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Everybody's Wrong About the Facebook/Murdoch Standoff in Australia

This tech/media fight down under is not about democracy or monopolies. It’s about ad revenue.

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Once upon a time, not that long ago, your local newspapers were not just a community's major source for journalism. They were also one of the major ways that advertisers attempted to reach you with product deals, coupons, classified advertisements, real estate ads, and so on. Subscriptions never really covered the cost of publishing a newspaper. Ad revenue was largely responsible for a media outlet's profits.

Those days are dead, and they're never coming back.

The internet has become a much more effective and efficient way for consumers and advertisers to connect. Search engines (of all kinds), online sales, and targeted advertising have made the very prospect of poring through a newspaper's classifieds and retail ads comically obsolete. Media outlets have been struggling for about two decades to adapt to this tectonic shift and many have failed.

All of this is to say that the fight between Facebook and Australian media companies—which boiled over Wednesday with an announcement that Facebook would no longer allow users to share links to news stories from outlets based in Australia—is not about "democracy" or monopolies in any way, shape, or form. It's about advertising revenue, and who gets it.

In Australia, lawmakers are considering a bill that would require social media giants like Facebook and Google to pay what can bluntly be referred to as a "link tax." The government wants social media companies to pay media outlets for the "privilege" of users linking to news stories. The companies have been fighting back against these demands, arguing (accurately) that the media outlets are the ones that benefit from the links with page views that they probably wouldn't get otherwise. They've threatened to cut ties and stop linking to news content.

The Australian government didn't just decide out of the blue that tech companies need to subsidize media companies in order to preserve journalism for democratic purposes—the Australian government actually has a lengthy history of official secrecy and raids on media outlets and journalists who attempt to report on controversial stories. This proposed law is a result of lobbying by media companies and was pushed heavily by News Corp magnate Rupert Murdoch.

Facebook has decided they're not going to give in. William Easton, managing director of Facebook Australia and New Zealand, notes the very obvious reality that the company doesn't make money off of people sharing news links, and the media outlets benefit from the sharing more than Facebook does:

In fact, and as we have made clear to the Australian government for many months, the value exchange between Facebook and publishers runs in favor of the publishers — which is the reverse of what the legislation would require the arbitrator to assume. Last year Facebook generated approximately 5.1 billion free referrals to Australian publishers worth an estimated AU$407 million.

For Facebook, the business gain from news is minimal. News makes up less than 4% of the content people see in their News Feed. Journalism is important to a democratic society, which is why we build dedicated, free tools to support news organisations around the world in innovating their content for online audiences.

Some of the reactions have been as mind-numbingly dumb as one can imagine. Facebook has been accused of essentially censoring all news coverage in Australia, as though someone's only or primary mechanism for finding out about news is when his mother-in-law posts a link:

"When push comes to shove" here means "When we're forced to pay media companies for a service that actually benefits media companies, not us." To wit:

Here's the real deal. According to data from Australia collected over the past two decades, advertising revenue for newspapers has plunged 32 percent over that time, while circulation has remained largely the same. The overall advertising market has actually grown. Almost the entirety of the revenue loss for Australian newspapers has been the loss of classified advertising. It's been almost completely eliminated in the Australian print media because the technological efficiencies of internet searches make online classified systems much for useful for consumers. There's no reason for classified advertising in newspapers to exist any longer. Online is better. If you need proof, watch Saturday Night Live's recent parody advertisement about the nearly pornographic fascination some people have with searching for houses on Zillow.

This is all about the historically common disruption that new technologies cause in the marketplace. Newspapers are no longer the best at serving up advertising to consumers, so that market went elsewhere. After engines were invented, horses stopped being the most efficient way to travel. After electricity was invented, candles stopped being the most efficient artificial source of light.

