Google deal nears, in a tribute to the rent-seeking ability of old media

As Sherlock Holmes would say, when News Corp doesn’t bark it tells us a lot about what’s happening.

Its response to the latest draft of news media bargaining suggests what’s been gossiped for the past few weeks: News Corp and Google are close to cutting a deal over money.

How soon should we expect the deal? Very soon — at least with News Corp, and all the other players (including Crikey) other than Nine.

This past six weeks, Nine through once-was-CEO Hugh Marks has been pushing back against concessions to big tech in the legislation to underpin the mandatory news media bargaining code designed to reset relations between Australia’s old media (News Corp, Nine) and Silicon Valley’s big tech, starting with Google and Facebook.

Google demanded the code take into account the value it delivers to old media by delivering audience to the mastheads, where they can be monetised through advertising or subscriptions.

“Totally undermines the policy intent,” Marks huffed in Nine’s SMH in November.

When the government revealed this week that it had agreed to accommodate Google, News Corp’s Australasian executive chair Michael Miller shrugged: “It’s a co-dependency.”

Facebook has been quiet since it announced in September that it would block news posts by Australian users if the code went ahead. However, this month it agreed to pay UK news media (including The Guardian) “millions” for articles in their News tab. It similarly agreed to pay some US publishers (including News Corp’s The Wall Street Journal) last year. With the price set in the United States and the UK, expect a quick deal in Australia.

A deal remains a better option for both Google and News Corp: with the legislation tabled only this week, the process of Senate inquiry, legislation, negotiation and arbitration could take the companies through to spring.

The announcement overnight that the US Fair Trade Commission (and dozens of states) are suing to break up Facebook by undoing the takeovers of Instagram and WhatsApp shows how quickly the ground can shift.

Similarly, News Corp’s continuing restructure to close or sell its loss-making segments gives it, too, an imperative to nail down a deal.

The agreement between Google and French publishers has set the global price at a level big tech can live with.

As with that French deal, the recognition of the value exchange between old and new replaces old media’s billion-dollar ambit claims of early 2020 with a more practical figure. Given Google’s tabled proposal to pay global publishers US$1 billion, it will expect the Australian share to be about A$50 million.

With News Corp, Google is understood to be close to deals with most of the other publishers, most importantly The Guardian — whose alliance with News Corp has given moral cover to the old media claims — and SBS and the ABC, which helps guarantee non-controversial passage through the Parliament (although at the price of conservative backbench dissent).

The agreements between old media and big tech are hurrying on the big restructure in news media. Through the late 20th century, news media optimised for local sorting into city-based monopolies. Now local ads are delivered more effectively (and cheaply) by the tech platforms’ micro-targeting while subscriptions require audiences larger than most local communities can provide.

Instead news media is re-sorting along national (even international) and ideological lines, which brings audiences large enough and engaged enough to pay the cost of subscriptions.

They’re the media that is best placed to deliver content of value to Google and Facebook, and who are most likely to be discovered through search and social media. They can expect the lion’s share of any payment.

Forcing Google and Facebook to pay up is a tribute to the enduring rent-seeking ability of old media.

Step back from the detail and see what old media has achieved: they’ve established the extraordinary principle that new industries can expect to be levied to pay the costs of transition for the old organisations they’re displacing.

It’s a principle that neo-liberal ideologists (including those on the opinion pages of old media) spent decades fighting. Now expect that “do what I do, not what I say” lesson from old media to be taken on board in other disrupted industries.