If anyone has caught the Aussie news lately you would have seen the war going on between Facebook (and somewhat Google) and the big Australian news outlets. We live in Canada and even we've heard about it so it must be a pretty big deal.
It piqued my interest as to what prompted Facebook to "ban all Australian news from its platform" and it left me questioning why was it only in Australia? So I did what any curious cat would do and watched the Australian news to get an understanding of what was going on.
As suspected, the news outlets were punching out the one-sided story with Facebook being the big bully in this situation. To get ALL the facts I would have to do some digging and look further than just the news outlets.
In this article we'll cover what all this all about, how it all started, why it's making the news and of course my thoughts on the situation. Let's go!
What caused Facebook to ban news from its platform?
"Facebook news ban stops Australians from sharing or viewing Australian and international news content"
That headline happened around the 18th of February, 2021 and it was all over the news. The tech giant Facebook felt like it "didn't have a choice" and banned all Aussie news content from its platform. Facebook did this as a result of a little thing called the Media Bargaining Code in Australia.
The News Media Bargaining Code (or News Media and Digital Platforms Mandatory Bargaining Code) is a new law designed to have large technology platforms that operate in Australia pay local news publishers for the news content made available or linked on their platforms. The code only started development in April 2020.
Check out this tweet from one of the Aussie politicians on February 25, 2021, which was one week after making some "last minute changes" to the code as a result of Facebook banning ALL news on the 18th of that month.
The code passed the parliament on the 25th of February, 2021 but it didn't just appear out of thin air. This all started way back in April 2020, so to understand how we got to this point we have to travel back in time to April 20th, 2020.
Timeline of the Media Bargaining Code
Development - April 20, 2020
The Australian government had asked the ACCC (Australian Competition & Consumer Commission) on April 20th, 2020 to develop a mandatory code of conduct to address bargaining power imbalances between Australian news media businesses and digital platforms, specifically Google and Facebook.
The code also includes a requirement to provide advance notice of algorithm changes and information on how and when Google and Facebook make data available for publishers. Penalties of up to 10 per cent of revenue could be applied if the tech giants fail to comply.
The Australian government hoped this "will ensure that news media businesses are fairly remunerated for the content they generate, helping to sustain public interest journalism in Australia".
Consultation - July 31, 2020
But back to the code for a minute. On the 31st July, 2020 the ACCC released a draft code for public consultation and a series of Q&As about the draft code.
Following consultation, the ACCC made recommendations to Government based on the views put forward by stakeholders. The Gov considered these recommendations and developed its final legislation. All parties had to review the code before August 28th, 2020.
Introduction - December 9, 2020
The code was converted to a Bill and introduced to Parliament on the 9th December 2020 and is available at: Treasury Laws Amendment (News Media and Digital Platforms Mandatory Bargaining Code) Bill 2020.
Banning of the news - February 17, 2021
Facebook users woke up this day to everything news related (and some non-news related) content removed from the platform, including even the publicly funded news outlets ABC and SBS.
Coming to an agreement - February 22, 2021
After the uproar from just about everyone, Facebook and the Australian Government came to an agreement and "last minute changes" were made to the code, and Facebook enabled the news content once again in the next few days.
The big change was that the government had clarified that Facebook will retain the ability to decide if news appears on Facebook so that they won’t automatically be subject to a forced negotiation.
So the way I see it is that the big Aussie news outlets want a piece of the money pie that they think they're missing out on by Facebook sharing their content "for free". And the pie they're asking for is no small sum, which we'll get into a bit later.
Facebook's reaction to the proposed code
As you would expect, Facebook didn't give the big blue tick to this idea. They began negotiations with the Government pretty much as soon as it all started and I don't blame them. Facebook's revenue would take a hit (albeit not a big dint overall) if they have to pay Australian news outlets to publish their content.
During the whole saga, Google even threatened to remove its search engine from Australia! Imagine that! Google has 94.5% of the search engine market share in Australia, according to web analytics firm StatCounter, so that would be a big blow if they had've followed through on that threat.
The Aussie Facebook managing director Will Easton was dead against the idea, even touting that the regulator misunderstands "the dynamic of the internet" and this would hurt the news outlets.
Here's what Mr. Easton had to say on the topic in September of 2020:
"Assuming this draft code becomes law, we will reluctantly stop allowing publishers and people in Australia from sharing local and international news on Facebook and Instagram. This is not our first choice – it is our last."
