Australia’s News Media Bargaining Code: A New Institutional Perspective

In 2021, the Australian Federal Government passed a landmark News Media and Digital Platforms Mandatory Bargaining Code through both houses of parliament, which requires the platform companies Google and Meta (then Facebook) to contribute financially to the production of news content by Australian news publishers. This measure, which is estimated to involve an annual transfer of around $A200 million, is intended to support public interest journalism, ensure the viability of news publishing, and reverse the downward trend in journalism employment by requiring financial contributions from the leading digital platforms that acknowledge the role played by news in driving online traffic to their sites.¹ It has been described as a world-leading initiative, and a strategic intervention that takes the first steps towards addressing the unequal bargaining position faced by news publishers in their dealings with platform monopolies.² It has also had considerable influence internationally, most notably with Canada’s proposed C-18 Online News Act, but also the European Union’s Digital Markets Act, Digital Services Act, and proposed European Media Freedom Act.

The News Media and Digital Platforms Mandatory Bargaining Code—hereafter referred to as “the Code”—arose as a response to the Australian Competition and Consumer Commission’s (ACCC’s) Digital Platforms Inquiry (DPI). The ACCC was asked to inquire into matters that included the extent of a digital platforms’ market power and the impact of digital platforms on choice and quality of news and journalism. Its Final Report identified key problems as being a reduction in the advertising revenues of news businesses, a precipitous fall in both the number of journalists employed in Australia and the number of news titles, and an imbalance in the relationship between news publishers and digital platforms which left the news media vulnerable to changes in platform policies and algorithms.³ The DPI made 23 recommendations overall,  most of which were adopted by the Liberal-National Party Government led by Scott Morrison, and of which the most significantly debated has been the requirement that designated digital platforms provide enforceable codes of conduct governing their relations with news businesses, and that such codes commit to treating news businesses fairly, reasonably, and transparently in their commercial dealings, including appropriate value sharing for the distribution of news content online generated by the news businesses.

Debates about the efficacy of the Code have been considerable. Policies such as the Code aim to address the asymmetric interdependence that has come to exist between news publishers and digital platforms, whereby a large number of news publishers are dependent for content distribution on a far smaller number of digital platforms that do not have the same reliance upon news content.⁴ The power of digital platforms has thus been seen as one of the key factors threatening the sustainability of advertiser-financed news production and, with this, public interest journalism.⁵ Other countries have used copyright-based approaches to ensure news publishers receive payment based on a right to publish. The European Union introduced a publisher’s right to request payment for content where more than a hyperlink was included, and this was adopted in 2019 by France, after previous unsuccessful attempts to apply such a policy in Germany and Spain.⁶ More generally, the responsibilities of digital platforms with regard to the future sustainability of news is becoming an issue in many countries,  as demonstrated by the Cairncross Review in the UK, the Time to Act report in Canada, and the ACCC DPI in Australia.⁷

The Code can be seen as one of many measures being applied by nation-states around the world to address the power of digital platforms, as part of what has come to be known as the “techlash,” or the movement to “regulate Big Tech.”⁸ As the power of digital platforms often raises policy questions that sit outside of conventional industry or regulatory frameworks, there is typically a degree of innovation involved in developing policy agencies and instruments that are suitable for the challenges presented; Philip Schlesinger has termed this “neo-regulation.”⁹ As a result, each new measure raises questions not only about its efficacy in addressing the particular matter of concern (market dominance, content moderation, hate speech, unfair trading etc.), but the extent to which it marks a sustainable policy response in what are frequently shifting relationships. The Code therefore provides an important case study in the adaptiveness of institutions to new policy and regulatory challenges, as well as an instance where the power of different stakeholders in such regulations—in this case traditional news media businesses and global digital platforms—can be evaluated in terms of their capacity to shape the policy agenda and interpretations of the public interest.

The Shifting Institutional Landscape

A recurring challenge in media economics arises in situations where market participants possess some form of economic power. Natascha Just has observed that addressing concentration through media policy typically requires “the alignment of two competing public interests: the safeguarding of competition on the one hand and ensuring media plurality (media diversity or pluralism) on the other.”¹⁰ The number of news providers is not in itself a sufficient guarantee of other media policy goals, such as equitable distribution of communicative power, availability of diverse content, safeguards against the abuse of media power, and the promotion of civic discourse and the public sphere. Moreover, the traditional media companies are increasingly reliant upon digital platforms and social media for the distribution of their content, while also facing the platform companies as competitors for digital advertising revenue. There is a need to focus not only upon price competition—which is complicated with digital platforms as many of their products and services are free to consumers—but also upon non-price competition factors such as innovation, quality and privacy, the nature of “attention markets,” the power associated with engagement in multi-sided markets, and the role played by access to “big data” as a barrier to entry for new competitors.¹¹

