Alan Kohler: Google and Facebook are getting hemmed in

Alan Kohler has a plan to promote media diversity.

Alan Kohler has a plan to promote media diversity. Photo: TND

Right now, it looks like Treasurer Josh Frydenberg and ACCC chairman Rod Sims might have Google and Facebook on the ropes.

This puts them on the verge of an historic moment that would remake both the internet and the media in Australia.

They could and should use this sudden, surprising leverage to promote media diversity, not simply to entrench the duopoly of Nine and Murdoch.

And I have just the idea for them to do it.

Search engines (whichever one it ends up being) and Facebook should be made to rewrite their algorithms to introduce a kind of football draft system into the way news is presented – that is, each season’s bottom sides get the first picks.

In the case of news, smaller less powerful publications should get higher spots in the search engine results and more prominence in Facebook just like weaker teams get access to better players in the draft.

That would be much better than just than just giving big publishers more bargaining power under a new code and therefore more Google and Facebook cash. It would help level the playing field just like the draft does with football and would lift the actual businesses of smaller publishers rather than just subsidise them.

The ACCC could learn a thing or two about promoting competition from the AFL. Photo: AAP

This would mean the ACCC’s News Bargaining Code was not simply a gift for News Corp and Nine. After all, the competition regulator is not supposed to entrench duopolies.

(Not that I’m silly enough to think this will actually happen – it would give a leg-up to annoying publications like this one. But let’s assume someone has the national interest at heart.)

Why have Frydenberg and Sims got the internet giants on the ropes? Because Microsoft has said it’s happy to go along with the proposed Code with its search engine, Bing, and more importantly, the European Union is planning to copy it in its proposed new laws regulating them.

Microsoft is worth almost as much as Google and Facebook combined, so it is a serious enemy, and the EU badly wants to regulate the tech giants. This week EU sources told the Financial Times they rather like the Australian idea and are planning to follow suit.

To recap the nuts and bolts of the Australian idea: The ACCC’s code would require Google and Facebook to negotiate a payment with news publishers for the use of their content.

Facebook CEO Mark Zuckerberg failed to head off the proposed new laws. Photo: Getty

There will be compulsory arbitration if they can’t do a deal and there must be no discrimination – that is, they can’t deal with one publisher but not another. What’s more, the arbitrator must choose one of the two offers, not something in between, to remove the possibility of ambit claims.

It’s diabolically clever legislation, which is why the EU likes it.

Google and Facebook say it would destroy their business model because they would end having to pay everyone whose websites appear in their search results or timelines. They say this is perverse and unfair since they drive valuable traffic to them.

Microsoft says it’s fine with them, because they haven’t got a business model at all at the moment anyway, since Google has 95 per cent of search traffic and Bing has 3.6 per cent.

If Google dumped Australia, as threatened, and Bing became our main search engine, Microsoft would still make a lot more money than it’s making now even if it had to pay destination sites for the privilege of driving traffic to them.

By the way, paying searchees might sound ridiculous, but we’re talking about a bargaining code, remember, not a fixed rate.

Companies that were desperate for traffic wouldn’t demand money and wouldn’t go to arbitration; those that didn’t care about traffic, but which Google and Facebook wanted in their results and timelines would have to get paid.

As for Facebook, it’s just promising to drop news links, not pull out of Australia entirely. Would that be so bad?

Anyway, Google, knees buckling, has told the government that it’s prepared to apply the News Bargaining Code to its News Showcase, as predicted in this column in January. What this means is that it’s prepared to have arbitration over the amount it pays publishers for content in it.

Will that be enough? No – there’s nowhere near enough money in the budget yet (US$1 billion globally over three years), although that could increase, but mainly because it doesn’t involve internet search, which everyone uses, just some website thing on the side that no one will look at.

Google could leave Australia to Bing and not suffer much, and we’d be OK too since Bing’s alright, but Google can’t leave Europe without huge damage, not to mention the prospect that President Biden in the US might copy Europe copying Australia, which really would be the end of days.

Google threatened to pack up its search engine if the code didn’t change. Photo: Getty

So, it looks like the Australian government has found itself in a strong bargaining position, and it should be used to genuinely promote media diversity.

Obviously, the Coalition is quite happy with the News Corp papers and Sky, and their former man Peter Costello is chairman of Nine, owner of Fairfax, which is why the government is keen to shower them with Google and Facebook money.

But this shows limited thinking. The Murdoch family can be fickle and Peter Costello won’t be there forever; the next chairman could be, who knows? … Kevin Rudd?!

The national interest is best served by an abundance of publishers, all with equal access to talent and audiences.

Which is why we need a draft – algorithms that help the bottom teams in the news business.

It shouldn’t be too hard for the geniuses at the ACCC to come up with something that advances its charter to promote competition.

Alan Kohler writes for The New Daily twice a week. He is editor in chief of Eureka Report and finance presenter on ABC News

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