In the Morrison government's stoush with Google and Facebook, democracy is the biggest loser
In 2017, the Morrison Government started a big fight with big tech, weighing in entirely on the side of news media businesses, particularly Rupert Murdoch’s News Corp and Nine. Since then, with the help of the Australian and Competition Consumer Commission (the ACCC) they have steadily built an impression among Australians that democracy is under threat because big tech is stealing advertising revenues that somehow rightly belong to big commercial news businesses. These are the big media businesses who for the last century have used journalists to generate news content to help them to flourish in their primary business mode – which is not as news businesses, but as advertising businesses. In this arrangement journalism has been strapped to the interests of advertisers for decades.
Of course when the internet came along, news media lost businesses lost their monopoly in, and inflated price controls over, the rivers of advertising gold. In 2002, before the rise of digital information access platforms, the big news media businesses in Australia commanded around 94% of the total available advertising market revenues (according to this chart on page 46 of the ACCC’s Digital Platforms Inquiry Final Report 2019).
But with the rise of the internet, suddenly there was a free platform with no barriers to entry for those journalists who might branch out and attract readers independently. And then in less than a couple of decades there arose search and share businesses like Google, Facebook, Twitter, Bing, and Instagram offering millions of free links to these new entrants to enable them to research, write, distribute and monetise quality news content without having to sell their soul to the old advertiser mastheads.
It unleashed a torrent of competition to the commercial news oligopoly dominated by Murdoch and Nine. Entrants like Guardian Australia, The Monthly, The Saturday Paper, Michael West Media, Pearls and Irritations, Inside Story, Crikey and The Conversation started scaling up as they never could have before. And they keep coming, because journalists can now finally make use of a competitively neutral publishing platform to do their essential job of holding governments and corporations to account. Editors in these outlets do not need to seek advertisers’ permissions. It is wonderful to watch.
The commercial news oligopoly hit back hard in 2017 by pushing the government to crush the “two-out-of-three rule” – allowing Murdoch and Nine for the first time to own all three non-digital platforms of print, TV and radio in one geographical market. And a change in the design of the NBN (shifting from Labor’s fibre-to-the-home to the Coalition’s inferior mixed-cable-to-the-node) gave Murdoch’s Foxtel a virtual monopoly on access to cable TV networks.
A news business oligopoly thereby morphed into a mega news and entertainment duopoly that is now seen as so disproportionately big and powerful that over 500,000 Australians signed a petition in late 2020 calling on parliament to inquire into it with an independent royal commission.
Gauging from the response to that petition, it is clear that Australians can divine that it is not a good thing for their democracy to have the level of news business concentration we now suffer. And yet many have been persuaded that democracy is more at risk from the fake news peddled on diverse share platforms than the fake news peddled on a massive scale by some traditional news media businesses, such as Murdoch’s Fox News. Many have been persuaded that news content has been stolen and advertising market shares have been newly monopolised by two big tech digital platforms, Google and Facebook. In reality this theory of a new advertising monopoly by big tech is false. Google and Facebook are a long way from monopolising digital advertising in Australia and even further away from dominating the total advertising market.
Big these tech companies may be, although in terms of revenue Google made $4.8 billion in 2019 and NewsCorp Australia made $4 billion – so they are both big. But in terms of the total advertising revenues they command, Google and Facebook are not as big as Australia’s news oligopoly. Far from it.
The news businesses still command around 39% of available digital advertising revenues, a similar share to Google’s 42%. But when digital and non-digital advertising revenues are combined, annual total advertising revenues for the news media platforms amount to around $10.2 billion (excluding outdoor/cinema advertising). According to the ACCC’s Report (page 62) “around $3.7 billion of Google’s advertising revenue is attributable to customers in Australia”. So the news businesses still dwarf Google’s share of total available advertising revenues in Australia by a factor of almost three. The news media businesses of print, radio, TV and online exceed by double the $5.4 billion in advertising revenue captured by Google and Facebook combined.
