Bullies, boofheads and the bargaining code

Sometimes, something happens and the reactions to it are so cynical and misconstrued, that one doesn’t know where to begin to unpack it.

Such is the case with this week’s “Facebook news ban”, in response to Australia’s brand new Media Bargaining Code. A gaggle of politicians immediately jumped on their well-worn soap boxes to denounce the tech giants generally, and Facebook in particular.

What is Facebook’s crime? They have refused to pay Australian media companies if you, or I, decide share a link to one of those media companies on Facebook. The Australian government says that showing this hyperlink is “making available certain news content”.

Of course, there is no news content made available when we post a link. To see the actual content, beyond the headline, we need to click on the link, leave Facebook’s website or application, and go to (say) the Sydney Morning Herald website. The same goes for Google. Apart from the link, the headline, and the line of the article to help you inform your decision to click on the link, Google does not make available any meaningful news content. But the code doesn’t care about this, it defines making news “available” as simply providing a link (Section 52B 1(b)).

This is, of course, laughable.

Links are how the internet works. Providing a link to a news site drives traffic towards the site, rather than taking it away from the site. So why are Google and Facebook being told they must pay if they publish these links? Shouldn’t it be the other way around?

The fundamental problem here, in the words of one Australian politician, is that the tech giants have “inserted themselves” between the Australian public and their traditional media.

This is true. Because we now access so much of our media via the internet, and these two companies have become very popular gateways to the internet, they have “inserted themselves” between us and our news. However, they do not charge us for passing through their gateways. Nor do they charge the media providers (unless we click on a sponsored link). Note also that this “insertion” is entirely consensual. The reason we pass through Google and Facebook is because we choose to – because they have provided platforms that can make sense of the information deluge that is the world wide web. That is a service, indeed quite a valuable one to us. We don’t pay for it directly, but someone does, of course.

The fundamental reason why both Google and Facebook make money is because they know us better than any other company, not because they are internet gateways, per se. Of course, the reason they know is better, is because we use them as a gateway. But they’re not charging a toll when we click on (unsponsored) links. They’re just watching, and learning what we like. That is value enough. So, when a media company wants to place an add banner on their website, they are faced with a stark choice: they can place an ad “blind” to the person who is looking at the website, which will have very little value and probably not result in sale, or they can ask Google and Facebook to tell them what ad to place, because they know who is looking at the website. [1]

Google and Facebook are, in effect, their only way of knowing who is browsing their sites, and the Media Bargaining Code specifically took aim at these two companies. The Australian Competition and Consumer Commission (ACCC) notes that the Code is supposed to address “the imbalance in bargaining power between each of Google and Facebook and news media businesses”.

So far, so good. We can probably all agree that there is an imbalance in bargaining power, due to the monopolistic (or duopolistic) natures of Google and Facebook, and we might also agree that “news” is a public good whose traditional business model (advertising) has been severely squeezed by the digital revolution and the “insertion” of the tech giants.

The question then becomes, what should we do about it?

And this is where the Government starts to look bad. The Media Code is an old school shakedown dressed up as consumer protection. Google and Facebook have set up successful businesses based entirely on our free choices to maximise our own utility. In doing so, they have deprived traditional media of some of their share of advertising revenues on which they depend. The response of the traditional media – which means Rupert Murdoch in Australia at least – has been to lobby their mates in government for protection. And no Australian government dares defy Murdoch (the only politicians brave enough to do that are our retired Prime Ministers).

This is classic cronyism.

Is this view too cynical, or conspiratorial? Well, let’s consider the Government’s motivation, as described by Josh Frydenberg, the Treasurer. He described the Bill as “an attempt to ‘create a level playing field where market power is not misused and there is appropriate compensation for the production of original news content’, and also ‘to ensure a sustainable and viable Australian media landscape’”.

This is from the same political party which, in 2003 and in 2017, removed restrictions on cross-media ownership in response to lobbying from Murdoch, the dominant traditional media company in Australia.

Former Prime Minister Kevin Rudd’s petition was launched in 2020 to address concerns “that Australia’s print media is overwhelmingly controlled by News Corporation, founded by Fox News billionaire Rupert Murdoch, with around two-thirds of daily newspaper readership. This power is routinely used to attack opponents in business and politics by blending editorial opinion with news reporting. Australians who hold contrary views have felt intimidated into silence.”

In 2020, Reporters without Borders (RSF) wrote that “Almost all of the privately-owned media are now owned by two media giants, Rupert Murdoch’s News Corp and Nine Entertainment, the heir to a consortium created by the Packer family. This oligarchic media model, in which media outlets focus above all on cost-cutting and profits, constitutes an additional curb on public interest investigative journalism”.

None of this has troubled the Government. They have been working hard to help Murdoch misuse his own market power, because they are the product of it.

