Antitrust 01/22/2021

Rupert Murdoch’s Australian Shake Down of American Tech

Chris Marchese
Chris Marchese Counsel

Australian lawmakers, bowing to pressure from News Corp, plan to shake down successful American tech businesses and give the money to Rupert Murdoch’s media conglomerate. This will devastate the open internet and hurt users everywhere.

Australia’s plan enables classic crony capitalism by manipulating industrial policy to further line the pockets of a few lucky companies in Australia at the expense of consumers worldwide.

That’s why Google, Facebook, and the U.S. government oppose the effort. Because such legislation would upend the open internet and business models built around it, Google and Facebook warned that they may have to reconsider doing business in Australia. Australian lawmakers, faced with the prospect of depriving their citizens of popular and valuable services, are unhappy and calling the warning a “threat.”

The real threat comes from Australia’s flawed legislation, which would hurt free trade and innovation, and would reshape the internet in ways that extend beyond down under. If American tech doesn’t withdraw from Australia, compliance with the law would make it harder for small businesses in the United States to reach Australian consumers as well as would threaten to close off access to one of America’s largest export markets for one of America’s most successful industries. 

Australia’s Cover Story

According to Australian lawmakers, American tech businesses should have to pay some Australian news publishers for featuring links to their news stories because websites benefit from the publishers, but not the other way around. Australia further claims that, to level the playing field and protect its free press, it must impose a “code of conduct” on American businesses. 

Under Australia’s Media Bargaining Code, Australian media conglomerates would have the legal right to force American businesses to bargain over prices for displaying links to or story snippets from those publications. Any disagreements over prices would be settled and finalized by an Australian arbiter.

Although billed as a tool to help the news media, the code actually helps only a few traditional Australian outlets, including large, profitable conglomerates like News Corp.

What’s Really Going On

This is classic rent-seeking from a few large corporations.

As the New York Times describes it, “Australia’s assertive challenge to the online giants has placed it in the vanguard of a movement to bolster a traditional news media ecosystem that America’s trillion-dollar tech companies threaten with extinction.. [and] has become a focal point of [tech’s] global efforts to limit regulation, as governments around the world look to rein them in.”

That’s because, thanks to the internet, people can read the news from millions of outlets and from all over the world. Google Search makes it easy to read stories from well-known outlets like the New York Times and the Wall Street Journal, as well as from newer outlets like Vox and Slate. Facebook, too, helps consumers discover different news outlets and sources. 

Despite record profits and ratings, traditional media giants–including Murdoch-owned channels like Fox News–find new and thriving digital competition threatening. 

Enter Australia. Pressured by one of the world’s richest and most powerful businessmen, Rupert Murdoch, the country wants to put its thumb on the scale and lend a helping hand to the Australian media magnate. Rather than admitting this unseemly and politically toxic manipulation, lawmakers are instead trying to cloak the subsidy as leveling the “value exchange” between Big Tech and Big Media.

What Australian lawmakers willfully overlook is how American tech businesses already supply immense value to media companies. Just as Google and Facebook drive traffic to online outlets like Vox and National Review Online, they drive traffic to traditional media outlets like the New York Times and the Wall Street Journal through their online versions, nytimes.com and wsj.com. In fact, Google Search directed over 3 billion clicks, worth about $218 million, to Australian publishers last year. 

And they’ve helped publishers gain subscribers in the digital era. The New York Times, for example, recently announced that it brought in more revenue from digital readers than from print subscribers.

Tech also drives advertisers to publisher websites. Because advertisers go where consumers are, increased web traffic means increased advertiser interest, which means increased advertising revenue. 

As if that were not enough, Google and Facebook also have direct partnerships with thousands of publishers. Both have negotiated individual contracts with publishers to pay them for featuring their content. That’s on top of the free benefits and expanded reach for readership these publishers receive from Google Search results or from Facebook’s news feed. This is in addition to the billions they’ve invested in helping publishers and small publications thrive in the digital age.

