Griffin on Tech: News bargaining bill should mirror Aussie deal

There’s something in my being that has an allergic reaction to our media industry’s current demands for Big Tech companies to pay them to feature links to their content on their social media platforms and search engines.

It goes against what the internet should be about, which is the freedom to link to any source of content online, openly sharing information and ideas for all to access. But there’s a special case to be made for the media, which effectively gave away its advertising cash cow to the emerging tech giants over 20 years ago in the awkward transition to the internet age.

The media play an important role in a healthy democracy, and that has to include commercial media. Our country’s newsrooms have been cut to the bone, coverage in many areas scaled back radically, and journalists incentivised to generate clickbait. It’s a business model of diminishing returns and the weak economy has shown how broken it really is. 

I was there, writing for the New Zealand Herald over 20 years ago, when the outlet made its first hamfisted attempts to get readers to pay for news online, one of a dozen or so columnists whose work was put behind a paywall. It didn’t go well, sparking a hostile reaction from readers. We were called “the mushrooms” because we were kept in the dark, both to the Herald’s plans for premium content, but also suddenly invisible to the vast majority of our readership. 

It was a short experiment, with a 15-year gap before the Herald revisited the paywall, successfully this time. It now has a healthy cohort of digital subscribers. If the country’s largest media outlet had taken a more innovative approach to implementing a paywall two decades ago, it may have saved itself and the industry a lot of pain, setting a precedent for premium content in the nascent days of the web.

The big advertising giveaway

But subscriptions alone aren’t enough to sustain a media outlet in the 21st century anyway. The real source of the media’s current pain is how it ceded its share of advertising revenue to Google and Facebook as the tech giants leveraged their propriety ad tech to great effect. Those two companies now claim around 85 - 90% of the online advertising market in most countries between them.

At a select committee hearing on the Fair Digital News Bargaining Bill, which was introduced by Labour in the last term of parliament and is being unenthusiastically considered by the new coalition government, Ashburton Guardian owner and managing editor Daryl Holden revealed just how badly advertising has been hollowed out for media outlets. Just 6% of the publisher’s advertising returns come from digital revenues.

“These are highly sensitive numbers ... but I think you need to hear it,” he told the select committee hearing. 

The Herald and Stuff will be doing a bit better from digital, but the reality is that too many publishers are fighting over a 10% share of the digital ad market. It’s not sustainable. It amounts to a market failure. Do we want healthy media or not? That’s the bottom line. 

The Australians settled the issue nearly four years ago, introducing the media bargaining code requiring Google, Meta, and Microsoft to come to commercial terms with news publishers or face a mandatory arbitration process. Meta initially revolted, removing news links from its platform. Despite the theatrics, the tech companies signed deals and a review by the Australian Treasury last year found the system has been a success.

There have been 23 agreements signed between Google and news publishers, and 13 agreements between Meta, the owner of Facebook and Instagram, and the news publishers. Those deals offered a valuable source of revenue during a tough economic climate. The ABC told the review that it had appointed 57 regional positions, including reporters in 19 locations, 10 of which did not previously have them, thanks to the revenue coming in from Big Tech.

Aussie’s media bargaining success

So we can go through the motions on the arguments here, but the same market dynamics exist. Replicating the successful Aussie media bargaining code makes sense. The alternative is the Government having to step in to fund journalism via our public broadcasters, or schemes like the Public Interest Journalism, which faced a backlash over the perception that media outlets were towing the government line on issues.

The bottom line is that whatever symbiotic arrangement between publishers and tech platforms that existed early on in the internet age, has disappeared. Stuff Sinead Boucher made that clear before the select committee: 

“Long gone are the days where search would bring up a bunch of links. Now they are designed to keep people within the ecosystem they are searching on,” she said, pointing out that only 6.5% of searches for Stuff on Google result in people clicking through to the Stuff website. The vast majority of readers are simply browsing headlines and news blurbs on the search engine itself. 

Some commercial deals have been struck between Google and Meta, and the news publishers here, but Grant McKenzie, chief executive of Allied Press, publisher of the Otago Daily Times, estimated that revenue from those deals amounted to $10 million. 

“Of the $1.8 billion [in annual NZ digital advertising], the vast majority is going to the social media giants. They know they should be paying, but the longer they delay, the better for their shareholders,” he said.

The coalition Government, New Zealand First aside, has little enthusiasm for taxing big tech to line the pockets of media outlets. But the stark terms the publishers put things in will give broadcasting minister Melissa Lee and her colleagues pause for thought. The media layoffs will continue this year. At the end of the day, someone will have to pay to stop the decline. The prime candidates are the handful of multinationals who have cleverly scooped up the vast majority of the online advertising market between them.