Media bargaining code risks further increase in big tech power

29 March 2021 Consultancy.com.au 3 min. read
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With the dust beginning to settle, management consulting firm Kearney has taken a look at the global implications of Australia’s recent Media and Digital Platforms Bargaining Code legislation.

When social media giant Facebook briefly pulled the plug on locally shared news content last month during its media industry dispute with the Australian government – inadvertently taking out a wide range of important community information pages – most Australians, while galvanised against Facebook’s actions, were probably of the mind that being a global test-case during a pandemic wasn’t ideal.

Now, there’s a suggestion the legislation will grant the tech giants even greater power. This is the warning from the analysts of management consulting firm Kearney, including Melbourne-based Asia-Pacific Communications, Media and High Tech practice partner Sarovar Agarwal, who notes that the online battle for news will ultimately be won by super-aggregators like the video and music realms before it. Super-aggregators such as Google and Facebook, with the “scale, data, and algorithms to create network effects for publishers, advertisers, and users.”

Media bargaining code risks further increase in big tech power

According to Kearney, the contracts that are being struck with publishers due to the new legislation only serve to reinforce and effectively legitimise the big tech companies endeavours to be overarching content umbrellas, and now with implicit or explicit government sanction. In simple terms, the compensated news content “will keep more people on their platforms for longer and tighten their grip over user data, which is their currency for advertising and service sales.”

In other words, the tech giants will hoover up even more of the advertising dollar, the very issue that has placed the traditional Australian news industry under increased pressure and sparked the investigation into the online advertising market by The Australian Competition & Consumer Commission.

The ACCC found that in 2019, Google and Facebook already commanded over four fifths of the segment. That left just 19 percent of the Australian online advertising pie to all – all – other websites.

Now, Kearney says, the resulting legislation (which requires big digital platforms to negotiate compensation deals with local news media outlets of a certain size for permission to link to their content) risks handing over the keys to the kingdom. While media publishers will welcome a short-term injection of cash to stem the tide, the consulting firm insists that without transformation the new laws won’t help to sustainably fund local media business models over the long term.

Concerningly, for some, Kearney suggests that if local media companies are to continue to rely on advertising revenue, the focus will need to be on the type of content that allows them to sell ads – with the Daily Mail’s particular brand of journalism given as one example of a successful market adaption. Meanwhile, the government and other organisations have touted the bill as one which would protect quality news journalism in Australia, as necessary in a functioning democracy.

The consultancy expects the Australian situation to become a broad template for other nations seeking to sure up their local publishing sectors, and urges news businesses to see such moves as a catalyst rather than reprieve.

“They need to reshape their business models and innovate so that they can stand on their own two feet and return to profitable growth. If they do not use this window to define themselves then the legislation will not be a reprieve so much as a stay of execution.”