The complex institutional nature of internet and digital platform governance is partly acknowledged in the academic literature. Robert Gorwa has represented internet governance as a triangle, with shifting configurations of industry, government, and civil society organizations acknowledging the increasingly hybrid nature of governance generally, and the particular pressures to decentralize internet governance so as to mitigate claims of state censorship.¹² An important limitation of this model, however, is that it cannot directly address conflicts between institutions within the three sectors. This is a particular problem with business, as competition is as much between firms in different sectors as it is within sectors, and businesses seek to use the policy process in order to gain strategic advantage. This has been referred to as rent-seeking behaviour, with rent defined as “a return to a resource owner in excess of the opportunity return the owner would otherwise receive.”¹³

The relations between digital platforms and news publishers as content providers raise what the institutional economist Oliver Williamson identified as “transaction cost” issues. Transaction costs are defined as information and communication costs that arise because “market actors . . . have basic information deficits and the price system does not reflect all the relevant information.”¹⁴ Platforms such as Google and Facebook are valuable to media companies as they provide infrastructure for content distribution that is freely available and can reach audiences beyond those directly attracted to their brand. The platform companies also benefit from the ways in which this news content drives traffic to their sites, and thereby enables them to be more attractive to advertisers. The challenge is that it is very hard to quantify benefits to either party from these transactions, as they come from the availability of content and services that are themselves free to the consumer. Moreover, both platforms and publishers are direct competitors for digital advertising revenues. The turn on the part of the news media industries for government action to address the perceived unequal bargaining power of the relevant parties arises from a strong sense that the cost burden associated with producing news content is being met entirely by the publishers, but that a significant—if unknown—amount of the resulting revenues are going directly to the platforms. There is thus a governance question surrounding the relationship that has been perceived to require a third party, such as government regulators, to mediate on behalf of the competing interests.

The importance of the governance framework for these institutional arrangements is intensified by the nature of news itself. News is not only the content that is being produced by media companies and distributed through digital channels. It plays a key role in shaping what Douglass North termed the “institutional environment,” that is,  “the rules of the game in a society, or … the humanly devised constraints that shape human interactions.”¹⁵  News media are critical to shaping the ideas, values, and beliefs that shape a culture, and particularly the ideologies or “mental maps” through which social reality is collectively perceived and acted upon. Putting this more concretely, concerns about misinformation, “fake news,” “news deserts” and a general crisis in the financial sustainability and viability of news publishers, and with this the employment of journalists, present issues about the future of democratic societies that go beyond the future of particular media companies or news brands. As Michael Schudson has argued, “The world will survive without a lot of the journalism we have today, but the absence of some kinds of journalism would be devastating to the prospects for building a good society, notably a good democratic political system.”¹⁶

Assessing the Australian News Media Bargaining Code

Two broad priorities can thus be identified with Australia’s News Media Bargaining Code. One is to create a more “level playing field” in bargaining relations between digital platforms and news publishers. Rod Sims, who was in many respects the architect of the Code as Chair of the ACCC, has argued that “the NMBC was precisely targeted at the issue of an imbalance of bargaining power.”¹⁷ He has summarized the point in these terms:

The Inquiry found that in the absence of the bargaining power imbalance the platforms and media businesses would bargain over the value created by the media companies from the use of their news content by the platforms, and the referral by the platforms of audience traffic to the news media businesses and reach a commercial arrangement. This was not possible in this instance, however, because the platforms had significant bargaining power and so could unilaterally set the terms of any such arrangement. . . . To the Inquiry this significant bargaining power imbalance represented a clear market failure that needed to be addressed.¹⁸

The Code can thus be seen as an explicit government intervention to set a “fair price” for the use of news content on selected digital platforms. At the same time, the aim has been to establish a co-regulatory framework rather than one based around command-and-control regulation, so the parties are obligated to bargain in order to establish a mutually agreed ‘price’ for the use of news on platforms.

This desire to appear noninterventionist has generated two sources of ambiguity in the Code. One is that no platform has been explicitly designated by the government as having to bargain with news providers, although it is implicitly understood the at the Code applies specifically to Google and Meta. At the same time, there is not a list of new organizations that the platforms are required to deal with, leading to ambiguity as to why some news publishers receive funding and not others, and concerns about a hierarchy among news businesses between the most powerful who are able to negotiate deals, and others who are set aside. In general, there are concerns about a lack of transparency in the bargaining process under the Code.

