America’s oligarchs face a toxic brew as publishers revolt

Opinion

Far away from Russia, legal fights are set to continue for years as regulators, governments and established media try to claw back ad revenues lost to tech giants. 

The social media networks have been in the wars in Russia –  or almost all of them have.

Facebook and Instagram have just been banned in Putin’s Russia and accused of carrying out “extremist activities”, and parent group Meta has also been labelled an extremist. Twitter is  banned, too.

WhatsApp seems to have escaped such sanctions because it has been deemed a source of communication rather than information.

TikTok users in Russia are restricted to Russian generated content such as RT (Russia Today) and investigators have unsurprisingly found that false narratives about the war are being spread, at speed.

Apart perhaps from TikTok, this is a rare case of the social media appearing to be the good guys whether they chose the role or not.

Overall, they can wear their denunciation by the Russian authorities as a badge of pride and, besides, they can probably cope with the loss of their Russian business in a rapidly declining economy.

Yet away from the war in Ukraine, the California tech giants are facing an increasingly torrid time from regulators, governments and established media organisations seeking to fight back and regain a large slice of the advertising revenues lost to the multi-billionaires.

Together they could add up to a toxic brew for the home-grown American version of oligarchy.

We need to look to Australia to see how the most vigorous attempt so far to extract money for publishers from the tech giants is shaping up.

A year ago, under pressure from the Murdoch press, the Australian Government passed the News Media Bargaining Code.

So far, according to a study by Bill Grueskin in the Columbia Journalism Review, Google and Facebook have handed over more than £85m to Australian media organisations.

For the Australian Broadcasting Corporation is has meant the funding of 50 new reporters covering underserved areas of the country.

The McPherson Media Group, publishers of papers such as the Yarrawonga Chronicle and the Deniliquin Pastoral Times believes the tech money will fund around 30% of its editorial salaries.

If £85m a year can be extracted in a country with a population of 25 million, just think of what could be achieved in the much larger media markets of the UK and the US.

Global pressure is mounting

Unfortunately there is a problem as, Grueskin explains.

“It’s a murky deal, with critical details guarded like they are nuclear secrets,” he says.

In particular nobody knows exactly how much each media organisation receives or whether the money has all gone into journalism or merely added to profits. Two of Australia’s public service broadcasters got money from Google but were shut out from Facebook.

The byzantine deal arose from a matter-of-fact finding by the Australian Competition and Consumer Commission, which found that the American tech companies have been vacuuming up hundreds of millions of ad dollars that once went to news companies.

Equally unsurprising the Commission found a gaping imbalance of power between the tech companies and local media businesses.

Rod Sims, the long-serving chairman of the ACCC, went further by finding that a significant market failure had occurred and because it affects journalism it affects society as a whole.

“Journalism is the classic public good: We all benefit from it,” noted Sims, an economist by training.

So far so good.

When the Australian Government threatened legislation, Google threatened to withdraw its search engine from the country. Facebook went further and pulled all news from its platform for Australians including public information on bush fires and Covid.

In the end, a deal was done in which the tech giants negotiated with individual media organisations. A refusal to negotiate would attract large fines. If the two sides failed to agree on amounts there would be binding arbitration between two numbers –  what the media organisation asked for and what the tech company had offered with no room for compromise.

The pressure is on across the world with Canada planning to introduce similar legislation “as soon as possible” while in the US the Senate is considering measures which would allow publishers to negotiate collectively with the tech platforms.

“Tech companies face a problem: They haven’t come up with a reason why they have managed to adjust to Australian regulations but would fight a similar arrangement in the US or the EU. They know, though, that if the idea spreads, their burden will become far more complex and expensive,” Grueskin argued.

Legal wranglings for years to come

That may be only the beginning of the complexity and expense.

Regulation bodies in both the UK and the European Union have just launched investigations into whether Google and Facebook colluded to use anti-competitive practices to hinder the development of a rival online advertising market system.

US regulators are also looking into the agreement known as Jedi Blue.

The allegation, which both companies vigorously deny, is that they gained a competitive advantage from the agreement under which Meta would get preferential rates and choice of where to place ads while Meta would support Google’s Open Bidding system.

The agreement, it is alleged, would act to to the disadvantage of a rival “header bidding” system which could be weakened and ultimately excluded from the market.

Then of course there is the long-awaited appearance of the Online Safety Bill designed to impose duties on the tech giants to remove harmful content or face fines of up to 10% of turnover.

The Bill requires platforms to ensure their algorithms do not promote harmful material such as racism, trolling or self-harm.

Social media bosses could face a jail sentence of up to two years for suppressing information and media regulator Ofcom will have powers to demand details on algorithms and to enter offices and seize data and equipment. They will not however be held criminally liable for failure to protect users.

The News Media Association has welcomed commitments by Culture Secretary Nadine Dorries that the Government will strengthen the safeguards for the content of recognised news outlets. Such content will be “completely exempt from any regulations under the Bill.”

As for the tech companies the legal skirmishes on all sides could continue for years providing much needed work for lawyers who no longer will have so many Russian oligarchs to swell their coffers.

Raymond Snoddy is a media consultant, national newspaper columnist and former presenter of NewsWatch on BBC News. He writes for The Media Leader on Wednesdays.

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