"We already invest millions of dollars in Australian news businesses and, during discussions over this legislation, we offered to invest millions more. We had also hoped to bring Facebook News to Australia, a feature on our platform exclusively for news, where we pay publishers for their content."
"But these proposals were overlooked. Instead, we are left with a choice of either removing news entirely or accepting a system that lets publishers charge us for as much content as they want at a price with no clear limits. Unfortunately, no business can operate that way."
What this meant was that users and publishers would not be able to publish or distribute any news articles on Facebook or Instagram. Facebook updated their terms of service on October 1, 2020 saying that they had the right to "remove or restrict" access to content, services or information so it could avoid or mitigate any regulatory hurdles in Australia.
The ACCC said Facebook and Google had 3 months to negotiate revenue sharing deals before the Bill becomes law via the Australian Government.
Why did Facebook ban news content on Feb 18?
Facebook believes it offers much more benefit to news companies than news companies offer to Facebook and I tend to agree when you look at the data.
Our old friend Will Easton said in a blog post that news content accounts for less than 4% of content people see in their news feeds, while Facebook accounted for 5,100,000,000 clicks to Australian news websites in 2020, worth an estimated $407 million. Facebook argues this value isn’t taken into account in how the negotiations are structured in the proposed news code.
To send a message, Facebook went loco and banned EVERY piece of news content to try to show media companies how little news means to Facebook and how much it might affect traffic to news sites if they were suddenly cut off.
I think it's fair to say that message was received loud and clear. After this stunt from Facebook, the Government went back into negotiations and made the last minute changes to the code, as i mentioned earlier. It was considered a win from both parties.
Who is expected to benefit from this code?
Whether or not the bargaining code is ever used, the Government got what it wanted: a large sum of money flowing from platforms to news publishers. It's the threat of the code that forced tech companies to negotiate. Only some news outlets will benefit though.
Not the little guys
The Bill stated that news companies that have met or exceeded AU$150,000 in revenue for the past year or at least the last 3 out of 5 years, are the ones that are eligible to enter into the revenue sharing deals. This means the little guys will miss out, while the big dogs get to dabble in the revenue pie.
The big news companies
It's the privately funded companies such as Nine Entertainment, who owns The Age and The Sydney Morning Herald and News Corp Australia, which owns The Herald Sun and The Australian, that are some of the big names looking to cash in with the introduction of this new code.
The publicly funded news outlets such as ABC and SBS will likely be excluded from these revenue sharing deals because they don't rely on advertising to fund journalism and their operating models haven't been undermined by Facebooks dominance.
What will Facebook have to pay each year?
With Google reaching a deal to pay Nine $30M annually for 5 years for its news content, the pressure is now on Facebook to reach a deal with the news conglomerates. But how much will they have to pay? The answer, it depends.
For every $100 spent on advertising in 2019, $53 went to Google, $28 to Facebook and just $19 to all other websites and ad tech. With that information, Facebook has a 28% share of the advertising revenue and possibly even more now since that data is based on 2019 information.
It's unclear exactly how much Facebook will pay the news publishers for its content, but it's likely to be less than the Google deal and on par with what it already pays news producers.
Facebook has maintained the right to reach deals with the publishers behind close doors and if an agreement cannot be reached then a third party arbitrator will be called in to settle the deal, using the new code as a guide, but this event is unlikely to occur.
All of this is about money, and the two tech giants have a lot of it. It's no surprise that the Aussie news companies wanted to get in on a piece of the money pie. Honestly, who can blame them? If they could get paid for the content that Facebook was already sharing for free, it makes sense that they'd chase this opportunity.
Looking at it from Facebook's side, they've directed over 5 billion people to news Australian news outlets in 2020, estimated to be worth over $400 million dollars. That's free advertising for these news publishers, which i think is being overlooked in this whole situation.
With the threat of "the code" being used if deals cannot be reached behind closed doors between Facebook and the news publishers, I think Facebook may be less likely to even engage with some news companies and therefore the news companies will miss out on both the potential revenue AND advertising that Facebook could have given them.
I personally think the big news companies are being a bit greedy and trying to "cash in" with revenue sharing deals that only benefit them and have no real benefit for Facebook or Google, other than the Government allowing them to stay present in Australia.
Overall, I believe the tech giants should pay something to the news outlets to publish their material on their platforms. But the news outlets need to appreciate how much free advertising they already get and it's hard to put a tangible value on what revenue that generates for them. It'll be interesting to see how this will all unfold.
Blake - FIRE with a family