World watches as Australian regulator rules on Facebook and…


A titanic struggle is taking place between some of the world’s largest corporations.

In one corner is Google and Facebook. In the other is News Corporation. It’s not alone. It stands with most of the established media companies which have watched with growing horror as their advertising revenues have migrated into the coffers of the digital behemoths.

Alphabet, Google’s parent, reported worldwide revenues of US$33bn in the third quarter and is on track to top US$120bn in 2018, mostly from advertising. Facebook’s revenues topped US$40bn in 2017 and have continued to grow during 2018. In just 10 years, the platforms have gone from nothing to hoovering up the majority of advertising dollars in Australia.

In contrast, News Corporation and most media companies have seen their revenues draining way. It began with what used to be known as print media, but are probably now better described as news media sites.

Now the conflagration has spread to free to air television, which depends on advertising for their existence. Their content is often republished on sites such as Facebook and YouTube without compensation, diverting eyeballs and diminishing their value to advertisers.

According to the journalists’ union, the Media Entertainment and Arts Alliance, the media sector has lost about 3,000 journalist positions since the growth of digital platforms escalated about 10 years ago.

The loss in the newspaper sector has been the most severe, down from 23,472 employees in 2010-11 to just 14,678 by June 2017. Some new digital jobs have been created but the impact is a net loss.

The beef the media companies have is that they invest in the journalism while the digital platforms simply take their output and republish it on people’s feeds and within their own news products.

It’s a complicated relationship: on the one hand the news media companies acknowledge they need Google and Facebook to reach younger audiences, who don’t read newspapers, visit websites or watch broadcast television. On the other hand, the financial benefit of their hard work is going straight to these multinationals, and now threatens their very existence.

A year ago the government, after intensive lobbying from the big Australian media companies, asked the Australian Competition and Consumer Commission to investigate whether these multinational digital services have an unfair advantage in the market, and whether they are abusing their market power.

This week we will get the preliminary view of the ACCC.

Chairman Rod Sims’ approach will have far reaching effects on the Australian media in the future. It will be important globally. His views will be studied by regulators around the world, all of whom are grappling with whether and how to ensure Google, Facebook et al don’t lead to the death of important and much loved media in their local communities.

Here’s some of the suggestions that have been floated.

Break up Google

One of the biggest complaints about Google is that it is vertically integrated and uses its businesses to keep people within the Google ecosystem.

In its latest submission, News Corp Australia argues that a separate ad-free Google News site was merely a tool to drive more traffic to Google search so it could monetise its services through mining user browsing data and then targeting ads to those users.

“Google makes every effort to keep the user within its own ecosystem, by including snippets of news that allow users to effectively read the key points without clicking through to the full article,” News says in its latest submission.

It’s also both the gateway to the internet and news content and an “intermediator” between readers and publishers through the provision of its Google News service, News says, and it uses these dual roles to generate revenue for Google at the expense of publishers.

Google disputes this and denies it misuses “snippets of news articles” so that users do not click on links of news websites.

“Google has no financial incentive to prevent users from clicking on links to news articles in response to their queries on Google Search and Google News. Because advertisers decide which search queries their ads will appear against, very few of them elect to advertise against queries that relate to news information,” it says.

Then there are Google businesses like Double Click. In order to obtain a reliable audience and advertising data relating to content featured, News argues publishers must pay for Google Analytics, and cannot use third party analytics software.

Google says it has been working with news publishers to address changing consumer behaviour, by sharing at least 70 per cent of ad revenue when they display ads from Google, and partnering with publishers to promote quality journalism online through the Google News Initiative and Google News Lab.

Fairfax Media has been part of the Google News Initiative and is generally supportive. However, it said “we see substantially less progress in commercial partnership opportunities with Facebook. It is our view that Facebook’s commercial interests are largely served by keeping users within Facebook’s environment.” Ditto some of the smaller platforms such as Snapchat.

“A clear preferred pathway is for publishers and platforms to explore and implement commercial, market-based solutions to the challenges presented by the current operating environment,” Fairfax said.

A carriage fee

Making Google, Facebook and Apple pay for news content that they push out in news feeds and on their own news services was floated by Rupert Murdoch in a statement on News Corp’s website in January.

“There has been much discussion about subscription models but I have yet to see a proposal that truly recognizes the investment in and the social value of professional journalism,” he said.

“The time has come to consider a different route. If Facebook wants to recognize ‘trusted’ publishers then it should pay those publishers a carriage fee similar to the model adopted by cable companies,” he said.

