September 9, 2020

Issues and policies


By Russell Marks
Image of AAP logo at the Sydney bureau of national newswire Australian Associated Press

Image © Dean Lewins / AAP Image

How Google and Facebook created the opportunity for NewsCorp’s latest coup attempt

In recent months, Australian web users have been met with a series of messages as they access the world’s most powerful search engine, Google. Among the first of these messages linked to an “Open letter to Australians”, which warned readers about a “new government regulation” – the draft news media bargaining code – that “would force us to provide you with a dramatically worse Google Search and YouTube, could lead to your data being handed over to big news businesses, and would put the free services you use at risk in Australia”.

It was an unprecedented step by Google LLC, whose famous early catchcry – “Don’t be evil” – has long since collapsed into PR fluff, evidenced by the gigantic tech company’s forays into data tracking, censorship, China, copyright breaches and massive tax avoidance. Google had never passed comment in this way on Australian laws that genuinely do threaten freedoms, such as the 2015 data-retention amendments, which require internet service providers to retain customers’ metadata for two years (so that it is available to law enforcement agencies) and which provide for secret “journalist information warrants” made by hand-picked judges (which make it a crime, punishable by imprisonment, to even speculate on a particular warrant’s existence).

What made the draft code even more deleterious of Australians’ freedoms, according to Google, than any of the 82-plus “anti-terror” laws Canberra has created since 2001? This is a genuinely difficult question to answer. In April, Treasurer Josh Frydenberg instructed the Australian Competition and Consumer Commission to develop the mandatory code, which would effectively force Google and Facebook to share revenue they earn from the advertising generated by their use of news content created (and paid for) by Australia’s news media. Frydenberg’s intervention was itself an extraordinary step for an apostle of the creed of small government, and it came after his earlier efforts – to have the tech giants voluntarily enter into a code following last year’s ACCC inquiry into their conduct – had been resisted by them.

It is hard to interpret Google’s “open letter” intervention as based in anything other than naked self-interest. Nielsen reported last year that Australians spend about 40 per cent of their time online on either Google or Facebook (or their various platforms), which is roughly 10 times the amount of time we spend on the websites of all the “traditional” news outlets – the ABC, NewsCorp, Nine, Seven West and Ten – put together. The news outlets pay for the news content they generate, and Google and Facebook facilitate the outlets’ revenue by linking to the outlets’ sites, in part because the journalism on them is also valuable to the tech giants. So far so good. But in this relationship, Google and Facebook have the market power. They’ve also taken over most of the advertising revenue that’s up for grabs online. The tech giants simply don’t want to share their ad revenue.

The old “rivers of gold” – the revenue earned from advertising, including classifieds, that once paid for journalism – now pour into Google and Facebook, which don’t pay for journalism. In fact, because of their market power, the news outlets now pay Google and Facebook to boost their search visibility. As the tech giants post ever-growing profits, the news outlets cut ever more journalists. It’s a classic story of digital “disruption”.

But what is being disrupted is not just NewsCorp’s profits, which a cynic might suspect is a significant part of the reason Frydenberg and Scott Morrison (who originally announced the ACCC inquiry) have finally intervened after years of recalcitrance by Australian governments. It is the very future of journalism itself.

At 2pm on Tuesday, March 3, just two days after Australia recorded its first COVID-19 death, Bruce Davidson told his staff that they would likely become the latest casualties of digital disruption. Davidson was then CEO of Australian Associated Press, an 85-year-old national news agency that provides essential services to media companies, such as newswire copy, subediting and photography. Its chair, Campbell Reid, accurately called it “journalism’s first responder”. Davidson explained that AAP’s shareholders – including NewsCorp, Nine and Seven West – had decided to break the company up and shut down its national newswire. It was, the company said, a direct response to the digital giants’ disruption: their propensity to “take other people’s content and distribute it for free” had made it too difficult for too many media outlets to continue buying AAP’s services.

It was the latest in a series of seismic shifts in Australia’s media landscape in the digital era. But in some ways, it felt like the biggest. Created as a merger between two existing news agencies in 1935, AAP was a originally a monopoly gambit by Keith Murdoch and Fairfax & Sons – then major competitors – to discourage competition in Australia’s news media by establishing costly barriers for new entrants, and by restricting the ABC’s access to overseas broadcast news, especially after the war created an urgent demand for it. AAP soon settled into an oligopolistic “wholesale” role in Australia’s news market. Its newswire service now contributes to, or generates, a substantial proportion of the factual (and fact-checked) “straight” news content that informs many outlets’ stories. The Media, Entertainment and Arts Alliance – the journalists’ union – slammed the tech giants and the government’s tardy response to their challenge.

