While the pandemic of 2020 left a permanent mark on the world, it wasn’t the only negative thing that occurred that year. Having begun in 2020, the struggle between the tech giants, Google and Facebook and the Australian government came to a head in 2021. The issue at hand was the financial struggle of a number of Australian media companies (further highlighted by the pandemic) and their need for the big companies to pay for the provided news content. As the tech platforms didn’t see eye to eye on the issue, the Australian government set on passing the law that would make them negotiate with local broadcasters and publishers regarding payments for news content included in news feeds and search results.

Just Cause

The complaint of Australian news companies is nothing new. On a global level, news outlets pointed out the issue two decades ago – that’s how long the internet companies have been linking advertising to their content without sharing the revenue. While tech giants are getting rich, the news industry is forced to cut down and restructure.

The partial solution seemed to lie in the form of a paywall that, instead of a subscription, provides incremental access to the content. But Google is also obstructing that as it refuses to label paywalled content in their search results, even though a recent survey showed that 67% of users would find it helpful.

That’s why Australia has joined other governments in their demands for the tech companies to pay. Of course, with titans such as Google and Facebook, a clash was inevitable.

The Code

The dispute with Facebook and Google is helmed by News Corp., owned by Rupert Murdoch whose considerable political influence played an important role in the proposed code. This code would do much more than simply allow publishers to negotiate for payments. Other standards Facebook and Google would have to meet include 28 days advance notice regarding the ranking algorithm changes and putting the moderation of users’ comments in the hands of publishers.

Mel Silvia, the managing director of Google Australia, immediately responded to the proposal stating in her open letter that the code would make Google ʽdramatically worseʼ.

Threats & Actions

Naturally, some threats ensued that only escalated the dispute. The first came from Google announcing a block of the search engine in Australia if the code is forced. They explained that the application of the code will lead to a degraded search and that ʽunmanageable financial and operational riskʼ gives them ʽno real choice but to stop making Google Search available in Australiaʼ.

The reply from Scott Morrison, the Australian Prime Minister was clear: ʽWe don’t respond to threatsʼ. What makes this threat even more irrational is the fact that it came just hours after Google reached a payment deal with some French publishers.

As 53% of online advertising in Australia comes from Google (compared to Facebook’s 23%), this threat would be a fierce blow. Luckily, it never became reality. The giant later stated that deals would be made with News Corp., Seven West Media, and Australian Broadcast Corp. Additionally, Mel Silvia proposed a compromise solution in the form of Google News Showcase.

On the other hand, Facebook’s threats came to action immediately – on February 18th they blocked access to Australian news and their sharing.

More News Coverage?

The shift in Google’s attitude promises certain changes that will certainly bring some new revenue for news companies. But does that also mean more coverage? It’s a question of where the money from the deals will end up – in the boardroom or the newsroom? Dedicated to actual newsgathering?

The president of the Media, Entertainment and Arts Alliance, Marcus Strom, states that the transparency on the spending of the funds is their primary concern. While this sounds promising, Facebook’s blocking move clearly indicates that some portion of the access to news will surely suffer going forward.

The shifting of the financial balance between internet companies and news organizations won’t happen overnight, but Australian publishers have definitely got some extra negotiating leverage.

As we’ve said at the beginning, the fight for news revenue didn’t start Down Under. France and parts of Europe are on the same track. But in Australia, partly due to Mr Murdoch’s great power and influence, the dispute has grown beyond local borders and can easily lead to global implications. The regulatory thinking of Australia has set a strong example and we can expect more deals between the internet giants and publishers in the future.