What you need to know:

• Meta’s refusal to keep paying publishers and rejection of the Australia’s News Media Bargaining Code is leading to a high stakes game of chicken.
• If the Federal government designates – i.e. forces a fee to be paid determined by arbitration – Meta has threatened to pull news from its platform.
• It has form locally and has done so more permanently in Canada when designated. The consequences for some local publishers have been existential.
• Digital Publishers Alliance Chair, Tim Duggan, suggests Meta’s ambiguousness about what a ban would look like is “by design”, with “chaos” the intent.
• Meanwhile, Australia’s larger publishers are blaming a deep round of cuts on the loss of Meta cash. Broadsheet publisher Nick Shelton called it two years ago, stating they would have to “gut their businesses” if deals were not renewed – and would be demanding government designate.
• He’s also calling for government to designate, but amend the legislation to include a “must carry” obligation for platforms with significant market power. That would avoid the Canada nuclear fallout.
• Private Media CEO Will Haywood thinks the news media’s problems run way deeper than Meta and bargaining code cash – and says the legislation is deeply flawed. He thinks properly taxing platforms on Australian revenues and dispersing the proceeds to publishers would be fairer, more sustainable and less volatile.
• All agree there is little more time to waste.

Killing time

News Corp was the first to axe dozens of roles to make way for a new streamlined structure that targets $65 million in savings over two years.

Seven West Media followed, with 100-150 jobs gone and big names ousted as part of an operational overhaul under new CEO Jeff Howard.

Days later, Nine Entertainment put 200 roles on the block, with a further 40 gone from its youth publishing arm Pedestrian after opting to exit third party licensing deals for the likes of Vice, Refinery29, Gizmodo and Lifehacker.

Amid the cuts, staff at Nine Entertainment’s publishing division went on strike for the first time since the 2018 Fairfax merger, leaving skeleton newsrooms at The Australian Financial Review, The Sydney Morning Herald, The Age, WA Today and Brisbane Times, as the broadcaster’s $305 million Olympics rights deal went live.

There is no positive way to spin it. Australia’s news media is in strife – and is pointing the collective finger at Meta and Google.

Fight club

Media businesses big and small have had their revenue models decimated by the cheaper and arguably more targeted audiences offered at scale by the two digital giants (with Amazon incoming): The duo trousered almost two thirds of global digital ad spend in 2023, with Google revenues from its ads businesses standing at US$237.86bn and Meta's at US$134.9bn. 

A tough macroeconomic climate, with a soft 2023 dragging well into 2024, has added cyclical headwinds to structural challenges. The combination has left publishers with increasingly difficult choices – in 2023 news publishing saw the steepest decline in ad spend of any media channel in this market, dropping 14.4 per cent on the year before. It was closely followed by TV, which fell 11.8 per cent. (Meanwhile, Amazon is flooding the market with cut-price inventory in its streaming ad markets around the world, despite growing doubts about the number of people actually watching those ads).

All of which has fuelled the impetus of local media to ratchet up pressure on Federal Government to rein-in global tech players over issues of privacy, security, misinformation and online safety, as well as competition issues.  

Australia's large publishers had benefitted to the tune of $200m a year after the News Media Bargaining Code legislation was passed in 2021 under the Morrison Government to address the “the bargaining power imbalance between news media businesses and digital platforms”. I.e. to put pressure on Meta and Google to handover cheques to Australia’s news media, which argue that the two have long benefitted from using content to attract audiences and sell ads – while paying nothing for that content. The platforms argue that they drive traffic to publishers which publishers can monetise. But the fact remains that publishing revenue, and for news media in particular, has declined sharply while Meta and Alphabet now book north of $10bn locally. In other words, more than ten times the revenue of print and digital news media combined, with caveats around where some of that spend booked locally ends up across APAC.