So much for a level playing field. All of that depends on which team you’re on.

What about funding the public good of journalism?

Mr Frydenberg’s concerns about funding journalists seems to be confined to those who work for Rupert Murdoch. When it comes to the “public goods” of the ABC and SBS, he (and his party) votes consistently to fund them less.

So shaking down Google and Facebook because you’re worried about media funding doesn’t really stack up. They’re quite happy to watch ABC and SBS funding drop (in real terms).

Meanwhile, other parts of the media – not owned by Rupert Murdoch (such as the Guardian, the Financial Times, The Economist) have all managed to compete and grow their businesses. But News Corp posted a $1.5bn loss last year, with a 16% revenue decline in Australia, and 25-30% decrease in advertising revenues from masthead newspapers. Right around the time the Government duly asked the ACCC to look into Google’s and Facebook’s “misuse of market power”.

Which is all fairly ironic for a political party which supposedly supports markets and the creative destruction of market capitalism. Markets are all well and good, until they turn against someone with good connections in Canberra. This is what is known as “crony capitalism”.

What about the “production of original news content” or a “viable Australian media landscape”?

I would be happy to believe that Mr Frydenberg is worried about the state of journalism in Australia, except for the fact that under Scott Morrison’s Government, Australian press freedom has suffered serious reversals. This is a government which in 2019 launched a series of police raids on journalists. The warrant in that raid allowed the police to “add, copy, delete or alter” material in the ABC’s computers. Think about that. Imagine a drug raid where the police were authorised to “add” material.

In 2019, Australia dropped 5 places in Reports Without Borders press freedom index, to 26th in the world (putting us behind bastions of free speech Samoa, Namibia and Cabo Verde).

Journalists have been banned from witnessing and describing to us issues of national importance – such as how we treat refugees – because the government finds it the ensuing debate uncomfortable. There is no national security at stake on Manus Island, only national (and political) prestige. It is not a pretty scene. You can read the whole sorry story here.

Whatever we think about the market power of Google and Facebook, and the need for public funding of journalism (and these are things we should think about), we should not be taken in by the current soap-box opera.

The breath-taking cynicism of this spectacle is depressing on several levels.

The first, is that our current government is patently not interested in funding journalism, it is not interested in preventing abuses of market power or curbing oligopolies, and it is not interested in press freedom and the associated public interest. All of these arguments are being selectively and cynically deployed by people who view them as mere words; bullshit rhetoric to the thrown to the masses if it gets the job done.

The second is the sheer stupidity and unimaginativeness of it – declaring hyperlinks to be news content. It’s as though a B team of bored civil servants were given an afternoon to come up with a viable shakedown policy, and this was the least stupid idea the group-think could converge on before everyone hit the pub.

At no time, during the subsequent raucous session at the pub, did anyone stop to recall their first Economics class, where they were taught that taxing something tends to result in less of it, not more. Taxing windows in the 18th and 19th centuries resulted in fewer windows, taxing beards resulted in clean-shaved Russians in the 18th century, taxing carbon in Australia resulted in less carbon dioxide missions, and taxing ciggies resulted in less smoking. Australia’s billionaire miners managed to depose Kevin Rudd because they convinced the Labour party that taxing mining would result in less mining. The Liberal party have built a political movement on the idea that taxing enterprise results in less enterprise. There’s a pattern.

And yet, our politicians are now outraged that that their brilliant tax on news hyperlinks has resulted in… fewer news hyperlinks. It would be tempting to attribute it to disingenuousness, but depressingly, it is probably stupidity.

Why not ask, when proposing a tax on the tech giants, “what do we want less of?” as a starting point. What about “fake news”, or “time spent on our phones”? Surely there are a myriad of good targets for taxation?

It is depressing that the ABC and SBS were bought off, late in the day through an amendment to the draft bill and co-opted into the News Corp hand-out. Whatever money they make from this deal will be stripped from them at the next budget review anyway. This code was not about them.

It is depressing that Google and Microsoft accepted this nonsense, because this will only reward and encourage such lazy and vacant policy making. Perhaps that is the thinking. They know some tax in some form is coming, better settle with the boofheads we know than the smarter regulation that we don’t.

It is depressing that our cynical government’s sole area of competence seems to be in spin, and they are successfully spinning Facebook’s logical response to their regulations as “bullying”. Given most people don’t understand exactly how Facebook makes money, they’re ready to believe this. The tech titans themselves have communicated spectacularly badly on this issue. Our hardened politicians know that truth or sense are just irrelevant: what’s important is to manage perceptions and take the high ground early.

Finally, it is depressing because it will give comfort to the News Corp bullies, who know they still call the shots in Canberra.

[1] This is why, incidentally, Google and Facebook do not “sell our data” contrary to popular belief. Our data is their only asset. They use that asset to make money, but they certainly don’t give it away.