Facebook has unfriended Australia. The social network’s news blackout came hours after Canberra trumpeted its “historic, world-leading” plans to divert some tech profits to news publishers. But it would be premature to conclude that lawmakers have over-reached. A deal struck by Google with Rupert Murdoch’s News Corp is a vindication of the proposed law’s ability to bring warring parties to the table.
The stakes were not as high for Facebook. It says news makes up less than 4 per cent of the content in people’s feeds — even though it is the most important source of information for many. For Google, by contrast, news plays an integral role in search, even if the ad revenues sold against it are relatively small.
Before the internet took over, newspapers and magazines claimed almost half of global ad revenues. They now have less than a tenth, fuelling complaints that Big Tech has destroyed the viability of a free press essential for democracy. But the tech companies argue that the value exchange runs in favour of the publishers, with publishers using platforms as free promotion.
Restricting news on Australian Facebook would cost publishers more than $300m, the social network claimed. When Google dropped its news app in Spain after it passed a 2014 law requiring Google to pay for “snippets”, traffic to small publishers fell significantly. The Financial Times has reached licensing agreements for news with both Google and Facebook.
The Australian approach has flaws. Tim Berners-Lee, inventor of the world wide web, joined in criticisms of draft legislation that required payments for links to content. But the approach to arbitration in the Australian code could spawn imitators. Sometimes known as baseball arbitration, a mediator will choose one of the final offers made by the two sides, to put some balance into uneven negotiating positions. In the EU, MEPs working on two landmark drafts of European digital regulation are looking at a similar option.
Facebook investors should be aware this is not a problem with a quick fix. So long as ad revenues continue to shift to digital platforms, it can shrug off public criticism — just as it did last summer’s boycotts. But the row over paying for news illustrates a point about lobbying power. Newspaper groups often have far more political clout than tech giants that are neither big employers nor taxpayers. Efforts to get Silicon Valley to stump up for news underscores just how regulation will increasingly bite the tech sector.