An increasingly digital world has led to an exponential growth in the power of digital platforms, and the topic of digital platform regulation increasingly controversial.
In particular, the accumulation of market power for digital platforms has caused digital platforms to be able to drive down the prices they pay for journalism. Media businesses are unable to negotiate prices, reducing their revenue, which reduces the incentive to produce news content.
As journalism is in the best public interest for social democracy, an under-allocation resources to a public good occurs (market failure). The Australian government have attempted to resolve the market failure through the implementation of the Australian News Media Bargaining Code (NMBC).
What is a digital platform, and what is the power they hold?
More specifically, an example of digital platforms are Google and Facebook (who are the main platforms targeted by the NMBC). Google and Facebook provide advertisers advertising opportunities, while providing services (such as access to media) at no monetary cost to consumers.
To put in perspective the importance of Google and Facebook in the digital space, a 2019 Nielsen Digital Panel has found that out of the time Australians spend on time, on average, Australians spend 8-9 times more time on Google and Facebook relative to news outlets.
Figure 1: Source – ACCC
The Reuters Digital News Report finds that after 63 percent of Australians preferring to access news via television, while over 50 percent have online news and social media ranked as Australian’s main news sources. Thus, more than ever, media outlets are finding a large reliance on digital platforms like Google and Facebook for promotion and access to their content (and access to advertising revenue), causing a great imbalance of bargaining power.
What are the implications of bargaining power imbalances?
The ACCC 2019 Report into Digital Platforms has found that both Google and Facebook have substantial bargaining power in its’ dealings with Australian news media businesses.
The inability of news businesses to negotiate individually with digital platforms, is most indicative of a bargaining power imbalance. This means that news companies have little say in the price of their news content, as well as policies impacting their commercial revenues.
To be specific, the ACCC 2019 Report expressed concerns that policies implemented by the digital platforms could work to:
- Have significant negative impact towards the ability of news media business to monetise their content and/or brand.
- Lack of brand will reduce audiences and decrease their advertising revenue.
- Significantly reduce the incentive to produce news content, in particular original and research-intensive content.
- As there is limited monetisation, it becomes increasingly difficult to afford the cost of doing research and original news content.
Journalism can be viewed as a public good contributing to democracy, as well as social cohesion. News is needed for a more informed and connected society. In particular, original news content is essential for media diversity, as without it there runs a risk of no diversity in topics reported, as well as differences in opinion.
Thus, we can conclude that the bargaining power that digital platforms have over media businesses can cause a market failure (under supply of public good).
Addressing the market failure – Introduction of the NMBC
The NMBC is a piece of legislation under the Competition and Consumer Act, that came into effect on the 2nd of March 2021. It is the ‘world’s first’ legislation dealing with bargaining imbalance between digital platforms and media news businesses.
The introduction of NMBC did not come without hardship, with both Google and Facebook penning public statements. The draft NMBC was released on the 31st of July 2020, and within 7 months:
- Google released 29 statements (blogs/open letters/pop ups – one which included the threat of removing the Google search function in Australia), and
- Facebook suddenly blocked all Australian access to news information.
Figure 2: Source - Facebook, Screenshot by Benedetta Brevini
Figure 3: Source - Google, Screenshot by Benedetta Brevini
The Australian Government responded, defending the code as a remedy to the lacking regulation for large digital platforms. From a political economic perspective, the relationship between the Coalition (who were in power during the formation of the code) and the news industry was a strong incentive to defend the code.
Historically, the Coalition have had a rocky relationship with the tech industry and sought to regulate technology. For example, in 2015, passing copyright law blocking file-sharing websites. In contrast, the news industry has been dominated by two conglomerates – Nine Entert ainment and News Corporation. These media companies have had personal relationships with politicians, with Nine Entertainment even holding a Liberal Party Fundraiser.
Details of the NMBC
The NMBC details the obligations of media news businesses and digital platforms in bargaining, and perhaps surprisingly – currently has no digital platforms under its designation.
Despite having no digital platforms under designation, the NMBC has evened out some of the previously imbalanced bargaining power. The mere threat of designation under the conditions set in the NMBC has provided enough incentive for main digital platforms to settle privately with the media news businesses on commercial deals, providing bargaining power to news businesses that would be otherwise absent.
Brief summary of how the NMBC works:
- For news businesses meeting the 6 requirements under the Australian Communications and Media Authority – they are able to benefit from the Code.
- The requirements consider annual revenue of the corporation, and contribution to Australian journalism.
- The NMBC mandates digital platforms comply with minimum standards and a non-differentiation
- These detail rules surrounding making changes to policies of the digital platform.
- The non-differentiation obligation prevents platforms from differentiating treatment between different categories of news businesses.
- The registered news business can inform the digital platform of their wish to bargain.
- If the businesses are unable to reach agreement by the end of 3 months, they agree to mediate.
- If mediation falls through, then the Australian Competition and Consumer Commission is notified of a final offer arbitration.
- Both businesses submit a final offer, and the ACCC decides based on the public interest.
Impact of the NMBC?
Instead of solving issues through arbitration, Google and Facebook created deals with Australian news media businesses. The platforms have signed deals with News Corp Australia, Nine Entertainment and Co, and Seven West, to name a few.
As a result, the news corporations have received deals worth more than $200 million (Australian Dollar) per year. While details of the deals are not readily available to the public, the Guardian has provided that the code enabled increasing staff by 50%, and the ABC has stated the deal financed 57 journalist positions in regional areas.
Critique of the NMBC
Nothing is perfect, and the NMBC is no exception. The lack of transparency regarding these deals between the digital platforms and news organisations, has been a main talking point surrounding the NMBC.
In addition, there is critique that small news organisations are unable to benefit from the NMBC, and that the most prominent players of the news industry have received the most beneficial deals.
Research undertaken by Brevini and Ward 2021, estimated that the main organisations (News Corp Australia, Nine Entertainment and Co, and Seven West) together, will likely gain approximately 90 per cent of Google and Facebook’s deals under the code.
This poses further challenges to media diversity, as well as the concentration of ownership in the Australian news industry.
Conclusion – NMBC and its implications globally
As the NMBC is the first of its kind globally (to tackle bargaining power between digital platforms and news organisations), other countries have followed suit.
Canada has proposed legislation, where deals are formalised and publicly reported. The United States introduced a Journalism Competition and Preservation Act, that includes some key features of the NMBC.
In conclusion, beyond being the first to attempt solving bargaining imbalance between news media businesses and large digital platforms, the NMBC has also opened conversations regarding the governance of digital platforms – something that becoming increasingly relevant in the current climate.
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