A battle down under for online news

In recent weeks, a remarkable conflict has played out between the Australian government on one side, and Google and Facebook on the other. Facing legislation that would force the company to pay news publishers for links that appear on the platform, Facebook instead banned news for all its Australian users. Amid the ensuing firestorm of criticism, the Australian government and Facebook reached a compromise agreement to allow news to return. Yet as countries around the world move to impose greater regulations on technology firms, events in Australia offer a preview of the acrimonious, high-stakes fights still to come.

The conflict in Australia turns on a news media bargaining code that requires large online platforms to bargain with news publishers to pay for links that appear on their sites. Tech companies argue this will break a fundamental principle of the net: the ability to freely link to content anywhere on the internet without having to pay to do so. For companies like Facebook and Google, it threatens a fundamental aspect of their business model: the free provision of the content that a company’s users rely on them to provide. In the case of Facebook, this content is made up in part of links to news services; for Google, this includes search results to news sites. For media companies, meanwhile, the Australian law is an attempt to claw back a bit of revenue from the platforms that now dominate the advertising markets that had sustained the news business for decades.

The nuclear option. Both Google and Facebook have objected to the law, which was passed on Thursday, but Facebook pursued a far more aggressive strategy. Late last week, the company blocked news on the platform for Australian users—and in the process, barred a wide range of pages belonging to government agencies and emergency services.

The company was roundly condemned for the move—the veteran media analyst Joshua Benton compared it to a hostage-taker executing his hostages—but Facebook and the government quickly hammered out changes to the law that saw the company restore news on the platform. Under amendments to the media code, Facebook and Google will not be subject to the law if they sign a sufficient number of commercial deals with news publishers to pay for content. Facebook is moving to sign such agreements, and Google has already struck agreements to feature news content in its Google News Showcase product. Having realized that it "erred on the side of over-enforcement," by banning news on its platform, Facebook said Wednesday that it would spend $1 billion to support the news industry in the next three years.

Support for journalism. The Australian law is aimed at supporting a news industry that has been devastated by the digital transformation of news and advertising. But there’s little reason to believe that the Australian initiative will solve these structural problems. The law may help large media conglomerates at the margins, but it is unlikely they will provide the kind of reliable income that would serve as a stable business model.

The agreement between Google and Rupert Murdoch’s News Corp.—whose political influence was a key factor in building support for the law—only amounts to “tens of millions of dollars” over a period of three years, according to NBC. It is also unclear whether the corporate owners of the Australia media outlets will use the funds generated by these agreements to pay for journalism, or whether they will be used toward other expenses.

In the ongoing fight between traditional media and the tech companies that have decimated their business model, Australia’s regulation represents a short-term victory for the former. In the long-term, media companies will now be more reliant on revenues from Facebook and Google, and these revenues are likely to entrench the market position of media incumbents.

A model for reform. Analysts on both sides of this debate—see Matt Stoller for a positive take, Benedict Evans for a skeptical one—agree that the Australian law is far from perfect, but that isn’t stopping regulators around the world from looking at the Australian measure as a model. Regulators in Canada have said they’re looking at the measure as a possible model, and European officials may follow suit. If so, the bitter conflict that has played out in Australia is only a preview of what is to come.

— Elias Groll (@EliasGroll)

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— The technologist Bruce Schneier breaks down the economics of why major technology firms, such as SolarWinds, appear to under-invest in cybersecurity.

Facebook, Google, and Microsoft provide financial support to the Brookings Institution, a nonprofit organization devoted to rigorous, independent, in-depth public policy research.