Newspapers and media outlets have no moral right to claim this money for themselves. The advertising industry money should go to where it's most effective. But because media outlets have been unable to replace the lost advertising, they've resorted to lobbying the government with claims that preserving newspapers is pivotal to the survival of democracy, riding on the current populist criticism of the size of tech companies. And it's coming to America, if people like Rep. David Cicilline (D–R.I.) call the shots:

This absurd exaggeration of Facebook's power isn't just overheated rhetoric. Cicilline is the chairman of the House Judiciary's Subcommittee on Antitrust, Commercial, and Administrative Law. This is somebody who has a significant amount of influence on antitrust enforcement, and he's attempting to characterize Facebook's refusal to capitulate to demands to transfer money from one corporation to another as "threatening to bring an entire country to its knees."

Is siphoning money from one massive corporation to another "compatible with democracy"? Because that's where this is going. Google, it turns out, has buckled under the pressure in Australia and has compromised with an agreement to pay some money to develop a special platform for News Corp's properties in a special showcase. The New York Times notes that they're planning some deals with other media outlets soon.

Do you think Google will be making these deals with all news outlets, even the little ones? Of course not. This is a capitulation for which certain media companies that have lost ad revenue—but not political influence—will get financial subsidies from Google. Others will not. Google's compromise means that the most powerful media outlets will leave it alone, now that they've gotten their cut.

This has nothing to do with either democracy or antitrust issues. It's about one entrenched industry with political influence grabbing another industry by the ankles and shaking money out of it, with politicians serving as willing assistants, claiming that this is all for the public good (and filling their war chests with the political donations that will follow).

NEXT: Limiting Mail-in Voting Won't Make Elections More Secure

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  1. Stop. Using. Facebook.

    Problem solved.

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    2. Except that there was no problem. Not being an Aussie, I really don’t give much of a shit if Zuckerberg is paying off Murdoch or not. And this is what the issue is about: Murdoch demanding that Zuckerberg pay him baksheesh to prevent Aussie gub’ment from breaking Zuckerberg’s knees.

      The fact that Facebook told Murdoch and his butt buddy Australia to suck eggs endears me greatly to Zuckerberg. More billionaires need to play the John Galt card.

      1. I’d argue that if the links were beneficial to media, they’d not be bleeding money hand over fist.

        Good on Australia for fucking over Facebook.

        1. Spoken like a true government worshiping proggy

          1. Half of what libertarians have hated about governments, also rings true for the social media giants who also farm people. They also have a certain amount of control over you through data harvesting even if you never signed up with them.

            These aren’t traditional corporations like primary industries, manufacturers, railroads, or shipping firms.

            1. A lot of supposed limited government types are making gripes about Big Tech that are carbon copies of the gripes made by proggies for the past 100 years about every other industry.

              Could it be that the alleged bad behavior by big business is actually affecting them personally this time? It is hard not to suspect they never had much in the way of principles to begin with, they were just content to hand wave away everyone else’s complaints as long as they weren’t affected.

        2. The links are beneficial, just not beneficial enough. I click on an interesting headline, get to a paywall and most times I don’t subscribe. Murdoch wants to get paid for me clicking on the headline even if I ultimately decide that the price he’s charging is too high.
          Facebook is absolutely right to respond to this financial coercion. Unfortunately most people want to punish them for their privacy policies and tax avoidance, so they don’t think about whether this legislation is intrinsically meritorious.

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  2. “You want a good magazine? Reason magazine… It’s a magazine for libertarians. It’s a magazine for everybody. It’s a magazine for the world. Reason magazine: A good, good magazine.”
    Rush Limbaugh, Talk Radio Host

    1. Well, Shackford, to be sure.

  3. This is the same government trying to pass legislation to overturn Math and ban encryption, so it’s not much of a surprise they don’t understand how the web works either.

  4. Facebook made the biggest mistake with this. I am constantly amazed by the boneheadedness of their PR people; I wonder if this has to do with Zuckerberg at the helm and trying to keep his finger in all the pies.

    Anyway, Facebook’s warning message should have read more like:

    Sorry, unable to post this news content
    Australia has recently passed a law which charges money for each link to a news article. You need to sign up for a premium account in order to post news, and will be charged $0.05 per article, to cover everyone who might look at the link. Sorry, we didn’t make the law: you might want to contact your local parliamentarian about this.

    Place the blame, and get more revenue until they fold. Win-win!

    1. Agreed, the law is absurd on its face and Facebook are way too pussy to call a spade a spade and actually defend themselves.

