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YOU You may have missed it, with the biggest recession since the 1930s and an ongoing pandemic, but there can be big and bad changes to the media landscape near you.
At this time, the Australian government is considering amending the Competition and Consumers Act 2010 to force Google and Facebook to pay local business media organizations for sharing their content on digital platforms.
The Code of Negotiation of News Media and Digital Platforms proposed by the Australian Competition and Consumers Commission will require technology and media companies to establish conditions through “binding binding arbitration”. It will also force them to disclose parts of their primary intellectual property (such as Google’s search algorithm).
It has been hailed as a world first for addressing the power imbalance between traditional news organizations and platforms.
Champions like commission chief Rod Sims argue that it is a simple matter of forcing Google and Facebook to pay a fair price for extracting value from journalism for which they pay nothing. As Sims said:
What it was all about was the imbalance in bargaining power, the market failure that follows from that and the underpayment of news that has a detrimental effect on Australian society.
Who can argue with that? Even Federal Treasurer Josh Frydenberg has described it as “a matter of fairness.”
But from an economic point of view, the entire trading code is hopelessly confusing. You don’t adequately understand the source of competitive pressure for media companies and why they have lost revenue over the past 15 years.
Mandatory binding arbitration between technology companies and the media is also a completely inappropriate political tool to achieve the public policy goal of fostering high-quality journalism.
As I have written in detail for the Stigler Center at the University of Chicago Booth School of Business, making the code law runs the risk of causing serious harm to Australian consumers while spending money on big media companies like Nine Entertainment and News Corp Australia.
Faced with the prospect of having to disclose key intellectual property, it would not be surprising if Google and Facebook simply prefer not to be in the Australian market. Millions of Australians who use Google, YouTube and Facebook will lose out.
Media revenue plummets
Between 2002 and 2018, consulting firm AlphaBeta estimates that the total annual revenue of Australian newspapers fell from A $ 4.4 billion to A $ 3 billion. Most of this was due to lost classified advertising revenue, worth A $ 1.5 billion in 2002, but just A $ 200 million in 2018.
“That’s Google’s fault,” you might cry.
Not really. The vast majority of lost classified ad revenue was due to online “pure games” such as Seek, Domain and Carsales. Google and Facebook basically took none of this revenue.
Media companies were sitting on a classified advertising goldmine. Then there was a massive technological disruption due to the internet and smartphones.
That, as they say in the classics, is show business.
It does not justify that companies that were successful in an adjacent space at the same time spend a part of their income.
But aren’t tech companies ‘stealing’ content?
If the big tech companies somehow allowed you and me free access to content that we would have to pay for, there might be a case to answer.
It would be as if Google Maps not only gave you directions to a restaurant, but also the means to avoid paying for food.
But using a search engine doesn’t allow you to get free meals or get around a news organization’s paywall.
In fact, getting your content featured in search results or shared on social media helps Australian media companies attract readers and sell subscriptions – something that now accounts for about half of the revenue of some leading players like The Australian.
All you get “free” is a one or two line snippet of the search.
For example, when I searched for news about the recently deceased United States Supreme Court Justice Ruth Bader Ginsburg, I got this:
If you can figure out the full content of the article from that snippet, you should use your superpowers for other, more lucrative purposes.
Beware of politics
There is a very real risk that this wrong code will eventually become law.
An overzealous regulator has come up with something that may benefit the big media companies, which, unsurprisingly, are strongly in favor of it.
Those same media companies have enormous influence over public perception and the fate of politicians. He will be a courageous elected representative who rejects the proposed code and bill.
But if politicians were serious about solving the real issue at stake in all of this, they would act more directly.
Like newspapers around the world, Australian journalists and media are under pressure, and one thing most people agree on is that high-quality news and journalism are critical to the smooth running of the business. democracy.
Whatever market forces have drastically reduced funding for such journalism, there are strong arguments for government intervention. But if the Australian government wants to subsidize high-quality journalism, it should do it itself.
With the 10-year bond rate below 1%, it would cost the government just A $ 18 million a year to finance the interest bill at A $ 2 billion of media subsidies a year. That’s 72 cents per Australian per year.
And all this without taking away the valuable services of companies like Google and Facebook that Australian consumers love.
Read the article here:
Vital signs. Google shouldn’t subsidize journalism, but the government could
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