Arrested development

The Code essentially forced the platforms to negotiate with publishers, or be 'designated' and face the prospect of having the deals set for them. Allowing the platforms to strike their own arrangements, keep the value out of the public domain and effectively side-step the legislation meant Meta and Google could avoid setting a legal precedent and the government could claim a win. But as a result, few smaller publishers saw any benefit.

Three years on, Meta has remapped its algorithms to carry less news and torpedoed a reported $70 million worth of annual publisher deals. The bulk of that funding had been split between News Corp, Nine and Seven, and as the money dried up, the axe has fallen on jobs – with journalists bearing the brunt.

Nine chief Mike Sneesby told staff the 70 to 90 roles slashed from the company’s publishing division were necessary to “offset the loss of revenue from the Meta deal and challenges in the advertising market”. The deal, and “the significant revenue” that came with it, per Nine Publishing boss Tory Maguire, ceased at the end of June.

The cash drying up comes just as the publisher is locked in pay negotiations. Even if their demands are met, striking staff face the threat of further job cuts as a result.

“The reality is that profits to shareholders for the past few years have been bloated by the Meta deal," said the Media, Entertainment & Arts Alliance’s acting director of Media, Michelle Rae. Nine in 2022 booked a $35.5m pre-tax profit gain as a result of the bargaining code cash.

"The company always knew that golden goose would not last forever, and now the Meta deal is over it is the profit bottom line that should be cut, not the frontline editorial staff upon whom Nine’s reputation for independent quality journalism depends.”

Flawed law

As Australia's publishers push the Government to designate, others suggest the solution lies beyond the News Media Bargaining Code.

“The big media companies are eager to argue their current malaise is due to cyclical challenges plus Meta's withdrawal. The reality is that the far greater challenge is structural, where viewers are moving on from TV and print, and the eyeballs just aren't there any more for advertisers to keep investing,” says Private Media boss Will Hayward.

Hayward says the News Media Bargaining Code was “flawed from the start”, based on a premise that "the technology companies were "stealing" content from media companies”.

“That idea led to the absurd scenario where executives from foreign-owned technology companies were left to negotiate behind closed doors, with zero transparency, the future of public interest journalism in Australia,” he says. “We'll never know what happened to the $600m that has been pumped into the sector in the last three years.”

Hayward is not alone in his cynicism – the media sector is awash with conjecture that shareholders and tech stacks have been the primary beneficiaries of the funding.

Either way, the short-term gain of those deals has arguably done little to ensure the long-term sustainability of public interest journalism, and with Meta having backed out at their first renewal, Hayward says it’s “hard to not conclude that the code is an abject failure”.

Others are more nuanced. Chair of the Digital Publishers Alliance, Tim Duggan, says that while the News Media Bargaining Code’s intentions were “noble”, the execution has been “flawed”, because it handed cash primarily to large incumbents. As a result, he says the Code has left the broader media landscape in a worse state than it found it. “We have one of the most concentrated media ownership regimes in the world, and this has only entrenched it.”

Duggan says that perverse outcome should be cause for concern for the Albanese government, which last year committed $4 million in funding for a News Media Assistance Program (News MAP) that will track Australia’s media landscape and inform policy relating to public interest journalism and media diversity. 

Broadsheet’s Nick Shelton called the collapse of the house of cards two years ago, at the time telling Mi3: "The large publishers secured a significant new revenue stream and they have based investment decisions on that. In three years time they will have to gut their businesses if that is no longer available to them. At that point they may be pushing for designation."

If it was clear then that Meta was not going to willingly sign further cheques, it does add some credence to the assertion by co-architect of the news media bargaining code, former comms minister Paul Fletcher, that the Labor government has been caught napping. But the same could apply to big publishers who cannot have failed to see this coming.

Shelton now – as then – says one of the key issues with the Code lies in the fact that it was down to Meta and Google to determine who they would do deals with. Broadsheet was not offered a deal by Facebook and the deal tabled by Google was “so low that it would cost us more to fulfil than the revenue we would be getting”, he previously told Mi3, “but it allows [Google] to say ‘we have offered them a deal’”.