    2. dangit, “premium account” and “local parliamentarian” should have been underlined in that, show up as links. Don’t even need to database it, just link “local parliamentarian” to parl_email[rand()*len(parl_email)], the point will get across inna fair crack of the whip.

    3. Sorry, unable to post this news content
      Australia has recently passed a law requiring us to pay billionaire Rupert Murdoch for the privilege of referencing stories from his rags. Thereforewe will stop posting links to his rags.

      1. You started out so good and then fucked it all up.

        Links are not the issue. Posting someone else’s content is.

  5. bUiLd yUr oWn cOunTry, Facebook.

    1. Yep. These billionaire assholes don’t have any problem doing business with China. If the Aussies want to soak them for a little baksheesh, what do I care?

      The tech oligarchs lost the moral high ground when they stopped acting like neutral infrastructure and became the thought police. Newspapers are propaganda too, but at least they can’t try to stop you from reading competing news sources.

  6. I see two claims being made that I’m not sure about.

    1) “The media outlets are the ones that benefit from the links with page views that they probably wouldn’t get otherwise.”

    —-Scott Shackford

    How much do they benefit from those extra views in ad revenue? To what extent does Facebook or Google linking to their stories undermine the number of subscriptions?

    “Almost the entirety of the revenue loss for Australian newspapers has been the loss of classified advertising.”

    —-Scott Shackford

    While it’s true that classified advertising has dried up, here in the United States, anyway, the price of commercial advertising online is substantially cheaper than it is in a traditional newspaper. By selling commercial advertising on linked content, Google is actually undercutting the newspaper’s advertising on price–and the price difference is significant.

    Here are stats from the United States, which should be representative of the kind of advertising market disruption the technology has caused Australian newspapers, as well:

    A full-page print ad in [The Los Angeles Times] cost about $50,000; a digital ad that reached an equivalent audience cost about $7,000; a Google-generated ad that appeared on the Times’s website—auctioned to the advertiser through a Google system the Times had joined—might bring the paper $20.

    —-Nicholas Lemann, Columbia School of Journalism

    NYRB, February 2020

    https://www.nybooks.com/articles/2020/02/27/can-journalism-be-saved/

    That article also contains the following statistics about the number of website viewers who became paying subscribers once these newspapers went behind a paywall:

    The Seattle Times <1%
    The Dallas Morning News <1%
    The Washington Post <2%
    The New York Times <4%

    The point is that not only is Google undercutting newspapers by tens of thousands of dollars on the price of their advertising–by linking to the newspaper's own content–Google and social media are probably also the main reasons why so many of these newspapers' former readers find their way to the same content without paying for a subscription.

    In other words, it may not be entirely accurate to say that newspapers benefit from Facebook and Google linking to their content. To whatever extent they benefit from their stories being linked, they're also getting hammered by the same thing. Those links do not appear to turn into revenue–either through selling commercial advertising or through subscription sales.

    1. I screwed up the italics in the middle there, but you probably already knew that. Everything between, “While it’s true” and “Australian newspapers, as well” is mine rather than the professor’s, but you probably already knew that.

    2. That’s a good counter argument. I appreciate it.

    3. I dunno. re: NYT not benefitting from people linking to their content — without those links, then they would not even have that 4% chance to make a paying subscriber. Former readers would not even be exposed to the paper, or its advertising, at all, and NYT’s readership would be following the trends of other paper news sources as they went to zero.

      1. I don’t think there are a lot of people in New York who wouldn’t know about the New York Times if it wasn’t for Google–especially if they’re interested in local sports, the arts, food, movies, the arts, crossword puzzles, or local politics. They have a very big reputation–bigger than most which is probably why their retention rate was four times some of the others. Even the others, I don’t think people need Google to hear about the Wall Street Journal, the Washington Post, the Seattle Times, the Los Angeles Times, The Dallas Morning News, etc.–not in their home cities, which is their traditional customer base. The Seattle Times isn’t pitching itself to people in Peoria, San Diego, or Bangor.

