Why Big Tech Might Actually Be Correct This Time
In a world where media outlets are struggling to adapt to the digital age, Big Tech companies like Meta (parent company of Facebook and Instagram) are making a bold move by refusing to pay media organizations for news items curated on their platforms. This decision has sparked controversy and debate, with legacy media outlets accusing Big Tech of endangering reliable news sources and fueling the spread of fake news. However, upon closer examination, it becomes clear that Big Tech may actually be correct in their stance.
Australia’s Attempt to Tax Digital Platforms
Three years ago, Australia implemented legislation that required digital platforms like Facebook and Google to pay media organizations for news content displayed on their platforms. This move was seen as an attempt by traditional media outlets to stave off their own extinction by taxing their more evolved rivals. However, this legislation not only violates normal commercial practice but also perverts copyright laws and unfairly burdens digital platforms.
The Financial Impact on Legacy Media Outlets
The financial impact of this legislation on legacy media outlets is significant. For example, Facebook payments alone are worth $250 million to these organizations. If they were to lose this revenue, it would create a huge hole in their profitability. To put this into perspective, the Nine Network, which includes Channel Nine and major newspapers like the Sydney Morning Herald, made a profit of $181.8 million last year. Similarly, News Corp., Australia’s largest owner of newspapers, earned $224.7 million. The $250 million from Meta represents a significant portion of these media organizations’ profits.
Hyperbolic Claims from Legacy Media Outlets
In response to Meta’s decision to stop paying news outlets, Michael Miller, executive chairman of News Corp Australasia, claimed that canceling these agreements would obstruct Australians’ access to reliable news and information. He argued that jobs would be lost, titles would close, and communities would suffer. However, these claims seem exaggerated and hyperbolic. It is easier for legacy media outlets to find a scapegoat than to accept responsibility for their own declining business models.
Understanding How the News Media Bargaining Code Works
The news media bargaining code in Australia requires digital platforms to pay news organizations if they touch their content in any way. If the parties fail to agree, the government can step in and arbitrate a settlement. Prior to this legislation, digital platforms were covered by standard copyright law, which required permission and possibly royalty fees for reproducing a news business’s material. However, the amount that could be reproduced without copyright clearance was open to interpretation.
The Problem with the Code and Meta’s Proposal
The legislation essentially asks digital platforms to pay news organizations for displaying snippets of their content. This is akin to newsagents being asked to pay newspapers for displaying their front pages. Meta argues that only 3 percent of their traffic is news-related, and that number dropped by 80 percent last year. They believe they would be better off without news content and the associated costs of paying royalty fees.
The Financial Strain on Big Tech
While Big Tech companies like Meta may appear to have vast profits, their margins are actually quite thin given the volume of traffic they handle. Meta has paid $250 million in Australia alone, representing only 0.4 percent of its market. When calculated on a per-user basis, this equates to roughly $7.25 per person per year. While this may seem like a small amount, when considering Meta’s global profit and user base, it becomes clear that the financial strain is significant.
The Failure of Legacy Media to Innovate
The underlying problem in this debate is that legacy media outlets failed to innovate when the internet arrived. Instead of adapting their business models to the digital age, they clung to their existing assets and relied on advertising revenue. When new platforms like Craig’s List and realestate.com.au offered advertisers better deals, legacy media outlets lost their dominant position. They devalued their news product by offering it for free on the internet and now struggle to monetize their content.
The Value of Mainstream Media’s Product
One of the main criticisms of legacy media outlets is the declining quality and accuracy of their news coverage. During the COVID-19 pandemic, alternative publishing sites and social media platforms often provided more accurate and timely information than mainstream media outlets. The claim that communities will suffer without reliable news is undermined by the fact that people are increasingly turning to other sources for information. Legacy media outlets must address the underlying problem of producing content that people want to read and pay for.
Conclusion
While the battle between Big Tech and legacy media outlets continues, it is important to consider both sides of the argument. Big Tech companies like Meta argue that paying for news content is not financially viable and would negatively impact their business models. On the other hand, legacy media outlets claim that without payment, reliable news sources will suffer, and fake news will proliferate. The truth likely lies somewhere in between. This debate highlights the need for innovation within the media industry and the importance of producing high-quality content that readers are willing to pay for.
