Australia takes on Silicon Valley to redistribute the wealth from news stories

The Australian Government has promised by July a mandatory code to force Silicon Valley to pay Australian media organisations for content used on their platforms.

Led by the Australian Competition and Consumer Commission, the mandatory code, which will be legislated following its introduction, will ensure money flows from the internet giants to the content creators. Companies such as Facebook and Google have greatly profited by being content aggregators, but without sending profits back to the content creators, the traditional media industry is not sustainable for the long-term.

As part of the new code, the internet companies would have to pay the original content providers for embedding content on the platforms. This could be approached in two different ways; a flat rate up-front for the work done on the article or a commission on the value which is realised by the social media giants for embedding the content on their platform.

“The ACCC, led by Rod Sims, produced an outstanding report which made a number of recommendations, recommendations that the Government has accepted,” said Frydenberg, during a press conference this morning.

“One of those key areas of focus for the ACCC was to develop a voluntary code between the digital media businesses and the digital platforms to govern their relationships. And last year, the Government announced that it hoped a voluntary code would be reached by November of this year. Those negotiations were held, and no meaningful progress was made on the most significant component of which the code was to deal with, namely payment for content.

“In the words of the ACCC, they did not believe that progress would be made, and a deal would be done with a voluntary code.”

Frydenberg made it very clear during the press conference that the Government did not want to step in to place regulation on the media industry, but as it nor the ACCC could see “light at the end of the tunnel” through these negotiations, it was forced to. The industry was given the opportunity to self-regulate, but it appears it was not changing its ways fast enough.

Meeting were being held and discussions were taking place, so it isn’t like the social media giants weren’t turning up, but advice from the ACC said it was unlikely there was going to be an end-result in the foreseeable future, certainly not before the November deadline.

While the internet has disrupted many segments of the world, few have been hit as hard as the media industry. Both in terms of the way in which these companies make money, and how the general public consume news, the landscape is incredibly different from a decade ago.

According to research from UK regulator Ofcom, 49% of adults now get their daily news from social media platforms. This is fine of course, but the way in which these platforms are designed means consumers will only get content which they are likely to find appealing. It creates an echo-chamber, which is more likely to create partisan political environments and stubborn individuals who are less accommodating of alternative thinking.

Social media certainly has a place in educating the public, but traditional media which presents news to consumers irrelevant to their ‘likes’, previous behaviour, advertising preferences and friends also plays a very important role. It is just as important for people to see news which they are not comfortable with.

Ultimately, the driver for this review and code is the need and desire to create a sustainable media industry. This is a critical component of a well-functioning and adequately informed democratic society, though as it stands, competition for advertising dollars is not in a healthy position.

With both the internet giants and traditional media competing for the same digital advertising dollars, the issue is the burden of content creation. As a content aggregator, the internet companies are not encumbered with the mission of creating or paying for content; quality and reliable journalism is not free.

But, a dynamic where two segments are competing for the same advertising dollars, but one acquires content from another for no cost is not a healthy dynamic. Traditional media companies have already had subscription revenues ripped off the spreadsheets, and unless they are adequately rewarded for their efforts, it is a struggle to see many of these titles surviving for the long-term. This is a significant problem for a democratic society which relies on the dissemination of information, analysis by experts and critique of claims.

This is of course a very valid mission for the Australian Government to undertake, as one this Silicon Valley has shown over the years is that its residents do not care about what benefits society when it detracts from profits. These are money machines, and if an initiative does not make more money, it is not important. This is perhaps the only reason the internet companies did not embrace the voluntary code when the option was available.

But what is worth noting is the ACCC will have to take into account failures in Europe.

Various European nations attempted to level the playing field, though these efforts would be considered a failure so far. The Australian authorities believe this is because it was attempted by reforming copyright law, which presented a raft of ripples throughout the industry. One consequence in France was a refusal from the internet giants to display domestic media unless it was for free, though French authorities are investigating whether this is a misuse of market power currently.

The Australian authorities believe the challenges can be avoided by taking a competition approach, rather than copyright. Few details of the thinking behind these claims were offered, though only time will tell. The fact it will also be legislated will add weight to the efforts.

What can be guaranteed however is a fight from the likes of Google and Facebook.

The lobbyists for the internet giants are some of the most active in the political capitals, while the lawyers are some of the most practised in the courtrooms. Silicon Valley generally does not react well to challenges to profits, irrelevant as to whether it is for the greater benefit of society.

The fight will of course delay the introduction of such as code, but this is a critically important move from the Australian authorities to ensure a fair, reasoned, unbiased media industry has a future in democratic societies.