The Federal Government will enact a mandatory code of conduct requiring bigtech companies to financially recompense traditional news outlets for reposting their content.
The mandatory code is currently being drafted by the Australian Competition and Consumer Commission (ACCC) under moves to redress the perceived dominance of digital news aggregators, including Facebook and Google, over news creators – a situation which, over the past decade, has seen critical revenue streams siphoned away from online news publishers.

In an official statement, Minister for Communications, Cybersecurity and the Arts, Paul Fletcher said the code will govern the commercial relationships and profit-sharing arrangements between the bigtechs, including Facebook and Google, and Australia’s digital media companies.

This code will lay down rules on the sharing of data, the ranking and display of news content, and the monetisation and sharing of revenue from news sourced generated by local media companies.

Once the golden goose of Australian industry, the local media sector is now under significant pressure to maintain profitability, today exacerbated by a sharp decline in advertising revenue due to the coronavirus shutdowns, according to Fletcher.

In a recent opinion piece, Treasurer Josh Frydenberg said that for every $100 spent by advertisers in Australia on online advertising, excluding classifieds, $47 went to Google, $24 to Facebook and $29 to other participants.

“In Australia, this market is worth almost $9 billion a year and has grown more than eight-fold since 2005,” he said.

Frydenberg added: “We are under no illusions as to the difficulty and complexity of implementing a mandatory code to govern the relationship between the digital platforms and the news media businesses.”

Owing to their ubiquity, Facebook and Google remain unavoidable trading partners for Australian news media businesses, according to Fletcher. However, the clear “imbalance in bargaining power” between the global tech titans and Australian publishers has hobbled the local media industry, devastating content creators’ bottom lines and furthering the already significant cuts made to staff numbers and resources across the sector.

This imbalance was highlighted in the ACCC’s Digital Platforms Inquiry final report last July, which found that the ubiquity of Google’s and Facebook’s platforms and news aggregation capabilities had placed them in a privileged position.

“They act as gateways to reaching Australian consumers and they are, in many cases, critical and unavoidable partners for many Australian businesses, including news media businesses,” the report noted.

Each month, approximately 19.2 million Australians use Google Search, 17.3 million access Facebook, 17.6 million watch YouTube (owned by Google) and 11.2 million access Instagram (owned by Facebook).

However, an ACCC report also noted the mutually dependent relationship between news media organisations and the bigtech aggregators, stressing that a significant number of media businesses now rely on news referral services from Google.

“Many news media businesses would be likely to incur a significant loss of revenue, damaging their business, if Google users could no longer click on links to their website in search results. For commercial news media businesses, having links to their websites on Google is a necessity.

Nevertheless, the dominance of the bigtechs in this relationship is manifest, the ACCC said, with Google having “significant bargaining power in its dealings with these media businesses”.

Moreover, given Australia’s current population of 25 million, with 21 million over the age of 13, it was clear that a large majority of the population are regular users of these bigtech platforms, the report added.

Minister Fletcher said the Government had directed the ACCC in December 2019 to develop a voluntary code of conduct to redress the power imbalance between digital platforms and news media businesses.

He said that if a voluntary code was not forthcoming, the Government would develop alternative options. With a voluntary code failing to materialise, the Government has opted to take the mandatory route.

In addition to its findings, the ACCC’s July 2019 report recommended a regulatory framework to better govern the media, communications, and advertising revenue-sharing arrangements.

Citing precedent

This is hardly the first time the tech giants have faced off with governments over their unabashed re-use of media content.

In 2014, Spain passed legislation requiring Google to pay news outlets for article extracts that they publish. In response, Google closed Google News and has not reopened this service since.

Last year, France became the first EU member state to implement a European Council Directive to protect the copyright of content where it is reproduced online. This would require authorisation and compensation for material reproduced.

In response, Google said it would not pay for content, nor display French news media unless able to do so for free.

French news outlets saw this as an abuse of market power about which the French regulator is now investigating.

A draft mandatory Australian code of conduct is due for release before the end of July, with the final code expected to be settled soon after.

Where do the dollars go?

In Australia, the problem for business users advertising via digital platforms is magnified by the “black box nature of online advertising products and services,” according to ACCC’s July report.

This, it said, was marked by a lack of transparency in the online advertising markets.

“It is unclear how Google and Facebook rank and display advertisements and the extent to which each platform self-preferences their own platforms or businesses in which they have interests.”

This opacity has made it difficult for advertisers to understand the factors that influence the display of their advertising.

“To compound the lack of transparency in the operation of Google’s and Facebook’s key algorithms, there was significant opacity in the operation of the ad tech supply chain,” the report said.

“The ad tech supply chain involves a range of advertising technology services offered by Google and other businesses to advertisers, websites, and apps in order to match advertising demand and supply and enable the instantaneous delivery of advertisements targeted at particular online users.

“The opacity of the ad tech supply chain means that the sum of the prices charged by suppliers of ad tech services and the share of advertising expenditure they retain are unknown to many advertisers and websites.”

The automated or ‘programmatic’ supply chain for advertiser was also found to be especially opaque. Effectively, it remains difficult for advertisers to know where their dollar goes or the true value of the advertising inventory.

Moreover, the breadth and scale of the user data collected by Google and Facebook underline their market power and reach.

The advertising businesses of Google and Facebook extend beyond their core owned and operated platforms. Both platforms sell ads on third-party websites and apps that were part of their respective advertising networks, as well as on the platforms they owned and operated, ramping up their revenue.