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RUBY:

From Schwartz Media, I’m Ruby Jones. This is 7am.

After lobbying from the Murdoch press and Nine newspapers, the government is trying to force Google and Facebook to pay for journalism.

The response from the tech giants surprised everyone: they’re threatening to stop sharing news from Australian outlets.

Today, Mike Seccombe on the game of brinkmanship that will determine the future of media in this country.

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RUBY:

Mike, last week, Facebook sent out an unusual press release. Let's talk about what was in it. What did it say?

MIKE:

Well, it was on Monday and Facebook put out this media release under a very bland heading, which was an update about changes to Facebook services in Australia. But, you know, what it contained was anything but bland.

RUBY:

Mike Seccombe is The Saturday Paper’s National Correspondent

MIKE:

In it, Will Eastern, who's the managing director of Facebook Australia and New Zealand, said that Facebook would, quote, reluctantly stop allowing publishers and people in Australia from sharing local and international news on Facebook and Instagram. So that was the threat that it contained.

And it caused instant panic, I think you'd say, right throughout the media industry.

Archival Tape -- Unidentified Woman #1:

“Social media giant Facebook is being accused of holding Australians to ransom after it threatened to ban news from its pages”

Archival Tape -- Unidentified Man #1:

“The social media giant says it will block Australians from sharing news if the plan goes ahead.”

Archival Tape -- Unidentified Woman #2:

“As it seeks to stop a world first law from being passed here which would… “

RUBY:

And so what has been happening behind the scenes here? What's led to this fairly extraordinary threat?

MIKE:

Yeah, I think extraordinary is exactly right. It was prompted by a proposal from the Australian Competition and Consumer Commission, the ACCC

Archival Tape -- Unidentified Man #2:

“What we have sought to do is to create a level playing field, to ensure a fair go for Australian news media businesses...”

MIKE:

To make Facebook and the other giant tech company, Google, pay Australian media organizations for their content appearing on Facebook and Google.

Archival Tape -- Unidentified Man #2:

“...And that when they generate original content, that they are fairly paid for it.”

MIKE:

And the government's foreshadowed legislation to actually force these digital players to negotiate a price with Australian media companies for the content of those Australian media companies when they publish it.

Archival Tape -- Unidentified Man #2:

“We want it to be on our terms. We want it to be in accordance with our law. And we want it to be fair.”

MIKE:

And this prospect has just mightily displeased these digital behemoths.

As well as Facebook’s threat, Google began running pop ups, warning users that the way Aussies use Google is at risk and quote, their search experience will be hurt by the new regulation. They were also appearing on YouTube, which is owned by Google.

But, you know, the Facebook one just escalated it to a whole new level.

RUBY:

Mike, this proposed new regulation is the culmination of a long running lobbying effort from traditional media companies here in Australia to try and to force the government to rein in the tech giants. So what is their main problem with the way that these companies operate?

MIKE:

In a nutshell, it's that they are sucking up all the advertising revenue.

Before the advent of the digital platforms, news organizations - radio, TV, print, et cetera - subsidise their newsgathering through ad revenue. And now these digital platforms are grabbing an ever growing share of that revenue. And so, the media organizations are in dire financial straits.

Archival Tape -- Unidentified Man #1:

“The latest cuts will put hundreds of journalists out of work and will be a devastating blow for communities around Australia…”

MIKE:

Thousands of journalists have lost their jobs. Important aspects of public life go unreported or inadequately reported.

Archival Tape -- Unidentified Woman #1:

“Newscorp has announced that the bulk of its community and regional newspapers will switch to digital-only services from the end of June…”

MIKE:

Cheap news and sponsored content is replacing serious news, you know, as the big companies shrink. And, you know, a bunch of smaller outlets are going bust.

Hugh Marks, the chief executive officer of Nine, went on radio last week...

Archival Tape -- Fran Kelly:

“Hugh Marks, welcome back to breakfast.”

Archival Tape -- Hugh Marks:

“Good morning, Fran.”

MIKE:

...and said that the threat from Facebook was an abuse of monopoly power.

Archival Tape -- Hugh Marks:

“The fact is there is only one social platform, it's a monopoly and we’ve been in a position where we haven’t been able to negotiate a commercial outcome because of that monopoly position…”

MIKE:

And he told Fran Kelly on Radio National that companies like Facebook and Google should be paying news companies because they were profiting from their content.

Archival Tape -- Unidentified Man #1:

“The question here, Fran, is a lot of our news is consumed in Facebook and not consumed clicked out into our environment. So really the argument is around what is the value of that to Facebook…”

MIKE:

Meanwhile, these big players are pulling in huge amounts of money. To give you one example of how much, Google Australia took in $4.3 billion from Australian advertisers last year and Facebook made $674 million. So, you know, there's a finite pool out there and they're just sucking it all up.

RUBY:

And so Google and Facebook, they might be taking ad revenue from traditional media companies, but they also benefit them, by helping them distribute their news, right?

MIKE:

Yeah, that's that. That's right. I mean, Easton, Facebook’s man, made the point that the media organizations voluntarily post their news on the site. Easton claimed that over the first five months of this year, Facebook sent 2.3 billion clicks from their news feedback to Australian news websites at no charge. I'm quoting him here, additional traffic worth an estimated 200 million Australian dollars that went back to the Australian publishers.

So, you know, assuming that his figures are right and they managed to actually reap that amount of money, it sounds like a lot until you compare it with the four point three billion that Google made and the enormous amount that Facebook made.