The Code has, of course, attracted significant criticism. Google and Meta believe that it unfairly singles them out as having responsibility to subsidize legacy media and note that they already contribute to innovative journalism through the Google News Initiative and the Facebook Australia News Fund (although the funds allocated trough these schemes are far lower than those distributed through the Code). There have been high profile media companies that have not been able to reach agreement with the platforms through the Code, most notably the multicultural government broadcaster Special Broadcasting Service (SBS) and the university-supported independent online platform The Conversation not reaching an agreement with Meta.  From a US perspective, the journalist and academic Bill Grueskin has argued that Australia looks like a success story to those who’ve long yearned to force Big Tech to prop up suffering newsrooms. But it’s a murky deal, with critical details guarded like they’re nuclear launch codes.¹⁹

The lack of transparency about how much money is going to news publishers, which publishers have deals and which do not, and how the funds are being used by news organizations has been a regular source of criticism. Bossio et al. have observed, “Given the lack of investment in smaller, independent journalism and the lack of transparency about how media organisations would invest the funding, it is yet to be seen how the NMBC contributes to maintaining a sustainable business model for public interest journalism, other than continued payments from platforms.”²⁰

In its review of the Code’s operations after one year, the Australian Department of Treasury concluded, “Looking back at its first year of operation, it is reasonable to conclude that the Code has been a success to date. Over 30 commercial agreements between digital platforms (Google and Meta) and a cross-section of Australian news businesses have been struck, agreements that were highly unlikely to have been made without the Code.”²¹

Recommending only minor changes to the Code’s operations, the Treasury considered whether it could be extended to other popular social media platforms, such as Instagram and TikTok. The architect of the Code, former ACCC Chair Rod Sims, has also argued that the code has been a success: “The NMBC has been successful by any measure. It has almost completely met the objective set for it, and more quickly than initially hoped for. Few other government measures can claim the same.”²²

There are a second order set of priorities which centre around securing the future of news and journalism. Access to reliable news and information performs a series of important social functions (trust in government, better public policy debate, exposure to diverse views etc.), and journalism has a historic mission to “speak truth to power.” Journalists must be prepared to investigate powerful individuals and institutions (governments, business, religion etc.) on behalf of the citizenry, and in doing so improve the accountability, transparency, and effectiveness of our social and political institutions. Whether news outlets and journalists do this in practice is of course hotly debated. But they have been able to rely upon an institutional infrastructure for doing so that has been to a significant degree underpinned by the flow of advertising revenues to commercial news brands.

This was the primary business of commercial news and journalism for over a hundred years, and it meant that media companies serviced two markets: consumers and advertisers. The rise of the internet has, however, transformed this market for news in a variety of ways, both good and bad. The traditional news media business model was highly profitable for the owners of media businesses but also a very effective engine for the employment of journalists. Underpinning it were monopolies over classified advertising, limited options for advertisers more generally, and a monopoly or oligopoly in particular geographical markets. The rise of the internet as an outlet for news empowered consumers and advertisers. Suddenly, consumers faced a proliferation of news options from around the globe, while advertisers and those using classified services had access to a much wider range of prospective buyers of their products and services, and far more fine-grained analysis of who viewed their content than analog media could ever provide. Social media also enabled news content to be shared, debated, and engaged with to an unprecedented degree.

This was a wave that the traditional news brands initially surfed quite effectively, revelling in new forms of audience reach, social engagement, and profile on global digital platforms. But the proliferation of free content from multiple sources undercut the scarcity rationales they had traditionally benefited from, while also leaving the news business far more open to a range of new providers, of varying degrees of accuracy and credibility. By the mid 2010s, as the problems of misinformation and “fake news” became more visible to the public and to politicians, there had been a scaling down of the operations of newsrooms which made them less able to respond to the new challenges of credible, accurate, and engaging content. In Australia, about 25 percent of journalism jobs disappeared between 2012 and 2017, and the impact of Covid-19 saw over one hundred newspapers close up across Australia, particularly in rural areas.²³

The future of the Code is under debate for a few reasons. The adoption of comparable measures by the Canadian Government with the C-18 Online News Act has triggered threats to withdraw Canadian news from Meta’s platform sites that have similarities to the threats made in Australia in 2021. Google and Meta remain highly critical of Australia’s Code and what they see as an arbitrary requirement to pay well-established commercial news businesses under threat of government designation. In an environment that is less profitable for the tech sector and with growing cost pressures faced by these companies, Meta has signalled a movement from social media to the “metaverse.” But the Code has considerable political support in Australia, particularly as it presents one way in which the financial sustainability of news production and journalism can be secured in the face of ongoing turmoil for the advertiser-financed business model. At the same time, the overall lack of transparency around how it operates, and who benefits from the associated transfer of funds, remains troubling for democratic accountability.

This article was originally published in the American Affairs symposium on Australia’s News Media Bargaining Code and Implications for U.S. Policy, April 2023.