Australia: Facebooks News Showdown

The world is watching to see if Australia succeeds in making Big Tech pay publishers for the content they profit from.

When Australians awoke to find that Facebook had blocked the posting, sharing or viewing of news last month, the move by the social media provider brought sharp attention to the showdown between big tech, traditional publishers and government.

Facebook’s action was a response to Australia’s proposed News Media and Digital Platforms Mandatory Bargaining Code, which would force forums like Facebook and Google to pay publishers whose content they host. Facebook decided to drop news rather than pay publishers.

The immediate crisis ended when the government and Facebook negotiated a deal that gave the company more time to work out deals with individual publishers and extended the possibility that voluntary donations to the Australian news industry by digital platforms might shield them from the code. But the fundamental economic dispute is still to be resolved.

In a February 17 statement, Facebook claims that “news makes up less than 4% of the content people see in their news feed.” The company adds that it “generated approximately 5.1 billion free referrals to Australian publishers, worth an estimated AU$407 million [about US$314 million]” last year.

Google has a very different business model. Being more reliant on people trawling for news stories on its search engine, it struck a deal with Australia’s major publishers to pay for content that appears on its newly launched News Showcase product but not the news stories catalogued and linked in its search engine.

The dilemma for news providers, digital-media analyst Benedict Evans recently noted in his newsletter, is that the internet has taken ad and circulation revenue from newspapers. Newspaper sales in the UK have dropped by two thirds over the past 20 years, for example; while in 2018, newspaper circulation in the US hit its lowest level since 1940.

The Covid-19 crisis put the industry under further stress. PwC’s Global Entertainment & Media Outlook 2020-2024 report projects that global newspaper advertising will have fallen by almost $8 billion in 2020, and that global circulation revenues will have declined by $6.5 billion compared with 2019. The PwC report also forecasts global newspaper advertising falling from $49.2 billion in 2019 to $36 billion in 2024—by more than a quarter in just five years.

While the world is watching to see if Australia succeeds in making Big Tech pay publishers for the content they profit from, the fact remains that news outlets need to find new ways to broaden their income base.