What you need to know:

• Facebook is playing hardball again, telling media companies outside the big conglomerates it won’t strike further revenue sharing deals.
• Publishers say Facebook has been duplicitous and disingenuous in its market conversations - a notable shift in sentiment occurred once deals with News Corp, Nine, Seven and The Guardian were done and the Federal Government appeased.
• The Conversation CEO, Lisa Watts, was “shocked” when after 18 months of charm from Facebook, it told her on July 22 it was ending all negotiations.
• The pressure is now on the ACCC and the Federal Government to “designate” Facebook and Google, forcing them into their worst-case scenario in which an independent arbitrator decides on deal terms.
• It’s the trigger some think could see Facebook again controversially pull all news feeds from Australian users. 
• Broadsheet Media Publisher Nick Shelton is deeply concerned that big media companies are now using their Big Tech funds to expand into its core lifestyle publishing business while it has no funding to counter.
• Per Peter Lewis, Director at the Australia Institute’s Centre for Responsible Technology: “If Facebook's not prepared to pay, the government needs to revisit its decision not to designate.”

Media companies like Broadsheet, SBS and public interest journalism publisher The Conversation, bankrolled by Australia’s universities, are in revolt after Google and Facebook struck deals with the big media conglomerates to head off their worst fear: forced arbitration to strike financial deals set independently by the Australian Competition and Consumer Commission (ACCC). 

Publishers say Facebook has turned entirely on its earlier charm to engage media companies beyond the big conglomerates, which earlier this year struck deals worth an estimated $50-70m annually with Facebook,  media industry figures close to the negotiations told Mi3.

Google has agreed to another estimated $150-200m in annual deals to big media groups such as News Corp, Nine, Seven West Media, the ABC and The Guardian.

But with those deals completed, Facebook has told independent and smaller media companies, after more than a year of a charm offensive, that they were shutting down negotiations on further deals. 

Publishers say Facebook is now reverting to an annual $5m pooled publisher grants program, possibly administered by The Walkley Foundation but controlled by Facebook, “to spin its way out of further deals” and keep the Feds happy.

Zuck you

“We’ve been in contact with Facebook trying to establish a commercial negotiation and they’ve rebuked us at every point,” Broadsheet Media’s Publisher and Director, Nick Shelton, with a team of 60 people, told Mi3 yesterday.

Facebook continues to feature Broadsheet’s content in its News Tab product, he said, but refuses to acknowledge it’s a news publisher.

“They’ve been very disingenuous throughout the whole process, not just with us, with the entire matter. They're clearly trying to limit any exposure they have to this and do the very bare minimum. I think Facebook have been much clearer – no, they will not do deals and are much less interested in the conversation in general. Google have been more open to dialogue, but it ends up in the same place," said Shelton.

“If the government and ACCC don't continue to apply pressure and let Facebook and Google know that there's more work to be done in the media sector, that is great risk. They're trying to do the bare minimum to avoid designation. It remains to be seen whether they'll get away with it.”

Designation under the Federal Government’s Mandatory Media Bargaining Code, which was legislated earlier this year, is what Facebook and Google want to avoid at all costs. It means if the ACCC and the Federal Government deem the two tech giants have not entered into revenue agreements that Australian media companies deem reasonable, the government can designate a platform to be forced into an arrangement, decided by an independent arbitrator. 

“It seems to me Facebook has just made an assumption that it can get away with it and I think it's probably the correct assumption, unfortunately,” said the boss of another publisher, who did not want to be named. “The assumption is [Federal Treasurer] Josh Frydenberg is not going to risk the PR fallout of Facebook turning off news again. So, they’re taking a ruthless approach." 

Whereas, said the publisher, "Google has gone ‘we don't agree with you, but we're just going to get on with it because we’ve got bigger fish to fry and we want to work constructively with the democratically elected fucking government of Australia’.”

Blatant breach

Not all, however, think Facebook will pull it off. Peter Lewis, Director at The Australia Institute’s Centre for Responsible Technology, thinks Facebook’s behaviour towards media companies outside the big conglomerates is in blatant breach.   

“The whole basis of the government not designating them was that they were going to, in good faith, negotiate in the spirit of the code, which was to recognise the value of public interest journalism to their network,” he said. “And after doing that with some of the bigger players that have landed deals, now they seemed to have drawn the line that they don't need to do anymore.

“The government was prepared to really put some pressure on earlier this year, and obviously the larger publishers were the beneficiaries of that. But the principal still remains that for the code to work, it needs to recognise the value of public interest journalism that doesn't end with News Corp, Nine and the big players. Rod Simms' [the ACCC chair] report was very clear that the media organisations that registered with ACMA and met the definition of public interest [and news] journalism should have the value of their content recognised," said Lewis.

“If Facebook's not prepared to, the government needs to revisit its decision not to designate.”

Lewis said a key final round amendment after heated negotiations with the two platforms before the mandatory bargaining code was legislated was that the government must first give notice that it was going to designate a platform for forced arbitration. “You would think at the very least the government should give notice and nudge Facebook along,” he suggested.

This is the flashpoint some figure could see Facebook again withdraw Australian news from its user feeds. Would Zuckerberg's company do it again? Most who have negotiated with the company speak of Facebook’s arrogance and duplicity – and would not be surprised by such a move.

Bait, switch

ACCC chair Rod Sims was unavailable for comment last night but Lisa Watts, CEO of The Conversation, which attracts circa 8 million Australians a month, said indications from Sims after Facebook dumped its earlier intent to strike a deal with her publishing platform, suggest designation may be required. 

“The code really does require the platforms to negotiate in good faith,” she told Mi3. “And if you don't give a reason why you won't negotiate it, I don't know how that meets the intention of the code.

“We honestly turned up to our last meeting in July [with Facebook] fully ready to figure out the best way we can put to them how we value the work and what it would look like. We were really shocked when they said that they weren’t going to negotiate with us.”

The Conversation had been an early participant in Facebook’s “Accelerator” program for publishers and had been charmed for 18 months. 

“It was genuinely a good exchange of ideas and information for everyone's benefit,” said Watts. “It's something they give you and then they give you some money. And most of that money you end up spending on Facebook ads. They are clever people. They've got an extremely successful business.”

Watts said Facebook’s attitude changed quickly after it had done deals with the big media players earlier this year. 

“I guess maybe they never shifted their sentiment. But it changed at the conclusion of the other deals being done, because what we were hearing from Facebook was that they had other priorities, that they were dealing with some larger commercial arrangements, which is completely fair enough. I'm sure that doing a deal with News Corp globally and Nine and Seven would be complicated and quite lengthy negotiations. So it sounded reasonable to me when they said we would be next in line. We were still quite positive around July.”

But on July 22, Facebook told Watts and her team via a Zoom call there would be no deal and it was ending discussions. 

Perverse outcomes

Broadsheet Media’s Nick Shelton is now deeply concerned about the competitive implications for his business. Shelton said he’s been told by senior executives in a big media company that struck deals with Facebook and Google that they would be using those funds to hire more lifestyle journalists to compete with Broadsheet’s state-based editions 

“They're using that funding in order beef up that side of their business,” he said. “We compete with News Corp, with Nine, with The Guardian every day for audience and for advertising. If they got a revenue stream that we now don't have as a result of this, that's a serious consequence," said Shelton.

"If this is not addressed and the government doesn't continue to apply pressure and Facebook and Google do get away with only funding the conglomerates and a handful of token smaller publishers, there's a really, really serious competitive issue. If they have a revenue stream that we don't have access to as a result of this, that's a really serious unintended consequence. It’s very, very concerning.” 

The ACCC has been contacted for a response.