This heavy-handed government intervention on behalf of News Corp will take away the benefits competition in digital markets provides. Australia’s code, for example, would require Google and Facebook to buy links whether they use the content or not—forcing Google and Facebook to subscribe to all of the media’s content even if that content isn’t relevant to Google and Facebook’s users.

This would be an unprecedented intervention by the Australian government. And it would set a dangerous precedent as other countries will quickly look to copy Australia’s model at the expense of American tech businesses. Even worse, other industries are likely to follow suit too.

Ramifications

Australia ignores the benefits today’s consumer-focused internet provides and tries to cast large media companies like News Corp victims. While Australian lawmakers want a David-versus-Goliath story, this is a story about consumers losing to large corporations.

If Australia passes the proposed code of conduct, internet platforms will have no choice but to restructure their business models or leave Australia. The open internet we now have relies on information sharing. Google and Facebook’s business models facilitate that in consumer-friendly ways by organizing the internet’s content so users can easily find the information they need.

But if tech businesses have to pay simply to provide links to information, or short snippets from websites, the free and open internet will be no more. As the creator of the World Wide Web explained, Australia’s Media Bargaining Code “risks breaching a fundamental principle of the web by requiring payment for linking between certain content online.”

Imagine if you had to pay every time you linked to an article in an email or text message, or a blog post like this explaining current events. Real-time information sharing would be far less common. And yet, Australian lawmakers think it’s okay so long as those paying are American tech businesses. Nevermind the global detriment this would have on all consumers.

But regardless of price, paying for links is simply not feasible. Google and Facebook’s business models rely on organizing information and making it easily accessible to users. That can’t be done if some content– Australia’s code doesn’t even specify what exactly counts as news–must be paid for just to be linked to. 

Because compliance with this law would require completely reshaping the internet as we know it, Google and Facebook observed they may have no alternative but to leave Australia. Even assuming they could change their entire business models, and do so in ways that minimize consumer harm, it would be impossible to have one model for Australia and another radically different model for the rest of the world.

Australian lawmakers don’t like this. But having their cake and eating it too is impossible. Forcing American tech to subsidize their allies in media conglomerates will mean American tech can’t provide incredibly useful services for their citizens. 

At the end of the day, absolutely none of this is necessary. Under existing practice, publishers can opt out from having their content shared. For example, Google Search won’t provide snippets from websites that indicate they don’t want snippets shared. Likewise, Google’s algorithms will exclude links to websites that ask not to be listed in search results. So if publishers are genuinely worried about their content being shared, they may simply opt out.

Unfortunately for everyone, including the Australian public, Australian lawmakers want both the benefits of American tech, including web traffic, and additional special benefits that forced payments to select Australian media conglomerates could provide. 

Bottom Line

Few doubt the important role a free press plays in global democracies like the United States and Australia. 

But contrary to Australia’s claims, America’s tech businesses help enable the global free press. Thanks to Google and Facebook, people have access to more news sources than ever before. And thanks to them, people have access to more news sources for free than ever before. That may not be great for some media outlets who’d prefer readers pay for a subscription, but it is a victory for the global public.

Even as tech breaks down economic barriers to how we get and consume content, media and journalism remains viable and, in fact, very profitable. As the Times shows, millions of people are more than willing to subscribe to media outlets to access high-quality reporting. And advertisers are still willing to advertise with media sources even as consumers surf more and more websites. 

Thanks to the free advertising and web traffic American tech provides, thousands of small and niche publications are able to gain followers. Without devoting large chunks of their operating budgets to reaching readers, publications like Vox can attract readers simply by writing relevant stories that show up in search results or that are shared on Facebook. This is a victory for the free press.

So while crony capitalists might benefit from Australia’s proposed legislation, society as a whole would suffer. Policymakers should be working to make it easier, not harder, for everyday citizens to access the news they desire. 

Next Post Ditching Section 230 Would Make Free Speech Worse for Wear