To bring Facebook into line, the government’s going nuclear

A few years back, the government tried a small stick approach to negotiate a deal with Facebook by which the US tech giant would compensate local media companies for using their content and effectively siphoning their advertising revenue. It failed – the company ignored the stick.

In its second attempt announced on Thursday, the Albanese government is resorting to “the big stick” – more accurately described as a sledgehammer – to bring the social media platform’s founder Mark Zuckerberg in particular to the table.

Prime Minister Anthony Albanese is attempting to bring Mark Zuckerberg’s Meta to heel. Credit: Bloomberg, Oscar Colman

The government has called it the “news bargaining incentive” – the “incentive” being it will legislate for the big social media and search platforms to be levied with a charge, which will reflect the extent to which they volunteer to negotiate a compensation deal with Australian media businesses.

For the government, it won’t be a revenue-raising exercise, but it does constitute a threat, albeit one that should be considered justified.

Make no mistake, the world will be watching.

Bringing the likes of Meta, Google and TikTok to heel around compensation for the use of media content has been the holy grail for many governments. In many respects Australia’s lead in this regard has made it the world’s crash test dummy.

Facebook’s parent company Meta initially ponied up to the media bargaining code by agreeing to compensate local media companies for use of their content. But the $2.5 trillion social media platform baulked at re-signing, preferring to tough it out, including being prepared to remove Australian media content from its sites.

Meta followed through with this strategy in Canada, harming that country’s local media.

The Australian government didn’t want to follow Canada down that path.

So it’s now ratcheting up the stakes – going social media/search platform-nuclear with the introduction of the charge.

You have to hand it to the government – it’s a massive swing and one that no other country has attempted.

The same threat will apply to the other major platforms such as Google. To date, it has kept its covenant with the original media bargaining code, though that agreement is set to expire. That said, Google is reportedly prepared to re-sign the deal but pay less to some media outlets.

The Meta deal, originally worth roughly $200 million a year to Australian media content providers such as the owner of this publisher, Nine Entertainment, was designed to compensate media companies for the advertising revenue they lost to Meta and Google.

The bargaining code was originally authored by the Morrison government, but despite the best of intentions, it didn’t contain a sufficiently rigorous mechanism to punish the platforms that didn’t continue to sign up.

The government’s argument is that these platforms carry or distribute content that is created and paid for by local media companies. But when the advertising leaches from the original publishers into the coffers of the likes of Meta and Google, the media companies producing the content have their business models compromised.

The publishers, which have invested in capital and staff, have lost revenue to the platforms, which in turn is threatening their ability to invest in journalism and content.

The government understands that a functioning democracy requires a strong media and that the platforms have compromised the media industry.

The way it works is that the bargaining incentive includes a charge and an offset mechanism. Platforms that choose not to enter or renew commercial agreements with news publishers will pay the charge. Platforms with these agreements will, however, be able to offset their liability.

The incentive will apply to large digital platforms operating significant social media or search services irrespective of whether they carry news.

Depending on whether the platform giants play ball, this would represent a much-needed financial shot in the arm for Australian media companies, which have been engaged in a massive redundancy-led cost-cutting exercise throughout 2024.

Time will tell.

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