Facebook Shouldn’t Have to Pay Publishers for News

(Bloomberg Opinion) -- With local newspapers ailing, the Australian government has hit on a seemingly simple solution: force Google and Facebook to subsidize them. It’s the latest example of an increasingly global tactic. And it’s hopelessly misguided.

Last month, the Australian Competition and Consumer Commission released a “mandatory code of conduct” that (if the legislature approves) will establish a bargaining process between digital platforms and local news organizations. The stated goal is to determine how much the latter should be compensated for the snippets of news that the platforms display to their users, on the premise that an imbalance of competition has led to the publishers’ decline. If the two sides fail to agree, an arbitration panel will decide how much the platforms have to cough up.

As a start, this approach misdiagnoses the problem. Journalism’s business model wasn’t broken by digital platforms. The internet unbundled many of the services — classified advertising, job postings, movie listings and so on — that newspapers once provided, while eroding the local or regional monopolies that made them so profitable. It offered consumers a wealth of free news and opinion and gave advertisers options and audiences that traditional publishers haven’t been able to match. It’s true that Facebook and Google have capitalized on these trends, but they hardly caused them.

Moreover, for the platforms, news is an insignificant source of revenue. Only about 4% of Facebook’s News Feed is actually “news,” as opposed to posts from family and friends, while Google doesn’t even bother to monetize Google News; it reckons that only about 1% of searches in Australia have anything to do with current events. By contrast, publishers everywhere are hugely dependent on platforms to drive traffic to their sites. If anyone should be paying up in this relationship, it isn’t Google and Facebook.

Nor has either platform acted abusively. If a publisher doesn’t like how Google displays snippets of its content, for instance, it’s free to adjust those settings or to opt out entirely. Neither aggregator impedes consumers from visiting news sites directly if they so choose. And both have voluntarily committed hundreds of millions of dollars to newsrooms around the world in recent years. Whether they’ve done so out of civic duty (as they say) or to deflect critics (as seems likely) hardly matters.

But the best reason to oppose Australia’s approach is that it’s a proven failure. By inducing platforms to do away with news snippets and previews altogether, it will in all likelihood reduce publishers’ traffic, depress ad revenue, erode competition, impede innovation and needlessly deprive consumers of a valuable service. Just ask Spain and Germany, where similar rules led to steep declines in local news traffic and caused outsized harm to smaller publishers. Or ask France, where regulators recently took the extraordinary step of requiring Google to provide and pay for news snippets whether it wanted to or not — a policy so heavy-handed and obtuse that it stands out even by European standards. 

Good journalism is, of course, essential to democracy. If Australia’s government, or any other, wishes to subsidize newspapers for the public good, that’s worth debating. But demanding that two overseas companies do so on a false pretext hardly makes for sound policy making and won’t fix any underlying problems. Combined with the threats implicit in such rulemaking — Australia has mused about confiscating 10% of a wayward platform’s annual turnover — this approach is more akin to racketeering.

Life hasn’t been easy for news organizations for some time, and it’s unlikely to get much easier. It’s heartening that policy makers now want to help them find workable solutions. Their first responsibility, though, is to avoid making things worse.

Editorials are written by the Bloomberg Opinion editorial board.

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