The illness that afflicts media
Digital markets have altered the value chain through which good or services reach consumers. While, by and large, this change has been good for users, the recalibration of incentives between producers and distributors have been a cause of concern for public policy. An example that highlights the inequitable distribution of incentives is from the digital news industry, which is struggling to ensure viability against financial stress.
The digitalisation of the news industry implies that most readers surf the Internet for their news stories. This has led to two phenomena: First,
most users are switching to online news, especially after the COVID-19 pandemic. Due to the safety concerns and restricted mobility, the number of unique visitors to digital platforms doubled during the lockdown; and experts believe that
50-60 percent of this impact will be sustainable even when the pandemic subsides. Second, many online users access news stories via digital platforms such as Google, Facebook, and WhatsApp. While the first factor pushed traditional print media to increasingly go online; the second factor is a more recent one and has jeopardised the predominantly advertisement-driven revenue model of journalism. Many readers that find news stories
on digital platforms, do not reach the publisher webpage by clicking on the hyperlink. Such readers are satisfied with ‘preview’ on platforms and, thus, do not feel the need to click the link to reach the publisher’s page. This results in digital platforms bagging the opportunity to monetise through displaying advertisements.
While, by and large, this change has been good for users, the recalibration of incentives between producers and distributors have been a cause of concern for public policy.
The News and Media Research Centre of the University of Canberra found
that 62 percent of the surveyed users access online news via indirect methods, such as social media, news aggregators, email newsletters and mobile alerts.
<1> In India,
only 18 percent of users consider direct access to publishers’ webpage as their main way of getting news online. Facebook and WhatsApp are the most widely used channels, with 75 percent of respondents using Facebook, and 82 percent using WhatsApp.
<2>
Why the state must act
Usually, the state intervenes in the market when there is an occasion of market failure or there is a need for redistribution of wealth. Arguably, the trigger of market failure in the form of free-riding is not present in the wealth distribution between information society service providers (digital platforms) and news publishers. Instead, there is a symbiotic relationship: While digital platforms use the news content to draw users to these platforms, news publishers (especially small ones) get indirect traffic through these platforms. It is also true that this relationship is skewed in favour of digital platforms, which take the lion’s share of advertisement revenues.
The justification for intervention is the pious desire to preserve and nourish a healthy society by ensuring a healthy and diverse media sector.
Journalism is a critically important sector for a healthy democracy and a healthy human society. Thus, the state cannot be a fence sitter when journalism is not financially sustainable. Against this backdrop, the justification for intervention is the pious desire to preserve and nourish a healthy society by ensuring a healthy and diverse media sector.
What has been attempted in the past
Several
policy steps have been considered to support digital journalism. One concrete step was when,
the EU created a new ‘neighbouring right’ in press publications, including ‘snippets,’ expecting that publishers could monetise on their IP-protected content when digital platforms use it. ‘Snippets’ are article extracts, photographs, infographics and videos from a publisher’s hyperlinked webpage.
Germany had taken a similar step before the EU.
The idea in both cases was to enable licensing of content to the digital platform, by recognising a new kind of property right in ‘snippets.’ Usually, intellectual property law does not recognise any property right in ‘snippets.’ This well-intentioned legislation, however, largely proved inefficient owing to the following problems.
Usually, intellectual property law does not recognise any property right in ‘snippets.’
• From the standpoint of intellectual property (IP) jurisprudence, the creation of the new ‘neighbouring right’ cannot be justified, as digital platforms do not free ride on the content of publishers. Market failure in the form of free-riding has been the prime justification for granting intellectual property protection. Thus, legal academics widely criticised this new legislation that while ensuring redistribution lost sight of legal limitations of intellectual property.
• The introduced press publishers’ rights do not require that there was a significant investment, unlike another kind of sui generis or neighbouring right, database protection. Once again, this was a departure from the set IP jurisprudence.
