Google Shouldn’t Subsidize Journalism in Australia, but the Government Could

 In Australia, Local, Australian Capital Territory, FVEY

You might have missed it – what with the biggest reces­sion since the 1930s and a pan­dem­ic going on – but there may be big, and bad, changes hap­pen­ing to a media land­scape near you.

Right now the Australian gov­ern­ment is con­sid­er­ing amend­ing the Competition and Consumer Act 2010 to force Google and Facebook to pay local com­mer­cial media organ­i­sa­tions for the shar­ing of their con­tent on the dig­i­tal plat­forms.

The News Media and Digital Platforms Bargaining Code pro­posed by the Australian Competition and Consumer Commission will require the tech and media com­pa­nies to make terms through “manda­to­ry bind­ing arbi­tra­tion”. It will also oblige them to divulge parts of their core intel­lec­tu­al prop­er­ty (such Google’s search algo­rithm).

It has been lauded as a world-first in address­ing the power imbal­ance between the plat­forms and tra­di­tion­al news organ­i­sa­tions.

Champions such as com­mis­sion chief Rod Sims argue it’s a simple matter of forc­ing Google and Facebook to pay a fair price for extract­ing value from jour­nal­ism for which they pay noth­ing. As Sims put it:

What this was all about was the imbal­ance in bar­gain­ing power, the market fail­ure that comes from that, and under­pay­ment for news having a detri­men­tal effect on Australian soci­ety.

Who could argue with that? Even fed­er­al trea­sur­er Josh Frydenberg has described it as “a ques­tion of fair­ness”.

But from an eco­nom­ic stand­point the whole bar­gain­ing code is hope­less­ly con­fused. It fails to prop­er­ly under­stand the source of com­pet­i­tive pres­sure for media com­pa­nies, and why they have lost rev­enues over the last 15 years.

Mandatory bind­ing arbi­tra­tion between tech and media com­pa­nies is also a com­plete­ly inap­pro­pri­ate policy tool to achieve the public policy goal of fos­ter­ing high-qual­i­ty jour­nal­ism.

As I have written about in detail for the Stigler Center at the University of Chicago Booth School of Business, making the code law risks doing seri­ous harm to Australian con­sumers while shov­el­ling money to large media com­pa­nies like Nine Entertainment and News Corp Australia.

Faced with the prospect of having to divulge key intel­lec­tu­al prop­er­ty, it would not be sur­pris­ing if Google and Facebook simply prefer not to be in the Australian market. Millions of Australians using Google, YouTube and Facebook will lose out.

Media rev­enue sink­ing

Between 2002 and 2018, con­sult­ing firm AlphaBeta estimates total annual rev­enue for Australian news­pa­pers fell from A$4.4 bil­lion to A$3.0 bil­lion. Almost all of this was due to lost clas­si­fied adver­tis­ing rev­enue, worth A$1.5 bil­lion in 2002 but just A$200 mil­lion in 2018.

“That’s Google’s fault,” you might cry.

Actually no. The vast bulk of lost clas­si­fied adver­tis­ing rev­enue was due to online “pure-plays” such as Seek, Domain and Carsales. Google and Facebook took basi­cal­ly none of this rev­enue.

Read more: Billions lost, boards to blame: Colleen Ryan on the rise and fall of Fairfax

The media com­pa­nies were sit­ting on a gold mine of clas­si­fied adver­tis­ing. Then there was mas­sive tech­no­log­i­cal dis­rup­tion due to the inter­net and smart phones.

That, as they say in the clas­sics, is show busi­ness.

It doesn’t jus­ti­fy making com­pa­nies who hap­pened to suc­ceed in an adja­cent space at the same time fork over a chunk of their rev­enues.

But aren’t tech com­pa­nies ‘steal­ing’ con­tent?

If big tech com­pa­nies were some­how allow­ing you and me free access to con­tent we would oth­er­wise have to pay for, there might be a case to answer.

That would be like Google Maps not only giving you direc­tions to a restau­rant but the means to also avoid paying for your meal.

But using a search engine does not allow you to get free meals, nor to get around a news organisation’s pay wall.

Read more: It's not 'fair' and it won't work: an argument against the ACCC forcing Google and Facebook to pay for news

In fact, having their con­tent pop up in search results, or shared on social media, helps Australian media com­pa­nies to attract read­ers and sell sub­scrip­tions – some­thing that now accounts for rough­ly half the rev­enues of some lead­ing play­ers such as The Australian.

All you get for “free” is a snip­pet of a line or two from the search.

For instance, when I searched for news about recent­ly deceased US Supreme Court Justice Ruth Bader Ginsburg, I got this:

 

If you can figure out the full con­tent of the arti­cle from that snip­pet, you should be using your super­pow­ers for other, more lucra­tive pur­pos­es.

Beware the pol­i­tics

There is a very real risk this mis­guid­ed code will end up becom­ing law.

An overzeal­ous reg­u­la­tor has pro­posed some­thing that stands to ben­e­fit the big media com­pa­nies, who are – not sur­pris­ing­ly – strong­ly for it.

Those same media com­pa­nies have huge influ­ence over public per­cep­tions and the fate of politi­cians. It will be a brave elect­ed rep­re­sen­ta­tive who pushes back on the pro­posed code and draft leg­is­la­tion.

But if politi­cians were seri­ous about resolv­ing the real issue at stake in all of this, they would act more direct­ly.

Like news­pa­pers all around the world, Australian media and jour­nal­ists are under pres­sure – and one thing most people agree on is that high-qual­i­ty news and jour­nal­ism is crit­i­cal to a well-func­tion­ing democ­ra­cy.

Read more: Platform regulation in Australia is just the start. Facebook and Google are fighting a global battle

Whatever the market forces that have slashed the fund­ing of such jour­nal­ism, there is a strong case for gov­ern­ment inter­ven­tion. But if the Australian gov­ern­ment wants to sub­sidise high-qual­i­ty jour­nal­ism, it should do it itself.

With the 10-year bond rate less than 1%, it would cost the gov­ern­ment just A$18 mil­lion a year to fund the inter­est bill on A$2 bil­lion of media sub­si­dies a year. That’s 72 cents per Australian a year.

And all with­out dri­ving away the hugely valu­able ser­vices of com­pa­nies like Google and Facebook that Australian con­sumers love.

The Conversation

Richard Holden, Professor of Economics, UNSW

This arti­cle is repub­lished from The Conversation under a Creative Commons license. Read the original article.

Image: Reuters

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