So, what he says is essentially true. But equally true is what the ACCC said in its digital platforms report, which is that the two big platforms are so dominant that they've become, quote, unavoidable trading partners for the Australian media. In short, the ACCC found the big platforms had just this huge, disproportionate amount of bargaining power.

RUBY:

And so what exactly is the ACCC proposing here in Australia?

MIKE:

Well, it proposes that the tech giants would be required to sit down and negotiate compensation for the news they use, and that if no voluntary, mutually satisfactory agreement proves possible, then they would go into arbitration. And this is something that the tech giants are obviously desperate to avoid.

And I should say that this is not unprecedented. Something like this has happened before when Spain, about five years ago, tried to do something similar to what's being proposed in Australia, Google News promptly just shut down its operations in that country.

RUBY:

We’ll be back in a moment.

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RUBY:

Mike, how did the relationship between media companies in Australia and Facebook and Google break down to this extent? And what are the consequences of that for the public?

MIKE:

Well, I mean, it's been hostile, I think you would say, throughout this process. Particularly, you know, as far as the big media companies are concerned.

But in recent months, the two giant companies, you know, Google and Facebook have, I'm told, been engaging fairly productively with quite a number of the smaller media companies on ensuring some kind of, you know, mutually beneficial arrangement whereby publishers would get at least some money and the tech companies would have an optimized platform for news, as they call it.

But negotiations with these big ones have been stalemated, particularly the Murdoch media and also Nine.

And, you know, as I mentioned in Spain, we've seen this play out before and the losers there, of course, were the public.

Archival Tape -- Unidentified Man #1:

“Google said in a blog post last night that it plans to close google news in Spain after lawmakers there passed rules that required Spanish newspapers to charge Google…”

MIKE:

And in Spain, according to at least one study I looked at, overall news consumption fell by some 20 per cent.

Archival Tape -- Unidentified Man #1:

“It seems pretty obvious to me that this is just going to decimate, sort of accelerate the demise of the Spanish news publishing industry…”

MIKE:

But the interesting thing about that is that it wasn't the big sites in Spain that suffered, the big news organizations. It was the smaller publishers that overwhelmingly suffered.

Apparently what happened was people reverted back to getting their news from one source, probably, or a couple of sources, and that they went back to the big ones and they took the smaller operators out of their news feed. So that's a big worry for diversity.

I would suggest the big publishers in this country, I might add, are probably aware of that outcome, which suggests there might be, you know, more than one reason for their intransigence in the current negotiations.

You know, not only do they potentially gain more revenue as a result of Google and Facebook being forced to deal, they would also damage upstart competitors. And some people also see another agenda, which is a political one, which is that the government's strong support for this measure is about looking after the big domestic media players so that the big domestic media players will look after them. That is, you know, Nine and particularly the Murdoch media, which, you know, as everyone knows, is very strongly supportive of the conservative side of politics. So there may be a bit of political mutual back scratching going on here as well.

RUBY:

Mm okay. And Mike, since Facebook made its threat last week, has the conversation progressed any further? Does it look like this impasse is going to resolve?

MIKE:

I regret to say not. The ACCC, I think, seems to have been a bit taken by surprise by this. A brief media release came out the next day quoting the commission chair, Rod Sims, which sort of just blandly reiterated that the draft media bargaining code aims to ensure Australian news businesses can get a seat at the table for fair negotiations with Facebook and Google.

And he went on to express the hope, you know, as the ACCC and government work to finalize the draft legislation, we hope all parties will engage in constructive discussions.

Well, it seems to me that events have kind of moved past the point of constructive discussions at this stage. I mean, I hope I'm proved wrong, but it seems to me that the tech giants and the big Australian media players have both dug in.

RUBY:

Mike, isn't this whole debate really one about technological change? New players arrive and disrupt the old models. So why should media companies benefit from government intervention here?

MIKE:

Well, it's a very good point. And it's divided a lot of expert opinion as well.

You know, there are those who worry about the impacts on news. And there are those who worry about the actual sort of, you know, precedent here for competition policy.

And we should remember here that the Liberal Party is supposedly the party of free enterprise and competition. I think the fact that we've already seen a proposal for such a serious intervention is kind of a reflection of the power that companies like NewsCorp have within government.

If Facebook does carry out its threat, there's a real cause for worry. As things stand now, Facebook hosts actual news, you know, real news. But it's also a cesspool of conspiracy theories and misinformation and hate speech and fake news. If you take away the real news, Australians are left with no counterbalance to all that dross. And that's got to be, you know, a bad thing for an informed democracy.

We'll see how it all plays out in the coming months. But we seem to have here an intractable problem, the irresistible force of the tech giants meeting the immovable object of Australia's big media players and their political agents. And, you know, this is bad news. I mean that not just figuratively, but literally bad news.

RUBY:

Thanks, Mike. Great talking to you today.

MIKE:

My pleasure. Talk soon.

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RUBY:

Also in the news today…

The Prime Minister, Scott Morrison, has criticised the Victorian Government's roadmap out of coronavirus restrictions, saying he hopes the state will open up more quickly than is currently outlined.

Morrison said that Victoria needed to lift its contact tracing capacity to match that of New South Wales.

However, he refused to extend JobKeeper and JobSeeker payments for Victorians, despite the fact many industries will remain shut for months.

Meanwhile, Victoria's Chief Health Officer Brett Sutton said yesterday that Melbourne could be released from lockdown earlier than expected if case numbers drop.

Professor Sutton said that while September 28 was locked in as a "hard date", all future dates were open to review, pending case numbers.

I’m Ruby Jones, this is 7am. See ya tomorrow.

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