Other independent publishers said the same thing, putting them “at a significant competitive disadvantage” and thus “hurting media diversity in Australia”, per Shelton.

He urged government not to sit on its hands.

“We [Broadsheet] believe Meta needs to face consequences for refusing to comply with the Code. Australia cannot allow global tech titans to determine which laws they do and don't comply with.”

Designate or bust?

The Albanese Government has been weighing up whether it will enforce Meta to comply via designation since the platform's official rug-pull in March, i.e. wondering what to do for almost six months. The Code stipulates the decision is in the hands of the Treasurer, though with Jim Chalmers having excused himself over a conflict of interest, Assistant Treasurer Stephen Jones will be the one to make the call.

Jones will have to consider whether: a) there is a bargaining power imbalance between Meta and news businesses, and b) if Meta has made a “significant contribution” to the sustainability of the Australian news industry. If he lands on designation, it would commence a process by which Meta would have negotiate with registered news outlets via a process of arbitration. But that’s only if Meta doesn’t pull the pin on news entirely – as it’s already done in the face of similar legislation in Canada, which actually did designate. Bosses from News Corp, Nine Publishing, Private Media and Capital Brief in March told Mi3 that had lead to a "bin fire" of disinformation, with similar ramifications locally.

Meta previously flexed that market power in 2021, with Australia’s small businesses and essential services collateral damage in the week of chaos that ensued. A repeat would be devastating for Australia’s independent media sector (who often depend on social media for referral traffic), but is of less concern for bigger conglomerates, who have lately stepped up lobbying efforts for Government to pull the designation trigger.

“Meta must be designated under the Media Bargaining Code and challenged to negotiate in good faith,” News Corp Australia CEO Michael Miller told the National Press Club in June.

Miller reiterated that stance in front the inquiry into Social Media and Australian Society the Government, joined by his counterparts at Nine and Seven West Media.

“We cannot be scared to designate the platforms that refuse to recognise our sovereign laws,” said Nine’s Sneesby. Meanwhile Seven’s Howard warned “non-designation”, along with “an unfair playing field” and “continuing ad market leakage” would reduce Seven’s ability to “invest in news content”.

Should Meta be designated, Private Media's Hayward says the likely news ban that would follow on Instagram, Facebook and Whatsapp would leave many young people without access to original journalism, and with “more access to fake news”.

At the same time, he says the “swathe of independent media companies that also rely on those platforms, and never benefited from the funding that flowed into big media, are likely to either make significant cost cuts or potentially go out of business entirely.”

For Duggan – who in his role with the DPA represents upwards of 50 indie publishers (Private Media and Broadsheet included) – the water is a little muddier. He says that designation would have a “disproportionately negative impact on smaller and independent publishers”, making it a “bad thing” at face value. But there’s a caveat. The DPA is in support of designation “if the Government is able to ensure that Meta is not able to do a news ban” – i.e. if it can enforce a “must carry” rule.

For the same reasons, Shelton is “advocating for designation, plus a new requirement for news availability”. Designation without that safeguard would be a further blow for Broadsheet, with a news block on Meta’s platforms affecting more than half of the city guide’s revenue.

That "must carry" rule – and enforcing it – could prove crucial. Canada's attempt to call Meta's bluff has crippled small publishers – with some seeing 40 per cent declines in traffic and revenue. After Meta pulled, Canada's government tweaked the legislation and quickly struck a deal with Google, which will now pay an index-linked, $73m a year in perpetuity into a fund for news publishers.

California is now working up similar legislation based on that tweaked news fund model – and regulators tend to lift what has worked.

