Articles – The Centre for Independent Studies

Was the government's fight with Facebook worth having?

Simon Cowan

27 February 2021 | Canberra Times

The Communications Minister, Paul Fletcher, argued that “where the digital platforms are using content, paid for and generated by Australian news media businesses … they should pay for it”.

Mr Fletcher described this as a principle, but it’s hard to see any principled merit behind forcing these payments at all.

A cynic might argue instead that Facebook and Google have basically agreed to pay ongoing tribute to existing news media for the privilege of freely and widely disseminating news to the Australian public, and getting the government off their back.

It would be one thing if this was an issue of a publisher taking content generated by a news outlet and posting or selling it as its own content. But this would clearly be an issue relating to copyright, not an issue relating to competition (as claimed by the government and its fundamentally misguided competition commission).

The phrasing of this supposed principle is intended to mimic the language of a breach of copyright law, but to extend it to activities that really shouldn’t be unlawful.

It makes no more sense than expecting the organiser of a book club to compensate an author for recommending others read the author’s book.

If a prospective reader wants to read the work, they have to buy the book, much like how a person clicking on a Facebook link to a news article might need to subscribe to read a piece behind a paywall.

If anything, you’d think this should work the other way around, with the publishers compensating Google and Facebook for sending them readers and subscribers.

It makes more sense when you realise it’s not really the use of content that the compensation is designed to redress: these payments are really for the loss of advertising revenue.

Perusing the ACCC report on digital platforms makes this abundantly clear: advertising dollars once spent with print media companies, which once sustained and supported journalists, have gone.

Much of this former revenue went to sites like Carsales, Domain or REA, and with a significant portion of advertising budgets now spent online, unsurprisingly a lot of those dollars now go to Google and Facebook.

The bargaining code is just a way to try and capture some of this new funding stream via coercive regulation. There are several problems with this.

First, the connection between the generation of news content and the accumulation of advertising revenue is clear from the news media side, but as Facebook made aggressively clear through its recent ban, neither its, nor Google’s, business model works that way.

On the contrary, one suspects that Facebook and Google not only don’t particularly care about news content, they don’t even care as much about the advertising revenue as they do about controlling the data flow of their customers.

Yet this doesn’t change the fact that Facebook and Google have legitimately captured much of the online advertising market through their better service offerings. Why should they be expected to cede those gains to legacy media?

Treating this as an issue of competition policy – supposedly correcting unfair and unequal bargaining power – makes little sense. This fundamentally reverses the outcome of an actual competitive process.

There is a bigger risk too. There are real concerns about these platforms that may be forgotten in the resolution of the red herring issue of media compensation.

For example, whether the major social media sites increasingly act as publishers – not in the traditional sense of generating their own content, but in the sense that they are actively curating and moderating content produced by others – and what to do about that.

This could extend into further debates as to whether social media platforms as significant contributors to public discourse do, or should feel a moral obligation to, exercise that moderating function in accordance with societal expectations of political pluralism.

There are also genuine privacy and data concerns on these tech platforms.

These are far bigger issues that may need to be addressed by government in some way, though there are good arguments to exercise a light regulatory touch at most.

In a few years, Facebook and Google may feel that staving off comprehensive government regulation by tossing a few bucks in to fund journalism was a great deal in retrospect.

After all, having expended significant political effort in this fight, it’s not certain that the government can rally public anger again. This leads to the obvious question: why was this the fight worth having?

The response seems to boil down to the idea that someone has to pay for public interest journalism and … well, Google and Facebook have a lot of money.

To be clear, the underfunding of journalism is a real problem. There is a legitimate point that journalism serves a democratically important role in holding the government to account.

While one might query whether the increasingly naked partisanship and activism by those in the media is serving to undercut that role, a free and robust press remains a crucial check on government overreach.

As this function is essentially a byproduct of what readers actually pay for – the delivery and presentation of news – consumers are likely to undervalue, and therefore underpay, for it.

And there are two added complications in relation to this particular positive byproduct. First, government funding may compromise the independence of journalists, and therefore dilute its effectiveness.

And second, the government already provides more than a billion dollars annually to the ABC and SBS, at least in part to serve this role. Yet attempts to better utilise this funding appear to be futile.

However, none of this is the specific problem of Facebook or Google, and there is no good reason why they should be expected to solve it. The bargaining code really amounts to little more than a crude attempt to extort money out of digital platforms to solve a political problem.

In point of truth, the government may have had a better outcome by providing incentives to the broader community to support journalism.

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