Making tech giants pay for news was a success the first time around. It can be done again
- Written by: Rod Sims, Enterprise Professor, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne
With the release this week of the government’s News Bargaining Incentive, it’s worth reconsidering the origins and achievements of its predecessor, the News Media Bargaining Code.
Both have the same aim: to gain payment from the search and social media companies that profit from the use of media content, but do not effectively pay for this necessary input to their business.
So what did we learn from the first laws, and how can that be applied to this new attempt to make tech companies pay for news?
A case of market failure
The bargaining code had its origins in the Australian Competition and Consumer Commission’s (ACCC’s) Digital Platform Inquiry from December 2017 to June 2019. The inquiry was tasked with examining competition, consumer, advertising and news issues.
There were 23 recommendations, one of which was for a news media bargaining code.
The logic for the code was that search and social media companies needed news, but they could choose any media outlet. But the media had no choice but to align with the major platforms.
There was thus a market power imbalance, a classic market failure. While not all market failures need a response, this one did, given the critical role that news media plays in our democracy.
The logic for the design of the code came from access regimes which the ACCC regulated in other areas. For example, many companies export their produce, but only having one port from which to do so gives the port huge market power.
In that situation, “regulated access regimes” can be used that require the parties to negotiate on the access fees and, failing agreement, they would be set by arbitration. The fees would be set via a negotiate/arbitrate process, not the use of significant market power.
A contentious start
The news media bargaining code required designated platform companies to negotiate with media companies and, failing agreement, an arbitrator would decide the payment for media content by search and social media companies.
Naturally, there were some enhancements. Perhaps the key one was that the code required the platforms to negotiate will all eligible media companies, which were to be those primarily devoted to public interest news.
Both Google and Meta objected to the legislation. Google threatened to leave Australia, while Meta removed all news and much more from Facebook.
Both eventually backed down, but they obtained one compromise from the government: platform companies would not be designated under the code if they did a sufficient number of deals with media companies.
This actually turned out well for the media companies as the platforms did numerous deals within around six months – much faster than had they been designated.
They were not designated under the code but this was never the objective; deals were.
More than $1 billion in deals
As public policy initiatives go, the News Media Bargaining Code was a success and a world first.
Deals worth around $250 million per year to Australian media companies were done, meeting the expectations of the ACCC.
Google did deals with virtually all relevant media companies, while Meta did deals with most. Importantly, some small media companies achieved deals better that the larger companies on a per-journalist basis.
While more than $1 billion was paid to media companies over five years, a problem emerged. When Meta’s three-year deals expired, it said it would not do any further deals. Google’s largely five-year deals continued.
Meta said it did not need news on its platform and, in response to legislation in Canada that largely copied the Australian code, but under which Meta was automatically designated, Meta took all news off its Canadian platforms.
While many called for Meta to be designated under the code here, it had to be assumed that if it was, Meta would also take news off its platforms in Australia.
How is the new initiative different?
More than 18 months ago, the Australian government said that to address this “flaw” in the News Media Bargaining Code it would proceed with a new approach. A News Bargaining Incentive would be introduced, which would cover the platforms whether or not they carried news.
What has never been explained, in any way, is why this provision could not have been inserted into the original code. That is, the News Media Bargaining Code would apply to Google, Meta and say TikTok whether or not they carried news.
This would have provided continuity, as Google was continuing to work under the code and was providing 70% of the total payments.
Of course, Meta would have objected, but no more than it will under the News Bargaining Incentive.
Because there is no arbitration mechanism under the incentive, the government has said the platforms do not have to do deals with all media companies. Indeed, four can be enough. To require deals with everyone would mean the media companies could extract high payments knowing the platform has to do a deal with no resort to arbitration to settle a dispute.
The incentive sets financial parameters on what the deals will be worth using the News Media Bargaining Code payment as a guide. If the deals are not done, the covered platforms will need to pay a “charge” set at 50% higher than the value of the envisaged deals. This is a very different approach with some complexity and potential inequity.
That said, the government is to be congratulated for pushing on with the noble cause of protecting journalism. Consultation is occurring on the News Bargaining Incentive, and it may well be legislated by mid-year.
Australia is again leading the world by taking such action. Let us hope some amendments are made and that the incentive works well.
Authors: Rod Sims, Enterprise Professor, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne
