crisis has escaped the notice of those who rely on social media for their news.

Lost in the debate has been an appreciation of the lead-up to last week’s dramatic action. That’s a shame, because with a better appreciation of the history, more people would understand why Facebook has thrown this hissy fit, and why it is important that the Australian Government not crumble under pressure.

I support the News Media Bargaining Code – the legislation designed to make Facebook and Google pay for the use of news media content. It is not perfect legislation, nor my preferred approach. But I support it for reasons both principled and pragmatic.

The principle is easy. The idea that those who profit from your work should recompense you for it is hardly new or radical. It is enshrined, for example, in copyright law.

The idea that monopoly companies, or near monopolies, should not be allowed to abuse market power is also hardly new or radical. Laws to encourage competition by limiting the market power of any firm are well established in most countries, and have a history dating back to the late 1800s.

So much for principle. What about pragmatics?

The news media bargaining code is not my preferred approach.

I agree with former Prime Minister Malcolm Turnbull that it would be better to tax expenditure on digital advertising and redistribute that revenue to public interest journalism.

There are a number of ways you could do that – by increasing the ABC’s funding; by handing out grants, or by giving tax exemptions for investment in public interest journalism, a measure that the Public Interest Journalism Initiative has explored.

But here comes the pragmatism. That solution is not on the table, and not currently politically achievable. Neither the government nor opposition has shown any appetite for such a tax. I also understand that such an approach might be vulnerable to legal challenge.

As it stands there is no guarantee that the big media companies will reinvest revenue gained from Google and Facebook in journalism. Instead, it might just fall to the bottom line, to be distributed to shareholders who have already allowed the hollowing out of journalism over many years.

This is a weakness in the legislation, given that the importance of journalism to democracy is part of the justification for government intervention in the market.

But the legislation before parliament is the only solution on the table for a problem that is increasingly urgent - the collapse of the business models that have traditionally supported most public interest journalism.

The business model collapse has come in two waves.

First, there was the loss of the classified advertisements to online platforms. Media companies such as Fairfax and News Corporation can rightly be criticised for being too slow and too arrogant to see it coming.

But that is old news – the story of the 1990s.

More recent is the disappearance of most of the remaining advertising revenue to the digital platforms. You can see the drop-off in a graph on page 18 of The Australian Competition and Consumer Commission Digital Platforms Inquiry report – the 2019 document that kicked off the disputes which resulted in last week’s Facebook tantrum. From 2014, news media revenue dropped off a cliff, and most of the dollars went instead to Google and Facebook.

Too bad, too sad, you might say.

But the result is a decline in both the quality and quantity of Australian journalism. From 2006 to 2016, the number of Australian journalists fell by 9 per cent overall, and by 26 per cent for traditional print journalists (including those journalists working for print/online news media businesses).

As the ACCC reported: “The number of journalists in traditional print media businesses fell by 20 per cent from 2014 to 2018. This is at a time when Australia’s population and economy were growing strongly.”

Between 2008 and 2018, 106 local and regional newspaper titles closed across Australia, representing a net 15 per cent decrease. Those closures have continued at a rapid rate, creating news deserts in our suburbs and regions. I wrote about why the death of local news is a particular threat to democracy in my last inkl column.

As well, the ACCC found, we had lost specialist reporting in areas such as science, the arts and health.

Journalism, as many audiences don’t need to be told, has become shallower and more superficial.

I don’t want to excuse the sad state of Australian journalism. I am heavy hearted about the increasingly common tendency of reputable media outlets to publish stories that are deceptive not, or not only, because the facts are wrong but because facts and context have been left out – the gotcha imperative replacing a true sense of service to the audience.

There have been important errors of fact, taste and judgement in recent weeks, in many media outlets.

Individual journalists should not be entirely excused for this, but the problems of under-resourcing are a part of almost all the problems audiences correctly identify in mainstream media.

Some of the cause of the faults is invisible to the average reader. Once, there were sub-editors who read the copy carefully before publication and who were plentiful, senior and experienced enough to detect errors and question editorial judgement. Everyone makes mistakes. It was the sub-editors who minimised the extent to which journalists’ mistakes infected public life.

Senior sub editors were some of the first to disappear from newsrooms when the cost cutting started, and they have never regained their position at the heart of news media quality.

This is commercially short sighted.

In his 2004 classic text The Vanishing Newspaper, US academic Phillip Meyer showed through detailed statistical analysis that the best predictor of audience trust in a news outlet was not the experience of the editor or the credentials of the investigative team, but rather the number of sub-editors employed.

Make a mistake in spelling a name or reporting a figure, or insult your audience with a poorly judged tone, and you lose trust – and trust once lost is hard to regain.

Meanwhile, the tide of malicious misinformation rises, and we all know where that leads – fractured communities and fragile democracies.

So, back to digital platforms. Why should Google and Facebook pay for news media content when the organisations that produce it voluntarily allow it to be shared on their platforms?