But the public focus on the digital giants, encouraged by Campbell Reid, was a sleight of hand by Reid’s employer, NewsCorp. Reid told AAP staff in March that NewsCorp and Nine (which had taken over Fairfax Media in 2018) felt, as AAP shareholders, that they were subsidising their competitors by propping up an ailing newswire. By “competitors”, Reid was referring in particular to the newer entrants – Guardian Australia, The New Daily (set up by industry superannuation funds in 2013) and the less worthwhile Daily Mail Australia. For that reason, AAP’s shareholders had not asked their media customers to pay more money, or made any moves to attempt to restructure the agency. NewsCorp simply wanted it gone.

A month later, its reasons became clear. NewsCorp, substantially owned by Keith’s son Rupert and family, announced plans to go it alone, by setting up a new, in-house newswire service – called NCA NewsWire – which would then replace AAP as the monopoly wholesale provider of news content to other media organisations as soon as its non-compete clause expires in February.

If it succeeds, it will be just about Murdoch’s greatest coup yet, at least in the country of his birth. NewsCorp already controls about 75 per cent of daily metropolitan newspaper circulation – the unhappy result of decades of poor decisions by successive governments and parliaments in the face of persistent and successful lobbying by Murdoch. Those decisions have also allowed NewsCorp to gain substantial interests in pay TV (through its majority ownership of Foxtel and its takeover of Sky News). But monopoly control of newswire services would effectively give NewsCorp total control of the wholesale news market – and, therefore, substantial control over the content produced even by its competitors.

It’s a move that Jacqui Lambie and others have likened to what would happen if Coles and Woolworths suddenly conspired to buy up the trucks, warehouses, docks and airports that form the supply chain for their supermarket products. It’s an apt analogy. NewsCorp would substantially increase its effective control of Australia’s media landscape without making a formal acquisition. There would be nothing for the ACCC to stop. NewsCorp would sneak past all existing competition regulation, including Australia’s cross-media ownership laws, which Murdoch has had in his sights ever since the Hawke and Keating governments made them three decades ago. A procession of public figures has begun to raise the alarm in recent days, including Kevin Rudd and Malcolm Turnbull.

In response to NewsCorp’s announcement about its NCA NewsWire, a consortium of philanthropists and investors stepped in at the eleventh hour to purchase AAP’s newswire business in June, which prevented it from disappearing entirely. By then, the future of a wholesale newswire business in Australia looked even more dire than it had in March, as COVID-19 had caused some of the biggest advertisers – airlines, tourism operators, major events – to disappear.

AAP 2.0, now run as a not-for-profit, is in a battle for survival, and for the very future of journalistic diversity in Australia. Its new CEO, Emma Cowdroy, says that some of its customers are only signing on for very short terms, in some cases as short as three months. Clearly, they’re waiting to see what its competitor, NCA NewsWire, can offer from early next year. These can only be seen as extraordinarily short-sighted decisions. AAP would be unlikely to survive if its major customers, like Seven West, switch to NCA NewsWire next year. As the much earlier, pre-AAP experience of competing newswires shows, there is unlikely to be room for two of them in what is now a much more “rationalised” market.

Who would win a price war between AAP and NCA NewsWire? Like Bunnings or Officeworks, or Coles and Woolworths’ home brands, NCA can be expected to use its substantial market power and capital reserves to undercut prices until AAP is driven out of business. To date unable to secure any funding commitment from the Morrison government (which, in contrast, has given NewsCorp $40 million in direct subsidies recently), AAP 2.0 has taken to crowdfunding. It wants half a million dollars. At the time of writing, it’s raised nearly $88,000 from more than 1200 donors.

It can’t be in anyone’s interests, apart from NewsCorp’s, to hand it more power. Murdoch and NewsCorp have already had a major distortionary effect on Australia’s political culture, especially regarding the global climate emergency and the fossil-fuel interests – like the mining industry – that are driving it. How could anyone be confident that any content generated by NCA would not be tinged with the fakery, quackery and cruelty that pervades NewsCorp’s other content, from its daily tabloids to the “Dancing Bears” on its Sky News rantathons? (“Dancing Bears” was Mark Latham’s derisive name for Murdoch’s coterie of right-wing commentators. Then, of course, he briefly became one.)

That NewsCorp is looking for ways to shore up its financial future in a disrupted world dominated by multinational tech behemoths is reasonable. That it plans to use the opportunity provided by the renewed focus on Google and Facebook by making a play for monopoly control of the newswire market is not. And that it has chosen to play such a cynically destructive role in Australia’s political culture at a time that our democracy needs quality journalism perhaps more than ever before is, to say the least, lamentable.

Russell Marks

Russell Marks is a lawyer and an adjunct research fellow at La Trobe University. He is the author of Crime and Punishment: Offenders and Victims in a Broken Justice System (Black Inc., 2015). 

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