“There is not yet any indication of a business model that can effectively replace the advertiser model, which in turn affects the production of this kind of content.” In a speech to the Melbourne Press Club yesterday, ACCC Chair Rod Sims outlined the importance of establishing a regulatory framework with Google and Facebook in light of declining Australian media advertising revenues required to fund quality journalism.
In a speech reflecting on the recommendations in the final report of the ACCC’s Digital Platforms Inquiry, released last month, Sims noted the regulatory imbalance between traditional media and digital platforms.
“While digital innovations have the potential to transform societies for the better, there are also forms of innovation that can be harmful,” he said.
More than just ‘dumb pipes’ with market power
“As Google and Facebook grow and expand into adjacent markets, they increasingly have the incentive and ability to favour their own businesses; so there are clearly competition issues that need to be addressed,” Sims said.
Sims said that the amount of time Australians spend on Google and Facebook platforms “dwarfs” the time spent on rival applications and websites, giving them “unparalleled access to Australian audiences”.
He cited the monthly statistics:
- 19.2 million Australians use Google Search
- 17.3 million Australians access Facebook
- 17.6 million Australians watch YouTube (owned by Google)
- 11.2 million Australians access Instagram (owned by Facebook).
“These are not community-based, not-for-profit companies, no matter how much they seek to portray themselves as benevolent enablers of human interaction and knowledge sharing. While they might provide a wide array of services to their customers, at zero monetary cost, like any other successful public company, their success is measured in shareholder returns.”
While Australian law doesn’t prohibit a company from possessing some degree of market dominance, Sims said it does not allow companies to use their dominance to handicap their competitors.
“The dominance of Google and Facebook as a means of distribution has meant many businesses rely on their services to reach customers. Such businesses are potentially exposed, given the ability and incentive of digital platforms to favour either their own related businesses, or businesses with which they have a commercial relationship.
“The lack of transparency in Google’s and Facebook’s operations compounds this risk.
“So while they might position themselves as ‘dumb pipes’, simply the messengers not the message, this portrayal is contradicted by their need to capture and monetise increasing amounts of user attention and data to continue to grow.
Regulatory framework and bargaining code recommended
The report includes a recommendation to establish a new regulatory framework to ensure the effective and consistent oversight of all entities involved in content production or delivery in Australia; and, recommends an enforceable bargaining code to be administered by the Australian Communications and Media Authority (ACMA) to ensure that media businesses are treated fairly, reasonably and transparently by the large digital platforms.
“There is an imbalance in the current regulatory treatment of content delivered via traditional broadcasting compared to content delivered via digital platforms, and that needs to be addressed,” Sims said.
He explained that the bargaining code would cover the sharing of data and understanding elements of algorithm outcomes.
“The codes we have recommended to government must be binding, legally enforceable and with meaningful penalties for breaching them.”
The plight to save Australian media
“Journalism is a classic public good. People benefit from it without paying or even reading or seeing it. This means that, left to market forces alone, it would be under provided,” Sims said.
“Certainly digital platforms provide benefits for media businesses and you would all know how they can be extremely effective tools for journalists, aiding the process of news gathering and reporting.
“The lower cost of producing and distributing online content has also assisted the entry of smaller scale ‘digital native’ news producers, which previously would not have been able to afford the costs of traditional print production and distribution methods.”
However, the impact that large digital platforms have made on the advertising that has traditionally funded journalism and commercial media has “reduced the ability of media businesses to invest in journalism, particularly at the local level”.
“Print media, now print/online media, has been the medium most significantly impacted by the reduction in advertising revenue.
“There has been a decline from AU$2 billion in classified advertising revenue in 2001 to AU$200 million in 2016. These are nominal figures; If these figures are adjusted for inflation, the decline over the same period is from AU$3.7 billion to AU$225 million,” said Sims,
“Importantly, the fall in the print advertising revenue of commercial Australian media publishers continued to decline even after the vast majority of classified advertising revenue had shifted online. Digital platforms and, in particular, Google and Facebook have been taking an increasing portion of the increase in online advertising revenue in recent years.
“Our final report paints a stark picture of the reduction in particular types of news and journalism in recent years. This included local government and local court reporting, which I think are important for the healthy functioning of the democratic process.”
Sims pointed to the closure of 106 local and regional newspapers across Australia over the last 10 years, leaving 21 local government areas without coverage from a print or online local newspaper.
“This type of reporting is more typically funded by advertising in Australia. There is not yet any indication of a business model that can effectively replace the advertiser model, which in turn affects the production of this kind of content.”Rod Sims, ACCC Chair
Not only this, but Sims said many media businesses are now reliant on large digital platforms, particularly Google, for referrals to their websites.
“It is because of their role as the gateways to Australian consumers that media businesses have legitimate concerns with their practices,” he said.
During the course of its inquiry, the ACCC heard complaints about digital platforms’ failure to act quickly to address copyright infringement complaints; a lack of transparency in the ranking of news content; ranking algorithms that do not appropriately recognise original news content or unfairly treats content which sits behind a paywall; and, restrictions on the types of advertising available in certain formats.
“In addition, the automisation of news delivered via digital platforms has made the platforms a ‘one stop shop’ online, with consumers not needing to directly visit the websites run by online publishers.
“That makes it difficult for publishers to maintain brand awareness and product differentiation.
“In addition, stories which are only of interest to a small audience and are unlikely to engender much user engagement, are less likely to be produced. However, such news stories, including local and regional news reporting, can be critical to our democratic process.”Rod Sims, ACCC Chair
“Not surprisingly, the decline of the more recognised media brands, in particular their editorial and advertising processes, has paralleled the rise of more disinformation or fake news. It is little wonder the consumer trust in media is at record low levels over the last decade, and is sliding.”
Sims said that Google and Facebook have a crucial influence over what news and journalism Australians do and don’t see.
“…they select, curate, evaluate, rank and arrange news stories produced by third parties, disseminating and greatly benefiting from other parties’ content. This is a critical role especially when 50 per cent of traffic to Australian news media websites comes via Google or Facebook.”
Have yours say
Sims said “We welcome the discussion our report has provoked. To date the dominant criticisms have either that we have not gone far enough, or that Australia can do nothing on its own.
“We remain convinced that our recommendations have got it right.
“Let’s address the problems we can identify now, but also let us put in place mechanisms to provide a continuing flow of information to deal with other problems as they inevitably arise.”
Sims urged the media industry not to underestimate the power of the ACCC’s recommendations.
“Thoughtful regulatory frameworks can help us harness the benefits of innovation while protecting society from its potential harms,” he said.
Public consultation on the ACCC’s Digital Platforms Report is open until 24 October 2019.