Google and Facebook have different business models, but both make money from gaining audience attention, and then selling advertising to that audience. One of the ways they gain the attention of the audience is by carrying news media content.

If you check out the top searches on Google any day of the week (which you can do here) you will find that a substantial number are news-related. Naturally, people wanting to know about things in the news. If you see where those searches lead, news outlets are in the top results returned.

This is worth something to Google. Imagine those news sites did not exist. Google would become radically less useful as a search engine, and the users would drop off. Therefore, its profitability, which comes from the ads that you get at the top of search, would fall away.

Turning to Facebook, it is probably true that news is less important to its business model than to Google’s. Facebook makes money by drawing you to and keeping you on the platform, clicking away, so it can serve you the maximum number of ads.

The best research suggests almost half of Australians under 25 rely MAINLY on social media for news. Therefore if Facebook didn't carry news, it would lose some of that traffic and therefore revenue.

News media companies ALSO gain from the sharing of news on Google and Facebook. They get extra traffic. But for years news media companies have been unable to get Google and Facebook to the negotiating table to work out the values involved.

What is the value, in each direction?

We don’t know, because at the moment there IS no market. And the reason that there is no market is because Google and Facebook have used their market power to refuse to allow one to develop.

That is why the government has legislated to force them to negotiate.

Overseas, various jurisdictions have tried to use copyright law to tackle the same problem. That has largely failed.

Learning from this, the Australian approach has been to use the much more powerful and clear-cut tool of competition law.

The ACCC recommended a voluntary news media bargaining code. That was attempted, but it quickly became clear that Google and Facebook were not negotiating in good faith.

The Government decided to legislate. Under the new laws, now before parliament, news media businesses over a certain level of revenue will be able to force Google and Facebook to negotiate with them for use of their content. The value of traffic to news sites will be part of the negotiations.

If no agreement can be struck, the ACCC will be able to intervene and set the price.

Google was also making threats a few weeks ago. It suggested it might withdraw Google search from Australia. It backed down smartly when it became clear that Microsoft Bing stood ready to pick up the slack.

While the Australian market is small, what happens here is being watched closely internationally. Google must have feared it would lose its place as the world’s favourite search engine to its competitor.

It has now cut deals with News Corporation, Nine, the Guardian (declaration: which I write for) and negotiations with the ABC and SBS area underway – with the government having committed to allowing our public broadcasters to keep any resulting revenue.

Facebook, on the other hand, has taken a calculated risk that by demonstrating its power in the comparatively small Australian market, it will send a warning around the world. So far, that attempt seems to have backfired.

The whole debate has forced an assessment of the nature of these digital behemoths. They are a new kind of entity – partly publishers, with the power to curate and determine what we see; partly utilities – essential to a great deal of important community activity, and partly tech companies.

There are always strong arguments for utilities to be in public hands – but that isn’t how these companies developed. Too late for that.

Meanwhile, Facebook has given the world a powerful example of its power, and demonstrated that it is ready to use that power in its own commercial interests, regardless of the welfare of its audiences.

I suspect that in the next week or so, Facebook will back down and strike a deal, as Google has already done. But the hard lesson it has given us will not be forgotten.

The media organisations hardest hit by Facebook’s banning of news are not the big media companies, but the small, independent players, some of whom depended on Facebook for their audiences.

They will already be looking for alternatives, and there are strong arguments for government to assist them while they do so – perhaps through an extension of the existing Public Interest News Gathering grants scheme.

Finally I want to tackle the perception that this is all about benefiting Rupert Murdoch’s News Corporation.

I believe News Corporation has too much power over our democratic processes, and that its dominance of the Australian media market should be pegged back – ideally by the encouragement of start-ups and innovation.

But that is a different argument. The news media bargaining code is not about addressing the concentration of media ownership. It seeks to address a different problem.

And News Corporation is not the only media organisation to benefit from the News Media Bargaining Code. So do its competitors.

I recommend the column by Lenore Taylor, editor of The Guardian, on this issue.

The News Media Bargaining Code is a flawed, untidy but real-world practical solution to pegging back market power. Probably, the ACCC will never have to arbitrate and set the price for use of news. The markets will, over time, determine the price -and that is as it should be.

A bigger issue is the need, worldwide, to regulate and peg back the power of the digital behemoths – Google, Facebook, Twitter, WeChat and whatever replaces them.

This is an issue that goes beyond journalism and encompasses the spread of misinformation and extremism, and the manipulation of our public sphere by malign actors.

The world has to find a way to tackle this regulatory challenge. What happens in the next few weeks in Australia will give some clues to the future of the worldwide effort.


Margaret Simons is an award-winning freelance journalist and the author of many books and numerous articles and essays. She is also a journalism academic and Honorary Principal Fellow at the Centre for Advancing Journalism, University of Melbourne. She has won the Walkley Award for Social Equity Journalism, a Foreign Press Association Award and a number of Quill Awards, including for her reporting from the Philippines with photojournalist Dave Tacon.

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