There’s a common political tactic in which a party or politician will propose an approach that takes aim a large, established enemy, in order to frame themselves as the white knight battling against evil, even if that policy will have little actual impact.
We most commonly see this tactic aimed at utility providers and supermarkets, the Government will propose policies attacking, say, petrol prices or phone charges, inevitable costs that we all bear, and which are controlled by large, faceless corporations. The end result, in almost all cases, is that nothing changes. A new commission gets set up to explore solutions, a new body is formed to police increases. But practically, everything stays the same. Because, really, the Government can’t make any significant change, for various reasons.
But even without a solid outcome, it frames the Government and/or the politician as the hero of the story, pushing for change on our behalf against the top end of town. It doesn’t matter if they know, and have always known, that what they’re proposing will never actually be implemented, it’s about the ‘optics’, being seen to be taking action. Even if it costs money and time and effort, all for a political stunt.
This is what the Australian Government’s proposal to make Google and Facebook pay news publishers for usage of their content feels like, political posturing to show voters that the Government is taking action – even if, really, those actions, logically, won’t lead to any change.
Back in April, Australian Treasurer Josh Frydenberg announced that the Government would be seeking to implement a new, mandatory code of conduct which would require Google and Facebook to share any revenue they generate as a result of news content they use, in any way, with the relevant publishers of such material. That would then provide assistance to the local news industry, which is struggling through the COVID-19 pandemic. Indeed, late last month, News Corporation announced that it would cease printing 112 community and regional newspapers in the Australian market.
This week, Facebook has responded to the Australian Government’s proposed code, saying, basically, that Facebook won’t be paying, and noting that both Facebook and Google will survive without news content, if that’s the path the Government forces as a result of this proposal.
As per Facebook:
“If there were no news content available on Facebook in Australia, we are confident the impact on Facebook’s community metrics and revenues in Australia would not be significant, because news content is highly substitutable and most users do not come to Facebook with the intention of viewing news. But the absence of news on Facebook would mean publishers miss out on the commercial benefits of reaching a wide and diverse audience, and social value would be diminished because news would be harder to access for millions of Australians.”
On the latter point, Facebook says that:
“Between January and May this year, Facebook’s News Feed sent 2.3 billion clicks back to Australian news organizations – for free. These referrals were worth approximately AU$195.8 million for publishers, based on what the average costs would be for similar activity through our paid advertising tools.”
In other words, Facebook’s saying that the Government has no leverage here – if you force it to pay for the usage of news content, it will simply stop using such, which will then see publishers lose even more money, the opposite outcome to what the Government is seeking.
Facebook points out that, in more recent times, it’s changed the focus of its algorithm to emphasize discussion among connections, as opposed to the sharing of news content, which has actually seen engagement increase, underlining the fact that news publishers need Facebook more than it needs them.
“It is not healthy nor sustainable to expect that two private companies, Facebook and Google, are solely responsible for supporting a public good and solving the challenges faced by the Australian media industry.”
Interestingly, Facebook also notes that news publishers are, essentially, competitors, in regards to digital ads:
“Regulatory interventions which impose an excessive cost on one digital advertising provider in order to subsidise a competitor will inevitably distort advertising markets, potentially leading to higher prices.”
In summary, Facebook is saying that this proposal makes no sense, and it’s not going to pay. Which, as noted, is the outcome, really, that you would expect. Yet, the Australian Government has chosen to push forward with the proposal anyway.
And there are also several other factors which point to this approach never working out.
In France, Google implemented a new process, in line with the French ‘neighboring rights’ laws, which meant that it would only display articles, images and videos in search results from media companies that had explicitly allowed it to use such for free. So while the Government sought to implement new rules, Google simply gained explicit agreement with the publishers themselves, and because the publishers stood to lose out by not signing on, the law changes ended up having little real impact.
In Spain, the Spanish Government’s approach to make Google pay for news content saw Google shut down Google News in the country at the end of 2014. That change reportedly saw many publishers experience double-digit drops in web traffic, though it’s largely normalized since then.
In both cases, Google simply sought alternate ways around the regulations, staying within the new parameters while still going about its business. So the Australian Government has two cases as precedent – again, it knows that this proposal won’t work.
And there’s also another big reason why the proposed code won’t get up.
Let’s say that the Australian proposal is implemented, and Google and Facebook are forced to pay for their usage of news content in the Australian market. That would set a significant precedent – that would mean that every other publishing sector in every other nation would see this, and would push to have the same implemented in their region.
For Google and Facebook, paying a portion of their revenue in the Australian market would have no real impact on their respective bottom lines. But if they had to do the same in every nation? The cost is too high, the impact would be too much – there is no way that Google and Facebook are going to agree to any such code that would open the door to wide-scale, similar push back in every market.
So, not surprisingly, Facebook is pushing back. And Google will too, and ultimately, this proposal will either lead to a negative outcome for Australian publishers, or it’ll get dropped.
But they have to do something, right? The publishing sector is dying while these platforms that disseminate their content are thriving. There must be some way to fix it. Right?
The real solution, as has been proposed by many academics, is effective tax reform.
The Australian Government has been working to address this over the last few years – both Google and Facebook have paid only marginal tax on their earnings in the Australian market because they’ve been able to funnel their expenses through lower-cost nations, like Singapore, in order to reduce their tax burden.
The Government has implemented new anti-avoidance tax laws to limit such behavior, which has forced both companies to pay more, but they’re still able to exploit certain loopholes. Facebook, for example, paid the equivalent of 2% tax on its earnings in Australia in 2018, while both Google and Facebook continue to battle with the Australian Taxation Office over their requirements.
If the Government could ensure that Google and Facebook pay their fair share in local tax, they could then pass that onto a fund that would support the media sector. The Government would need to remain indepedent of such, of course, but there are ways in which the Government could institute a support system, of sorts, for the media sector through such measures.
But that’s a lot harder to implement, meaning it will take a lot more time, and it won’t look as impressive as ‘we made Google and Facebook pay for news’. It won’t, essentially, give the Government the white knight glow of taking on the big corporates.
So we have this – Facebook has rejected the proposed code, Google will do the same. And the outcome could get very messy, depending on how the Government chooses to push it.
But for all of those media onlookers hoping for a new way to generate more revenue, this won’t be it. The idea that there might be a sudden influx of money flowing in from Google and Facebook is basically a pipe dream, and while there may be alternate avenues for the Government to ensure some flow-through of revenue from the web giants, the reality is that traditional media business models need to be updated.
You can read Facebook’s full response to the Australian Government’s proposal here.