Others have echoed the call for digital platforms to pay up.

Foxtel says in its submission to the ACCC: “Our ability to attract subscribers and advertisers, and in turn obtain a return on our investment in content, is being seriously undermined by platforms which host our content without our permission, make it available for free to our entire potential subscriber base, and use that content to attract advertisers away from our platform.”

Nine put it this way: “A fundamental issue is that there is no equitable remuneration for the use of publisher content on digital platforms, and the digital platforms are extracting advertising dollars from the engagement with that content.”

Exactly how a carriage fee would work is not clear. Google has partly acknowledged that it is benefiting from the journalistic effort of others, with its Google News Initiative.

An algorithm review board

News and others have backed an “algorithm review board” to investigate how Google prioritises news organisations in its search results and to ensure it is acting fairly.

Search engines, like Google, use algorithms to decide the order they display links to web pages in a search. This is immensely important to media companies in generating traffic to their sites.

The algorithms take into account several factors including relevance, the reputation of the page and popularity to decide who to rank higher.

But it is not transparent and Google regularly makes changes to the algorithm, which are also not public.

News Corp has claimed that Google downgrades companies that have paywalls on their material, something Google has disputed in its submissions. (News has hard paywalls on most of its masthead sites, but none on news.com.au.)

Despite often railing against additional regulation, News Corp has proposed a review board to oversee the algorithms and make sure they are fair.

Free TV has set out the type of information it believes Google and Facebook should be making public such as what causes upgrades and downgrades. It also wants one month’s notice of changes to the algorithms.

Google told the ACCC: “Certain comments suggest that Google does not provide enough information about how its algorithms work. These comments do not recognise that Google is constantly engaged in finding the right balance between providing transparency about how search works while playing a cat and mouse game against sites that try to ‘game’ Google’s algorithms without providing any benefit to users.”

Fairer regulation in relation to advertising and content

From the free to air television industry’s perspective, the key changes the industry wants to see is some balancing up of the relatively heavy-handed regulation applying to television compared with the non-existent regulation of the digital platforms.

Nine Entertainment Co, which has just taken over Fairfax, calls it “regulatory disparity”.

“Nine is subject to strict regulatory requirements and licence conditions, including in relation to the standard and composition of its content, while the digital platforms prefer to be characterised as “tech companies” that do not have responsibility for the content they distribute, or require media regulation,” it says.

In relation to advertising, for example, television, radio and pay TV are subject to an election advertising blackout three days before an election. Digital platforms are not, with the result that political parties direct a deluge of money into Google ads in the last days of the campaign. Once upon a time that money would have gone into print – but no more.

In the days before the Wentworth byelection, anyone using Google search from their computer or phone in the Wentworth electorate, or searching a story about the byelection, was bombarded by ads for the Liberal candidate, Dave Sharma, or Kerryn Phelps, the independent.

There are wildy different rules that apply on sensitive advertising like gambling ads.

That doesn’t necessarily mean that free to air wants digital platforms to be subject to the same rules as them. They would be just as happy, perhaps, with a reduction in regulation across the board.

The bigger issue of Australian content is arguably outside the scope of this ACCC inquiry, which said at the outset it was focussing on news and journalism. But it may be tempted.

Most of the television networks and Foxtel have made reference to the free ride that digital streaming services such as Netflix, Stan and Amazon get under the Australian content rules.

The screen industry wants the popular on-demand platforms to spend at least 10 per cent of their programming on Australian content.

Currently, they have no requirement to spend on local programs, unlike the free-to-air networks which must meet local programming quotas, and pay TV, which must spend 10 per cent of its programming on local drama.

Fast take-down mechanisms

Another big gripe is that the digital platforms, particularly YouTube, are slow to act on requests from the networks and other copyright holders to remove material posted by users in breach of copyright. Free TV, the industry group, is arguing for a swift response mechanism when copyright is infringed.

Verification of ad claims by digital platforms

One of the other gripes of the existing media industry is that they are expected to make verifiable claims about the advertising reach of particular channels, publications or websites, but the digital platforms are not. The television industry funds OzTam which measures audiences. The digital platforms rely on their internal information to sell ads, which admittedly is more easily measured online.

The ACCC report is expected this week. There will then be a second round of submissions before a final report comes out next year.

The ACCC can potentially make orders about the structure of the industry if it considers there are serious breaches of the competition rules occurring. But issues such as Australian content rules would require legislation.

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