Moreover, in dollar terms, the news businesses’ online advertising revenues would seem to have risen by 21% in real terms in the four years between 2014 and 2018, if the ACCC’s chart can be relied on. This does not verify a lack of market power by NewsCorp and Nine.
This is the detail of the data behind the above graph from the ACCC. It is detail which does not suit the picture the Morrison government would prefer to paint. Far from verifying that there is a “bargaining power imbalance” where Google and Facebook diddle journalism businesses out of payment for their content, it instead verifies that the digital advertising market has three big players vying in healthy competition for advertising revenues with excellent margins compared to those the big news businesses could have commanded before the net. Google may service 94% of the search requests we make each year, but they earn nothing like 94% of the advertising revenue in Australia.
The data also verify that the advertising revenue that has been lost from the news businesses’ print platforms has not all been syphoned off by Google and Facebook. At least half of what they have lost in print news advertising has been picked back up again by shifting to online classifieds, display ads and news. And this has been augmented again by increases in reader views funnelled to them without charge by Google and Facebook. Net results should be markedly better for the news businesses, compared to the pre-digital era. This applies to small and big news businesses. None of them are under threat from the digital disruption if they shift with it.
Because the data in the ACCC’s charts don’t support the conclusion that there is a bargaining power imbalance, the Treasurer Josh Frydenberg and the ACCC’s Chair Rod Sims have lately taken to changing the figures. As the Treasurer stated on Nine TV in December 2020, “For every $100 of online advertising, $53 gets spent with Google and $28 gets spent with Facebook.” Media businesses and Rod Sims have since converted this to a message that "Google and Facebook have 81% of the digital advertising market and “everyone else” has 19%". This is materially different to figures quoted by the ACCC on page 122 of their Report which state that: “… for a typical AU$100 spent by advertisers on online advertising (excluding classifieds), $47 goes to Google, $24 goes to Facebook, and $29 goes to all other websites and ad tech”. This attests to a 71%/29% split, not an 81%/19% split in Google and Facebook’s favour.
Of course, in order to get the picture looking this way, Messrs Frydenberg and Sims have had to exclude at least $1.6 billion in online classified ad revenues, all of which accrue to the news media businesses, not Google and Facebook. If the online revenues from classifieds weren’t excluded, then the split of online advertising works out to 61% for Google and Facebook and 39% for the news businesses, or for a typical AU$100 spent by advertisers on online advertising (including classifieds), $42 goes to Google, $17 goes to Facebook, and $39 goes to all other websites and ad tech – news media.
And when the total amount of advertising revenue available in the online and non-digital markets is included, Google’s share of the market drops again to only 22% and Facebook’s to 10%. The tables turn and on this genuine reckoning of shares of available advertising wealth in Australia, the news media businesses come out on top with around 61% or $10.2 billion of the available $16.7 billion in advertising revenues.
If news businesses can’t produce some decent quality journalism with $10.2 billion in revenue, they’re not trying. Nor does the News Media Bargaining Code come to them with any quid pro quo that whatever they get from Google and Facebook will go to re-employing the thousands of journalists who have lost their jobs instead of into media barons’ pockets. The Code is nothing short of a stitch-up of Google and Facebook, which might be tolerable for some if it didn't come at democracy’s expense.
Of course, you have to massage figures pretty hard to justify a market intervention like the News Media Bargaining Code – an intervention which defies existing level-playing-field competition principles and, in an unprecedentedly anti-competitive way, proposes to make two participants in a market pay all the costs of their competitors. It is bully-boy brinksmanship bluff on grand scale in order to squeeze out competition to big news media, not just from Google and Facebook, but from smaller news business entrants.
Let’s hope the government doesn't overplay its hand and fall for its own myth that there is a justification in designating two businesses - and two businesses only - under this Code. We will end up with less competition in journalism, not more. The sacrifice for consumers, market efficiency and democracy is just too great to for Australia.