Earlier this week, Facebook announced that it plans to stop allowing publishers and users to share news on both Facebook and Instagram in Australia. The decision came after months of public debate and private negotiations on potential payments from the social media giant to news organizations. When the Internet platforms and the news organizations led by Rupert Murdoch’s News Corp (by the far the largest media organization in Australia) were unable to arrive at a deal, the Australian government and its regulator announced that it would legislate a solution by requiring Google and Facebook to pay publishers for content posted by its users on its site. The Facebook decision to block news sharing on its platforms has been described as a “threat” to the government and democracy, leading to supportive op-eds calling on the Australian government to push back against the company. Canadian Heritage Minister Steven Guilbeault has denounced the move, stating “the Canadian government stands with our Australian partners and denounces any form of threats.”
There are many serious concerns about Facebook: it is in federal court in a battle over whether it violated Canadian privacy law, its response to potentially misleading political advertising has been inadequate, it has moved too slowly in removing posts that urge violence, it faces antitrust investigations, it has paid billions in penalties for its conduct, and many simply fear it is too powerful. But it is in the right in this battle over news in Australia and the Canadian government would be wrong to emulate the Australian approach.
This dispute is not about the future of media, the regulation of social media, or threats to democracy. It is simply a battle over money, being fought primarily between a giant Internet company and giant media company. Facebook users post many things – photos, videos, personal updates, and links to various content online, including news articles. Those news articles do not appear in full. Rather, they are merely links that feature a headline, photo, and brief description that then send users to the original news site for more. From Facebook’s perspective, there is enormous value in referring users to media sites, who benefit from advertising revenue from the visits. Indeed, Facebook estimates the value at hundreds of millions of dollars. While it does licence some news content, the overall value of news articles to the site and its users is limited. As it noted in its submission to the ACCC in Australia:
If there were no news content available on Facebook in Australia, we are confident the impact on Facebook’s community metrics and revenues in Australia would not be significant, because news content is highly substitutable and most users do not come to Facebook with the intention of viewing news.
Given the limited value of links to news articles to its service, Facebook is unsurprisingly reluctant to pay a significant price for what amounts to a linking licence. There is no copyright violation for linking to content, the posts come from its users, and there is value to the publishers in the form of the referrals to the full content.
Obviously, the Australian news organizations value their content differently and are seeking significant compensation for linking to their content. They argue that their advertising revenues are down and believe that Facebook is the beneficiary of the shift in ad dollars, attributable in part to the availability of links to their articles on the social media site.
While I think Facebook has the better argument – the news articles may be everything to the media organizations but are a tiny part of the Facebook universe that are not even posted in full – it is hard to see how this amounts to anything more than a dispute over a licensing fee with the Australian government intervening by creating a binding arbitration mechanism to mandate the licensing fee. Facebook is effectively now saying that it does not want to licence the content and will take steps to ensure that it is not available on its site. That isn’t a threat, it’s a reasonable commercial response to government intervention in a licensing dispute. The move should not come as a surprise, given that Facebook said that this is what it would do months ago. Moreover, similar attempts to mandate licensing of news articles in Spain and Germany led Google to remove the content from its news service. There is a difference in valuation and the companies – like any other companies – are responding by adjusting their business model.
Minister Guilbeault says he stands with the Australian government, but it would be a mistake to follow the same approach. First, given the limited value of news articles, there is little doubt that Facebook would do the same thing in Canada (or any other country). Once Facebook has built the capability of identifying news articles and blocking them from the service in Australia, it will be easy to implement the same approach. As a result, everyone would lose: Canadians would have less access to news on Internet platforms and Canadian news organizations would have reduced visitors and revenues.
Second, the approach would require Guilbeault – or the CRTC (which is likely to be granted new powers) – to regulate content and commercial relationships on Internet sites. This would turn the Internet in Canada into a cable-like service with a regulator potentially dictating what must appear on websites (essentially making Canadian news a “must carry” on the Internet). The approach would swiftly lead to constitutional and trade challenges as potential violations of the Charter of Rights and Freedoms and the newly signed USMCA. Canada is particularly vulnerable on the trade front given the new trade agreement and the specific targeting of two U.S. companies with these measures.
Third, the entire approach raises a series of new risks. The absence of news articles on Internet platforms will enhance the profile of questionable sources, running the risk of more misinformation, not less. Further, despite concerns about Facebook’s power, this will make the company even more powerful as it makes its own determinations about who qualifies as a news organization (and therefore finds its content blocked from sharing). There are also obviously risks to smaller media organizations that rely on social media as part of their business model, yet find themselves blocked alongside the media giants.
The government has been looking for a solution to assist a troubled media industry. I’ve argued that if the market alone will not sustain much-needed journalism, then there is an argument that government should support it in the public interest using general tax revenues. Yet Guilbeault has thus far failed to deliver on prior promises of support with programs struggling to get up and running. Rather than looking to the Internet as an ATM for government policy and aligning with Rupert Murdoch in a manner that will ultimately harm Canadians and Canadian media, he would do better to focus on figuring out why support announced months ago is still stuck at the starting gate.
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Thank you Michael,
I completely agree with this analysis. Typically the ACCC is on the side of the Australian public so I was surprised to see it stepping in to regulate payments from Internet giants to News Media companies.
It seemed like this was created just to support the Rupert Murdoch media empire. I would much prefer that less money is sent to Rupert Murdoch’s companies as he ensures that his papers publish biased journalism that support his views and mislead the public.
When I separate the issues, the conclusion is clear: a tax on one new industry to support a failing one reeks of government-imposed barriers to entry bought by well-paid lobbyists.
Success on the internet has long relied on sharing third-party links.
Facebook will block News Corp and News Corp will cease to gain any decent level of traffic.
If the Australian government is anything like that of Canada, News Corp will blame Facebook for its failure and demand subsidies, much like traditional Canadian media companies have here.
This cycle has to stop.
Bill, it seems as if you’ve completely missed the mark. The media industry in Canada hasn’t done what you’ve claimed.
Taking a look at Canadian media and Facebook in Canada and it would appear as if Canadian media has _embraced_ Facebook as an outlet and method of referral.
So unless you have deeper insight than what is actually occurring, it appears you’re just grinding your axe to wield against “the media”. Now _there_ is a cycle that has to stop.
Michael has raised some very pertinent points, and leveraging that to air a personal grudge is poor form at best.
I think most of Bill’s comment relates to the behaviour of News Corp and the government in Australia, which is pertinent to the article.
The Australian government is mostly full of Luddites; they understand physical media and they don’t get the internet. Especially at the Federal level we have had:
1. Scrapping of the game fund to help fund new game development in what is a growing industry. (see https://igea.net/wp-content/uploads/2018/12/IGEA-building-a-thriving-game-development-industry.pdf)
2. No tax incentives for games companies. (IGEA would like to see a 30% refundable tax offset)
3. Scrapping of fibre installations for internet across the country in favour of reusing copper as much as possible.
And this article covers the proposed tax on internet media for linking to articles on a news media website. I really do hope that Google and Facebook delist all the links.
I don’t understand your hostility.
I’m not questioning the points that Michael has made. I’m simply stating that existing industries use their connections and lobby power to stifle new competition, essentially reinforcing what Mr. Geist has stated above.
And it’s not a personal grudge, but I suppose I’ll stop ‘grinding that axe’ when the traditional Canadian media industry stops lobbying for – and taking – public money from the Canadian government. Or when they stop petitioning government (ie. the CRTC) to create barriers to entry, per Michael’s discussion above.
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