If tech giants don’t pay for news, Australia must tax them
THE powerful combination of the Australian government and the Australian Competition and Consumer Commission (ACCC) announced that the digital free ride will be terminated by the end of this year, in a world first, competition-based approach.
The free ride occurs when digital platforms such as search engines and social media, including Google and Facebook, publish media-generated content without paying for it. A compulsory code of conduct will force payment under the Competition Act and will redress commercial imbalance across all types of content as well as data sharing and other issues.
But time has been lost in getting to this point, waiting for a voluntary agreement by the digital giants. In the meantime, public interest journalism is collapsing, with extensive closures, production suspensions and job losses.
The ACCC Digital Platforms Inquiry emphasised that public interest journalism is a special good, unlike most others, where ordinary market forces, the interaction of supply and demand, balance the wishes and wants of the public with the capacity of suppliers to provide.
Public journalism, in the words of the ACCC, brings benefit far beyond its market cost - as amply demonstrated by the COVID-19 crisis and the recent bushfires - and needs special support. In the past, the cost of producing news was subsidised by advertising, but this is no longer the case.
Two forces have been at work in arriving at this situation.
In the short term, the coronavirus has caused the shock collapse of tourism and real estate advertising in newspapers, with numerous rural and regional newspapers closing, ceasing production or going out of business.
While an even more powerful force - the long-term migration of advertising spend from newspapers to online - has been evident for over a decade.
It's now imperative that more time is not lost and that payments from the tech giants start to flow from the beginning of the next calendar year.
The digital platforms would be well-advised not to try to avoid the impact of a payment system.
In France and Spain, where regulators have imposed similar requirements, platforms simply withdrew from using any news content.
However, the combined power of the Australian government and the ACCC should not be underestimated. The regulator can use court orders, fines and other sanctions if the platforms don't co-operate.
If there is no co-operation, I believe that the Australian government will - and must - introduce a digital tax on revenue (not profits). This will set a worrying global precedent for the digital platforms. If they are only obliged to pay media for content, they will have got off lightly.
Which raises the question of how much should platforms pay for content.
Published research by the Public Interest Journalism Initiative (PIJI) shows that the public is willing to pay $1.50 to $2.90 per person per month, or to $340 million to $740 million a year. This provides a possible starting point.
An alternative approach is to set a benchmark based on lost newspaper advertising since the advent of the large digital platforms. We could start this calculation by noting the ACCC's breakdown of all online advertising as 47 per cent to Google, 21 per cent to Facebook and the remaining 32 per cent to all other Australian websites combined. This is a dramatic shift from when the majority of advertising was done through traditional media and has created a staggering disparity when you consider the cost - and inherent value - of producing public interest journalism.
Once an appropriate amount has been determined the ACCC, or possibly an independent tribunal, will have to determine how to allocate the money. A difficult question, but as the national regulator, the ACCC is in as good a position as any entity in Australia to address.
While these questions are complex, the priority is to arrive at a workable framework before the end of the year and refine the allocations in later years.
If there is an undue delay, public interest journalism in this country, both at a national and a local level, will continue to be crushed under the weight of declining revenues.
The very existence of this key piece of civic infrastructure - that holds governments and other powerful institutions to account, that reports on political, legal and public policy matters and that is a pillar of the continuation of life of the community - is under threat.
Australia's democracy simply doesn't have another three years to wait.
Allan Fels is chairman of the Public Interest Journalism Initiative and former chairman of the Australian Competition and Consumer Commission.
Originally published as If tech giants don't pay for news, Australia must tax them