Chaos theory

Meta has always rejected suggestions it owes news outlets for their content, claiming that removing news content from its platforms would be commercially inconsequential. In a submission to the ACCC's Social Media inquiry, Meta said declines in news engagement mean news content accounts for less than 3 per cent of content on the Facebook feed, making it “substitutable”. That’s despite 49 per cent of Australians using social media to access news, according to this year’s Digital News Report from The News and Media Research Centre at the University of Canberra.  

Regardless of the value of news content on Meta’s platforms in the present day, Duggan argues “the symbiotic relationship between the media industry and Meta” is historical – Meta encouraged publishers to set up on its platforms in the early days of building its audience. (A decade ago, Meta's then director of global engineering, now chief technology officer, Andrew 'Boz' Bosworth, told Cannes the newsfeed was "the most popular feature on the site", which would have contributed to tens of billions of dollars in revenue.)

Now that it insists it won't play ball, Duggan reckons Meta is looking to capitalise on a lack of clarity in the legislation – including vague definitions over what constitutes a “significant contribution” to the Australian news media ecosystem, and what counts as news media.

“In Australia, the definition of what is news and what isn't news, and what is public interest journalism and what is hard news, has never properly been determined in any of the key legislations, and that's why you have confusion, and you have misunderstanding.

“I actually think that one of Meta’s aims in this is chaos – to not have a clear understanding of what a Meta news ban looks like, who will be affected, how long they'll be affected, how it will work, and why some sites will be banned, and others won't,” continues Duggan. “All of that is by design, and all of that is on Meta.”

Google hardball

Google has been more cooperative than its social media counterpart, though is now playing hardball. It’s been renewing deals under the Code since earlier this year, but per the AFR, it’s dropped fixed, three-year and five-year terms in favour of one-year agreements that will roll over. That means it is harder for publishers to plan and invest in staff or products beyond the short-term, though arguably lowers the risk of the current cliff edge reoccurring. 

“We've already extended our agreements supporting public interest journalism with some of our earliest News Showcase partners, including Solstice Media, Times News Group, The Conversation, Women's Agenda, and Independent Australia — all of which are regional and independent outlets,” said Google’s Australian director of government affairs and public policy, Lucinda Longcroft.

Some publishers suggest Google’s willingness to come to come back to the table comes down its search engine being more commercially dependent on news content than Meta’s algorithm – though Google insists that less than 2 per cent of searches globally are “news seeking”. Others point to the fact that Google has taken a similar approach around the world when legislation looms – resist, force a compromise and ultimately pay a profit rounding error to make legal constraints go away.

Retooling required

The News Media Bargaining Code is not the only mechanism the Government has to tackle the structural issues facing the news media industry.

“The media sector in Australia needs long-term, sustainable funding that isn't subject to the whims of Meta,” per Hayward. “It is likely also to experience another decade of significant disruption as the bigger end of town adjusts to a new economic reality.”

Some, including Private Media, have recommended a digital platforms levy that could be redistributed to eligible news media businesses. In its submission to the Social Media inquiry, Private Media outlined that the “sensible, sustainable approach” would be for the Government to us the existing system to tax digital advertising businesses on their revenues generated in Australia and use some of those funds "to create incentives for public interest journalism”.

Broadsheet has similar ideas but envisions a levy that is distributed by a “third party at arm’s length from government”.

“Such a levy would be difficult for Meta to avoid as they have tried to avoid the bargaining framework,” explains Shelton. “[Keeping it at] ‘arms length' is important because the Government should not be deciding what publishers are receiving funding. The conflicts of interest are too great.”

Such a model could sit in conjunction with the News Media Bargaining Code, which with the right amendments the majority in news media are hopeful can operate as intended.

“Sometimes it's in the best interest to modify an existing tool, however flawed, precisely because it is an existing tool, and it took years for the News Media Bargaining Code to get developed,” says Duggan.

“My concern is if we throw that out and start something new, it will take years again for that to properly come into effect – and smaller and independent publishers don't have years to survive through political machinations.”

Both Meta and Google were approached for this story. Meta has been asked for further detail.