Interestingly, in several Member States of the EU, Google refused to use snippets altogether unless provided for free. Faced with this conundrum, publishers accused Google of abusing its dominant position in the online search market. The German competition agency,
the Bundeskartellamt, did not find Google’s action abusive. Contrary to this, the French competition authority,
Autorité de la concurrence, found Google’s actions abusive. Arguably, the decision by the French authority was motivated by the objective of the legislation, i.e.,
to ensure ‘fair’ redistribution’ of incentive, and not based on competition law jurisprudence. The contrary views of the Bundeskartellamt and the Autorité, raise a question on the efficacy of the EU device whose implementation was left to competition law.
The Australian model
Australia enacted the News Media and Digital Platforms Mandatory Bargaining Code on 25 February 2021. The bargaining power imbalance between Australian news media businesses and Facebook and Google (individually) is the motivation behind drawing this code,
which asks for mandatory negotiation of a maximum of 90 days to decide an appropriate compensation, failing which parties must go to arbitration. Previously,
Facebook had responded to the mandatory Code by restricting its users from sharing and viewing news stories.
Google had also threatened to do the same.
The Australian Code is based on the overall value that news content creates for digital platforms. This way, the Code avoids the controversy around creating a new ‘neighbouring’ right on snippets, that, despite the best intention of the legislation, ran into enforcement troubles.
A ‘bargaining imbalance,’ that is the result of a party’s market power, is often addressed through the application of competition law by invoking the abuse of dominance position. As the European experience had demonstrated, there were problems with the enforcement of ‘neighbouring rights’ in snippets through competition law.
A ‘bargaining imbalance,’ that is the result of a party’s market power, is often addressed through the application of competition law by invoking the abuse of dominance position.
It appears that the impending Code had already brought Google and Facebook to the negotiation table. Recently,
Google agreed to pay Nine Entertainment Co more than US$ 30 million annually for the use of its news content.
Salient features of the Code
• It creates a framework for registered news business corporations and designated digital platform corporations to negotiate in good faith for financial remuneration for the use of, and reproduction of, news content.
• Where a commercial bargain is negotiated outside of arbitration, the parties would not need to comply with the general requirements, bargaining and compulsory arbitration rules.
• Designated digital platform corporations must provide registered news business corporations with a range of information including advance notification of planned changes to an algorithm that will have a significant effect on referral traffic to, or advertising associated with, covered news content.
• Where parties cannot come to a negotiated agreement about remuneration an arbitral panel will select between two final offers made by the bargaining parties.
• Responsible digital platform corporations must not differentiate between the news businesses participating in the Code, or between participants and non-participants, because of matters that arise in relation to their participation or non-participation in the Code.
• Digital platform corporations may make standard offers to news businesses, which are intended to reduce the time and cost associated with negotiations, particularly for smaller news businesses.
Lessons for other jurisdictions
It has now been clear that digitalisation has adversely affected the advertisement-driven business model of journalism. While there has been an acknowledgement that steps should be taken to ensure a healthy and plural news media sector, there are not many precedents to help devise the correct policy tool. This article has juxtaposed two alternative models: One from the EU and the other, a more recent one, from Australia. Even though the purpose of both is to ensure redistribution, the former suffers from several limitations. Other jurisdictions, including India, can draw the following lessons from this comparison.
• The application of a particular law to achieve a public policy objective is tricky. One also brings in its jurisprudential limits that might give rise to a new problem. To this end, the Australian Code is superior to the EU model. Its efficacy is reflected in the fact that it has already brought digital platforms to the negotiation table.
• The potential deficiencies in the Australian Code can be fine-tuned along the way.
• Ensuring an equitable distribution of advertisement incentives is all the more important in a developing country such as India, where many users may not be in a position to opt for paid subscription. Consequently, users paying for news (paywalling), which is the other alternative to advertisement revenue, appears to be a sub-optimal solution in developing countries. Unfortunately, in India, Times of India, Hindu, and Dainik Jagran have already paywalled their content. Therefore, India should move swiftly and follow the Australian model.
<1> Page 207.
https://www.accc.gov.au/system/files/Digital%20platforms%20inquiry%20-%20final%20report.pdf
<2> https://reutersinstitute.politics.ox.ac.uk/sites/default/files/2019-03/India_DNR_FINAL.pdf
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