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Cracks in media code opposition as Microsoft outflanks Google and Facebook

The platforms have responded with full force and fury. Google has threatened to shut down its search engine if the laws proceed, while Facebook says it will block the sharing of Australian news on its platform. In a sign of the high stakes, Silicon Valley’s tech tsars – Google chief Sundar Pichai and Facebook’s Mark Zuckerberg – personally contacted Morrison and Treasurer Josh Frydenberg this week.

Google chief Sundar Pichai and Facebook’s Mark Zuckerberg personally contacted Prime Minister Scott Morrison and Treasurer Josh Frydenberg this week to air their concerns.

Google chief Sundar Pichai and Facebook’s Mark Zuckerberg personally contacted Prime Minister Scott Morrison and Treasurer Josh Frydenberg this week to air their concerns.Credit:Alex Ellinghausen

Professor Rasmus Kleis Nielsen, the UK-based director of the Reuters Institute for the Study of Journalism at Oxford University, which receives grant funding from Google and Facebook, says Australia is a frontrunner in a global push by news publishers to renegotiate their terms of trade with digital platforms.

“The world is watching what is happening in Australia,” he says. “It’s very clear that publishers all over the world … are really following this with great interest.”

At a time of heightened concerns about the dominance of Google and Facebook, and the growing problems of misinformation and conspiracy theories, regulators and lawmakers around the world are also paying attention.

The Canadian government has signalled its plans to introduce laws to force the tech giants to compensate news publishers and is closely observing the Australian model. Canadian Heritage Minister Steven Guilbeault, who is steering the process, backed Australia’s efforts as news of Google’s threatened exit made international headlines.

“We stand in solidarity with our Australian partners,” he tweeted on January 23. “Canada is similarly working to introduce a more equitable digital regulatory framework across platforms and news media. When facing the web giants, we must stand united.”

The code

The News Media and Digital Platforms Mandatory Bargaining Code has been heavily debated in media and tech policy circles. The code uses the threat of mandatory arbitration to force the digital platforms to broker commercial deals with Australian media companies for the value they obtain from having news content in newsfeeds and search results. If they refuse, they face fines of up to 10 per cent of annual revenues.

For their part, Google and Facebook say they are willing to pay for news, but argue the code in its current form is unworkable and exposes them to an unknowable financial risk. At a Senate inquiry set up to scrutinise the proposed laws, Google Australia managing director Mel Silva said the code would “break” the company’s business model by forcing it to pay news outlets for featuring links and snippets of their content in search results.

“It is not compatible with how search engines work or how the internet works,” Silva told the public hearing in January. “The concept of paying a very small group of website or content creators for appearing purely in our organic search results sets a dangerous precedent for us that presents unmanageable risk from a product and business model point of view.”

Scott Morrison kept his reflections on the conversation with Google’s global boss Sundar Pichai , brief, but said both parties were in “a much more positive space about [Google’s] ability to continue to provide services here in Australia”.

Scott Morrison kept his reflections on the conversation with Google’s global boss Sundar Pichai , brief, but said both parties were in “a much more positive space about [Google’s] ability to continue to provide services here in Australia”.Credit:Bloomberg

If the code became law, Silva said Google would have no option but to exit the search engine market in Australia, abandoning its 94 per cent market share worth $4.8 billion.

The media industry contends that the platforms derive value from the existence of news in search and on Facebook, which they use to build their audiences while collecting advertising revenue. As the gateways for reaching online audiences, news outlets had little choice but to exist on the platforms, but they are unable to extract any compensation for their content due to the imbalance of power they face in dealing with them.

Australia’s media giants, Nine Entertainment Co – the owner of this masthead – and News Corp Australia, the local subsidiary of Rupert Murdoch’s global media behemoth, have been the driving force behind the industry’s campaign for the laws. But they are backed by other big publishers such as The Guardian.

“Without this legislation, digital platforms will continue to refuse to pay for the content they’ve used to secure their monopolies or live up to the responsibilities that come with such power,” Nine’s publishing boss Chris Janz said in his evidence to the Senate hearing last month.

Microsoft’s play

Sniffing an opportunity to capitalise on Google’s threat and deliver a blow to a rival, Microsoft made an extraordinary intervention into the fray this week. Its global president Brad Smith publicly pledged Microsoft’s full support for the code, and said the company would invest in its own search engine Bing to fill the void should Google depart.

“We are comfortable with a model that, frankly, reduces the revenue that is coming to the search service and increases the revenue that is going to news publishers,” Smith told The Sydney Morning Herald and The Age on Wednesday. “We’re not currently subject to the rules the way the legislation is drafted but if we have the opportunity to grow, we would be happy to abide by these rules.”

Microsoft competes with Google in the gigantic market for cloud computing services and also has lucrative contracts with various Australian government departments. But its intervention still shattered many of the arguments Google and Facebook have relied upon.

Smith said Microsoft did not see any problem with the concept of tech platforms paying media companies to display links to their news content – the basis of Google’s opposition to the code. Google has not responded publicly to Microsoft’s manoeuvring. But the morning after Smith’s comments, Google’s global boss Sundar Pichai was beamed by video link into the Prime Minister’s office. Pichai did not withdraw Google’s threat but nor did he restate it.

Morrison kept his reflections on the conversation brief, but said both parties were in “a much more positive space about [Google’s] ability to continue to provide services here in Australia”.

In a further sign Google’s position is softening, the company launched its Google News Showcase product in Australia on Friday. Smaller but prominent publishers including Crikey and The Canberra Times have signed up to Showcase – a licensing program that involves Google paying the publishers for behind-the-paywall content to be featured on a curated platform.

The product has been central in Google’s push for revisions to the media code, a mechanism it says would allow it to pay publishers for news content and avoid being forced to pay to display links to stories.

Setting a precedent

Swinburne University of Technology’s Belinda Barnet, an expert in digital media and hypertext (the linking of online documents through hyperlinks), says Microsoft’s intervention struck at the core of Google’s argument.

“You’ve got another trillion-dollar company [which] has a lot of experience building technology, longer than Google in fact, coming in saying ‘We’re happy to do it, it’s not impossible and we agree with the code’,” Barnet says. “It shows it was never about breaking the internet or technical problems or the long list of reasons Google has come out with publicly. It was always about setting a global precedent.”

Former Facebook Australia boss Stephen Scheeler believes Google and Facebook’s fears extend beyond a payment-for-news precedent.

“I don’t think they are worried they are going to have to pay too much for news in Australia,” he says. “They are worried that if you’re forced to pay for some sort of content on the internet, or even a link to other content, then that opens up a pandora’s box. If a news organisation says we have the right to be paid for a link to our site by Google, what is to stop a cafe from saying we have a right to be paid?”

Scheeler, who left Facebook in 2017, says he is sympathetic to some of the platform’s concerns about the details of the code, but say its threat to block news is “chilling”.

“What it shows is they can turn news off for whatever reason they want and mess with our democracy,” he says. “Hopefully it stiffens the government’s resolve because we can’t give in to threats like that.”

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