    4. That’s a good point. Where does Google get its money from? They’re not providing those links to news stories out of the kindness of their hearts – it’s how they make their money. I don’t see a problem with the media being linked to demanding a slice of the pie. They portray Google as being evil thieves, Google portrays them as being greedy leeches. The fact is it’s a symbiotic relationship with most of the proceeds accruing to Google. They’re just haggling over the division of the spoils.

      1. Meanwhile, the newspaper industry has imploded with the collapsing price of advertising and the free availability of content–and that’s largely due to the efforts of Facebook and Google.

        No doubt, Ebay, Craig’s List, online car sales, online homes for sale listings, and online personal ads have also added to the problems of the newspaper industry. It’s not just Facebook and Google.

      2. This. And Australia as a sovereign state has the ability to define what is and what is not IP.

    5. So by your logic, now that Facebook is no longer linking to them the media outlets should be better off and Facebook worse off. So nothing to whine about.

      1. I’m not aware of any publications that have said they’re better off than they would be otherwise because Facebook and Google undercut their advertising rates and obviate the need for a subscription.

        Meanwhile, I am aware that Google agreed to a deal with News Corp yesterday that pays News Corp for the right to link to their content.

        “News Corp (NWS) reached a three-year deal with Alphabet Inc.’s (GOOG) Google to license content from its publications and produce new audio and video products for Google platforms, News Corp said Wednesday.

        Google is paying the media company tens of millions of dollars over the course of the deal, according to a person familiar with the matter.”

        —-WSJ

        https://www.wsj.com/articles/google-to-pay-news-corp-for-access-to-its-publications-content-11613592397?

        The Wall Street Journal is a News Corp owned newspaper, and, no, I am not absolutely sure that Reason should be forced by the government to pay News Corp because I quoted News Corp’s content and linked to their article. It’s possible that News Corp might be glad that I link to them from Reason–even if they don’t profit from Facebook and Google doing so for free. Reason seems to want you to share their content as widely as possible.

        Whether Reason should pay for commenters linking to News Corp’s content should probably be up to News Corp and Reason rather than up to the government, but I’m not absolutely sure that the government saying that Facebook and Google can link to News Corp’s content for free is in harmony with that principle. If a department store wants to prosecute large gangs of organized shoplifters but not individual teenagers, for whatever reason, that should be up to them.

        Are there any news organizations in Australia complaining about Facebook is no longer linking to their content? That News Corp. agreement probably includes News Corp Australia. News Corp Australia is the dominant newspaper owner in Australia, and if Google is paying for access to that content, I don’t see why Facebook should be able to sell advertising on top of News Corp’s content for free.

        If Google paid News Corp a premium to have exclusive rights to distribute their content on social media, then I’m not sure News Corp (or any other news organization that’s so inclined) is wrong to turn to the government to help protect their rights to their own content from wholesale theft on a scale so huge that it hurts not only their bottom line but the whole industry.

        The legitimate purpose of government is to protect our rights. We have police to protect our rights from criminals, criminal courts to protect our rights from the police, a military to protect our rights from foreign threats, and civil courts to protect our contract rights. If News Corp has a right to its own content, and they’re not willing to let Facebook have it for free–and Google is willing to pay them for access to that content–then I’m not convinced that ensuring free access to News Corp’s content is a legitimate function of libertarian government.

        I am open to persuasion, regardless, but I’m not yet convinced that news organizations are better off because social media is linking to their content, and I’m not convinced that news organizations think they’re better off because Facebook and Google are linking to their content (without a contract) either.

        1. If you want to stop people in general – or just particular websites – from linking to you, you can break those links with some technical measures. It’s a little bizarre to offer free content and then complain when people link to it, though. Do you want the traffic or not?

          I’d say you never have the right to stop others from linking to your webpages if they are freely available to the public. They aren’t stealing your content by doing so. They’re just saying “hey, you can get content here”, and that should be protected speech.

          1. An excellent point.

            Any chance the conundrum you describe indicates there is another level of operation at play.

            Maybe, just maybe it’s not a matter of simple links and only simple links.

