What the Code's about

A revised News Media Bargaining Code has now been introduced to parliament. The Code was born from the ACCC's Digital Platforms Inquiry and sought to correct an imbalance in bargaining power between Google and Facebook on the one hand, and news publishers on the other.

The power imbalance stems from the news publishers' dependence on audience referred from Google and Facebook. That audience is critical to their advertising revenue, making Google and Facebook unavoidable trading partners.

The Code tries to fix the imbalance by forcing Google and Facebook to pay for the right to `make available' news content on their platforms and providing other minimum service standards. We've written about the flaws in this approach here and here.

After fierce public lobbying from Google and Facebook, including Facebook threatening to withdraw news altogether in Australia, the amended Code reflects some big changes.

What has changed in the new Code

  • `Making available' news content is defined. Under the Code, Google and Facebook have to pay to `make available' news content. That's now defined to include reproducing news, `placing' it on the platform, linking to it, or providing an extract. Paying to reproducing news content makes sense; that's essentially a copyright licence. But paying to link to a news site that's crazy talk. There's no good reason to make the platforms pay to link to a news site. Logically, the news publishers should pay the platforms to provide the link. That's how they get the audience on which their revenue models so heavily rely.
  • The value of the audience supplied by Google or Facebook is now relevant. The remuneration to be paid by Google or Facebook can now take account of the value of the audience that they supply as well as the value of the news content to them. This could undo the whole remuneration regime where the value of the audience is likely to outweigh the value of the news links (possibly by a lot). For that reason, it might also be the thing that stops Facebook and Google from pulling their news services altogether.
  • Google and Facebook can contract out of the Code. This would make more sense if the Code were framed as a formal access regime with regulated access terms for the relevant services. Then it would provide news publishers with a clear safety net if they can't agree with the platforms. Instead the Code leaves them with a complicated and uncertain fallback to the arbitration rules in the Code. Add to that the consideration of value provided by the platforms in an arbitration, these two changes represent a big loss for the news publishers in the updated Code. On the upside (for the government), allowing for deals outside the Code reduces the risk of the otherwise inevitable legal challenges arising from the Code.
  • Other stuff: There's been work done on the `minimum standards' required of the platforms, clarifying and narrowing the algorithm change and information supply obligations. The ABC and SBS scored a win and can now seek payment from the platforms. And Treasurer Josh Frydenberg now says the Code will initially only apply to Facebook NewsFeed and Google Search. Instagram and YouTube are out.

Where does that leave us?

With the changes to the Code, it looks like the government accepts that this is a bad piece of legislation.

It started heavy-handed regulation pandering to the major news outlets. In attempting to dilute it and placate the platforms, it has become more complicated and far less certain of having any positive effect on the news industry whatsoever.

And the policy behind the Code remains fundamentally flawed. It represents the government creating artificial supply markets to bolster the news industry, without addressing the underlying problems with an advertising-based revenue model for news. The tension between public interest reporting, and reporting that generates ad revenue, long predates the existence of Google and Facebook. Why it falls to them to prop up the news industry nobody has really explained.