Facebook news crisis: Storm in a teacup or strategic play?

5 March 2021

Within the space of a week, Facebook had shut down access to Australian news content, drawn strong criticism from many circles then reinstated news services again. Spoke Corporate media specialist SIMON SHEPHERDSON investigates how the extraordinary move came about and why it may have been so promptly reversed.

When Facebook pulled the pin on Australian news content recently, the Federal Government and most of the country’s media went into a tailspin, launching a tirade of criticism on the tech giant.

However, it is a classic case of “be careful what you wish for” because they were the very parties that set the train in motion in the first place, working together to devise legislation enforcing certain tech platforms to pay for Australian news content links.

Facebook argued that its reach provided far more value to news providers than they provided to Facebook. The company also provided very clear warnings that the proposed legislation would force it to make some drastic moves. And it followed through.

Less than a week later, the news broke that the blanket ban had been reversed. The Australian Government and its strong media alliance are claiming victory and so is Facebook. And we all know that when two warring parties claim to have the upper hand, there have no doubt been losses on both sides too.

From the Government perspective, the claim to victory is that they have now forced Facebook to the negotiation table to strike commercial deals with media organisations. But they also appear to have caved and made various amendments to the proposed News Media and Digital Platforms Mandatory Bargaining Code.

Media consultant Hal Crawford, who has previously held roles including Editor in Chief and Publisher for NineMSN Australia, and Chief News Officer for New Zealand TV, radio and digital news provider Mediaworks, says the legislation was bad from the start.

Hal has followed with interest – and a reasonable dose of pessimism – the evolution of the code.

“For many years, Rupert Murdoch had been on a warpath for what he regarded as theft of content from news organisations, particularly by search engines,” Hal said.

“That was one of the original drivers for the legislation, but it gained the support of a much broader coalition of media as time went on.

“There’s little doubt that Murdoch’s News Corp and other mainstream media players put pressure on the Federal Government to implement the legislation. It was a way for an industry with declining revenues and little clarity on how to reinvent themselves to generate a new income stream.

“Unfortunately, very few people in the media looked at the arguments for and against it with any level of objectivity and Facebook’s move last week showed there was a downside.”

“The Federal Government has introduced legislation that specifies it applies to digital platforms, but does not actually name any parties. It leaves that to the discretion of the Treasurer. It has strong-armed Google and Facebook into paying media companies by saying that it will add them as named parties.

“Google freaked out first, because it risked losing its dominance of the Australian search market and opening the way for Microsoft to gain the lion’s share, so after initially really kicking up a fuss, it has negotiated deals with the major media providers.

“For Google, the Australian search market is worth $4.3 billion annually, so the $100 million-odd dollars it has paid out to media organisations so far is a commercially sound decision to protect its revenue and avert the risk of Microsoft’s Bing taking over the search market.

“Unlike Facebook, Google is unable to easily extract or ban news on its platform, so was faced with either staying in the Australian market and paying for links, which sets a horrible global precedent, or leaving and losing $4.3b – also setting a horrible global precedent of giving a market to Bing.”

For Facebook, Australian revenue is derived from advertising, and was reported as $674m in 2019. While some of that revenue can no doubt be attributed to advertising from media and government organisations, the bulk is from commercial providers of products and services whose advertising would be effective regardless of the presence of news content.

Commercially speaking – and presuming media organisations would be looking for similar deals to those done with Google – Facebook was neither going to lose much by banning news content or gain much by paying upwards of $100 million to protect it.

Certain Federal Ministers were talking of brinkmanship – the practice of trying to achieve an advantageous outcome by pushing events to the brink – when Facebook switched off news access.

If anything, the brinkmanship appears to have come from the Government’s side. In addition to its attempts to force as-yet unnamed tech platform providers to the negotiating table, the code specifies significant fines – up to 10 per cent of a company’s revenue – for failing to comply with requirements.

“This was not brinkmanship on Facebook’s behalf, it was a clear statement of intent,” Hal said.

“It had always been Facebook’s intent not to tolerate what the company regarded as a deeply flawed code.

“The latest amendments made to entice Facebook to bring back news include a month’s warning if they are going to be named. It seems clear that so long as they pay a sufficient amount to news organisations, neither Google nor Facebook are actually going to be subject to the law. It’s a weird situation after more than a year of legal engineering.”

When Facebook announced it would reinstate Australian news content, the company justified its about-turn in a statement which included the following:

“After further discussions, we are satisfied that the Australian Government has agreed to a number of changes and guarantees that address our core concerns about allowing commercial deals that recognise the value our platform provides to publishers relative to the value we receive from them.”

The crux of the matter lies in the reference to the value of the platform to publishers versus the value to Facebook.

Hal believes this could give the tech platforms the upper hand.

“The deals being done at the moment are recurring arrangements,” he said.

“When news providers and the platforms sit back down to renegotiate in the future, there may be a new government in charge and different political conditions.

“Because the value exchange that the platforms are paying for isn’t what I would call robust or real, at the time the platforms may just dial back the payments.

“I think the legislation is based on an idea that’s patently wrong – that news publishers should be paid for links to their content.

“If people were owed money for being linked to by Google, the platform wouldn’t exist. Why are news providers deserving of payment for their links while all other content creators are not?

“It’s true that Facebook and Google have substantial market power, as the Australian Competition and Consumer Commission found, but it doesn’t mean that everything they do is an abuse of that power.”

We will no doubt learn over the coming 12 to 24 months just who is the more commercially astute out of the Australian Government/media coalition and the global tech platforms.

Whatever the case, it appears for now we’ll retain access to the content defined in the code as news.

As for most non-media organisations wanting to share content across social channels or boost their Google rankings, it will be business as usual for the foreseeable future.

Hal Crawford is the founder of Crawford Media Consulting and regularly provides expert commentary on the state of the Australian and global media landscape. He recently appeared as a panellist on the ABC’s Q&A show on the topic of Bargaining with Big Tech.