    6. Answering the question “Does Facebook (or Google) benefit at the expense of the newspapers?” is not actually relevant to whether a government should be creating a special purpose law on this matter. The statistical details unearthed in attempting to answer that question actually obscure the more important question: are Facebook or Google using force or aggression to take something from the newspapers that the newspapers didn’t already make available to all comers? In other words, what is the conclusion to be drawn when only applying the Non-Aggression Principle and its supporting assumptions and aspects such as victim definition etc.?

      For example, if you or I post a link to a newspaper online article on this or any other forum, are we covered by this law? Must we pay the newspaper when we post a link? Does Reason have to? If I post to, say, a small private forum such as pilotspin.com (an unmoderated privately funded forum where mostly private pilots (non pilots welcome too) can get down and dirty and argue politics – most other pilot forums censor such content, alas) links to newspaper online articles, what principle is being invoked that requires anyone on that site to pay the newspapers?

  7. I found this paragraph I had written in 2018, in reaction to the EU trying something similar nut much more comprehensive:

    Every online forum or website which allows comments or uploads or linkage must include ill-defined copyright filters, and they must delete “extremist” material within one hour of being notified by the government or be fined up to 4% of their annual revenue. You could not quote any more than *one* word of a news article when linking to it, and linkage itself requires whatever payment the news source demands. Only sports organizers can post any pictures from a sporting event — no selfies, no pictures of a game. No idea if this extends to texting or tweeting scores or who did what. No pictures which incidentally record copyrighted material like ads on buses or t-shirts or buildings whose architects have copyrighted their facades. No fair use exemptions for critiques, reviews, parody, etc. One of the strangest aspects of this is the huge fines involved, the incredible bias it creates to never ever take the slightest chance of making a mistake. There is no upside to risking 4% of your revenue, and no downside to erring on the extreme side of caution. Do these clowns actually think their system is workable? How can any news source, for instance, possibly think that any search engine will take any risk in linking to them? Who in their right mind would search for news articles when the most descriptive summary is a single word? Will new German-style words come into existence, as they did to reduce telegram per-word fees?

    I don’t know what happened to the EU copyright extension proposals, other than guessing they never went anywhere. I am sure they will try again.

  8. It’s not just NewsCorp. It’s all Australian news, including public news services. It’s not just news, it was also other Australian sites. Of course, Facebook said those were caught in the ban trap in “error”. But hey, muh private company…

    1. Well, Shackford did concede that he was wrong right in the title…

  9. Thank you, God………for Reason. com

  10. What the author did not mention is that most Facebook users don’t click through on the link. They instead look at the headline, snippet, photo, and read the comments. Yes, content publishers like Reason.com do get millions of visits thanks the Facebook, but there are still 10x more traffic that Reason.com is not getting because how efficient Facebook is at keeping its audience captivated.

    1. Now we are getting closer to the heart of the matter.

  11. It sounds to me like the Australian media got caught selling ox carts in an automobile market, and now they want a law to protect their ox cart manufacturers by taxing the automobile manufacturers. Dumb.

  12. Crony Socialism in the making. Unless it is determined in a judiciary that Tech is ‘Stealing’ Journals material and the criminal behavior must be stopped — THIS is not Justice; this is Gov-Gun robbery.

    Everyone wants a piece of the Commie-Pie created by communists who steals from YOU to make a [WE] pot.

  13. There is little if anything free market about this. Neither side is a good guy. But it is an accepted role of the government of Australia to mediate. And they will never be a disinterested party when international corporations are involved.

  14. The proposed Australian government legislation does nothing to improve service from Facebook and is little more than a revenue grab for ‘traditional media’.

    Facebook claims to be a carrier of information and therefore not responsible for what the user distributes or sees. However by choosing not to distribute Australian news sites it has clearly demonstrated that it is in fact a publisher and should be restricted in the same way as all other publishers. We may disagree about the level of restriction but not that the restrictions should apply to all publishers.
    Facebook clearly has a conflict of interest between it’s two business modes and it is surely time for the US government to consider breaking the carrier side from the publisher side using anti monopoly powers.
    While I enjoy using Facebook, I should have the right to choose which publishing algorithms are used to provide my feed. There is no reason why there can not be multiple publishing companies using the Facebook carrier service where Facebook has no input into what the user sees.

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