In February 2021, the Australian Parliament passed a landmark legislation ~ the News Media and Digital Platforms Mandatory Bargaining Code ~ mandating that technology giants like Facebook and Google pay news outlets a ‘negotiated fee’ to link to or use their news contents on their platforms. The legislation obligates them to engage in compulsory arbitration if any settlement can’t be reached with the news publishers on payment terms for sharing their news content, failing which the arbitrator decides the terms of such agreement. Failure to negotiate and settle attracts a stiff penalty ~ the highest of $10 million, 10 per cent of turnover or thrice the monetary benefits derived from the news contents.
Given the untrammelled power of tech giants, their ability to propagate harmful content and violation of privacy rights of users for their own commercial benefits, Governments in different countries have been trying to regulate them for quite some time now, without much success. In the USA itself, there are at least half a dozen anti-trust lawsuits against Facebook and Google. Last year, the US Justice Department sued Google for resorting to monopolistic practices and the Federal trade Commission sued Facebook for buying and freezing out small start-ups to choke competition, demanding it to unwind its acquisitions of WhatsApp and Instagram. Many US states have also filed antitrust lawsuits against them.
But the entire world was watching with bated breath to see the outcome of the legislative process in Australia which may become a global template for regulating the tech giants’ relations with news publishers. The companies tried their tricks to intimidate the Government ~ Facebook blanked all news on its platform in Australia and Google threatened to shut down its services in the country. But in the face of the Government’s resoluteness, both the companies backtracked – Facebook restored the news pages after five days and struck a deal with some publishers before restoring the news pages.
It agreed to pay Seven West Media ~ a major Australian media firm ~ for using its news content, while starting negotiations with another media company called Nine Entertainment. Google also fell in line, striking a multi-million dollar three-year deal with Rupert Murdoch’s News Corp, the parent company of the Wall Street Journal.
The dispute between the tech giants and news publishers has been going on for years now, and Google and Facebook so far managed by paying publishers on their own terms while evading the core copyright issue, on the pretext that they automatically help publishers by directing users to their sites through links, and that requiring them to pay would violate the principles of web-linking that drives the internet. Publishers argue that tech giants have immense asymmetrical power to force their terms. But the real issue actually strikes at the very root of democracy and that is why governments are concerned. The arguments proffered by the publishers also do not hold: in the early days of Google, searches turned up links that directed users to the websites, but now Google itself answers the queries, filling the top of its results page with images and large amounts of text borrowed from the publishers, sparing the users the necessity of further opening the links.
Similarly, comments posted by Facebook users on the linked newspages do not automatically ensure directing the users to those, but enable Facebook to monetize the attention generated by the post with its own ads. Thus while the two giants have grown into ad-behemoths, their stranglehold on advertisement revenues are decimating the news-publishing industry. With their ad-revenues steadily declining all over, they are struggling for bare survival. Many have already perished, and many more have been forced to erect a paywall which further erodes their reader base. The two tech behemoths together account for 80 per cent of external traffic to news websites and appropriate around 80 per cent ad revenue from the digital distribution of news contents generated by news publishers and further squeezing their survival space. Prior to the legislation, an inquiry by the Australian Competition and Consumer Commission (ACCC) found that tech giants were appropriating a disproportionately large share of the online advertising revenue at the expense of media houses even before the pandemic hit the media industry hard, shutting down many and/or laying off journalists or stopping printing altogether by the others. ACCC found that “for every $100 spent on online advertising, Google captures $53, Facebook takes $28 and the rest is shared among others”, which is a pittance ~ the lion’s share being cornered by the tech giants who bear no cost for producing the news that get them the bulk of revenues that rightfully belongs to the media houses. Indeed, their revenues from digital advertising registered steep increases between 2019 and 2020 ~ Facebook’s revenue increased from $71 billion to $86 billion while that of Alphabet which owns Google increased from $161 billion to $182 billion. In Australia alone, Google made $4.3 billion in ad revenues, while FB made $700 million. Hopefully the new law will now give the asphyxiated media houses a fresh lease of life.
News and its free dissemination constitute the most essential feature of democracy, and by using the news content without paying for it, the tech giants are not only killing the newspapers but weakening the very foundation on which democracy itself rests. Internet has emerged as a most significant democratising tool in our age by providing a universal open forum to disseminate news and opinions. Advertisement revenues rather than subscriptions are the lifeblood of the newspaper industry which invests heavily in men and equipment for creating news content, but companies like Google and Facebook that control the internet have no obligation to pay for the news while garnering all the revenues from them, and robbing the news producers of those revenues. Unless the newspaper industry which is key to any vibrant democracy becomes financially viable, meaningful discourses and debates cannot provide inputs to governmental policy formulation; it also imperils democracy besides causing losses in jobs and taxes.
Until recently, most Indian newspapers were available free in the web ~ today to sustain themselves, most newspapers have erected paywalls based on a subscription model which in turn curtails their circulation and reduces their revenue further. The model becomes viable only when sharing the Facebook or Twitter links on any news content would need a subscription password, without which neither Google nor Facebook will be able to access them, defeating their very purpose ~ more so for a search engine like Google which in turn would demand a share of the digital revenue from news publishers.
In 2019, before the Australian legislation, the EU allowed publishers to ask tech platforms for payment. When France became the first country to implement this, Google threatened to shut down Google News but eventually struck a deal with French publishers to pay them for online news. It proved that a determined Government can force its will on big tech. The Australian case is a further vindication of this. Internet is without any national boundary and nations need to collaborate to force tech giants to behave rationally lest they become monsters out of control.
But like in every other sphere, here also we need to institute a system of checks and balances, to spread the benefits equitably across all publishers, big and small. Since presently only the big media houses like Rupert Murdoch’s stand mostly to benefits from negotiations and payments, the question being raised is how to make small media organisations also benefit from the new law ~ here again, the might of the big may force the small without any bargaining power to accept whatever terms are being offered to them.
But one thing is certain ~ more countries will now brace themselves for taking on the might of big techs. Canada, UK, Germany and Spain are waiting in the wings, and many more may join soon.
In India, the Government has not yet started any course of action. Both the Copyright Act, 1957 and Competition Act, 2002 in India lack the teeth to force these companies to mandatorily share revenues with publishers. To make them adopt a uniform revenue sharing model worldwide is one option, which requires all countries to collaborate. More than 130 countries are presently negotiating to finalise a framework to prevent multinational companies evade taxes by shifting their activities and profits among countries.
Last year, India imposed a 2 per cent tax on all foreign billings for digital services provided in India, followed by a similar 3 per cent tax imposed by France. But collecting such taxes is easier said than done because the digital companies earn revenues from one country but pay taxes elsewhere. In the absence of an agreed international framework, tech companies would always exploit the situation by yielding to powerful governments while bullying the weak. Being one of the largest and fastest growing internet markets, India must lead the world in fighting the big tech companies and making them pay uniformly.