Google and Facebook have incredibly powerful digital advertising businesses. Photo / Getty Images
OPINION:
An independent report posted by economic consultancy Sapere this week dismissed the idea that news organisations should be able to collectively bargain with Facebook and Google over fair payment for use of their news stories.
The report was quietly uploaded to the website of the Ministry of Heritage and Culture, an institution that earlier this month made a submission to the Commerce Commission largely in support of the collective bargaining proposal.
Mixed messaging aside, the report notes there's a mutually beneficial arrangement between news companies and digital publishers.
"Digital platforms benefit from increased consumer engagement from having links to news content on their platforms, but it is also apparent that news firms derive considerable value from their content being made easily accessible to consumers via Google and Facebook's platforms," the report notes.
Sapere concedes that there's a power imbalance between the tech giants and local news companies, but that this is evident for content creators and any other business dealing with these large entities.
It goes on to say there is no policy justification for the Government to intervene to aid the commercial negotiations of one sector and not others.
The report also notes that any government intervention could raise policy considerations of industry and competition rules, as well as impacting the likelihood of foreign firms to invest and provide services to New Zealanders.
As Sapere sees it, if news firms are so dissatisfied with Facebook and Google, then they can simply "opt-out".
From a purely commercial perspective within the context of the existing legislative framework, all these arguments might seem to make sense.
The problem, however, is that they greatly simplify the impact that Facebook and Google have had on the market over the last 15 years.
A graph shown earlier in the report shows there were roughly 15,000 employees working in newspaper publishing in 2006, and by 2020 that number had declined to about 4000.
The thing with advertising spend in New Zealand is that the overall pie hasn't increased all that dramatically. In 2012, the Advertising Standards Authority figures show total advertising spend in New Zealand at $2.1 billion. By 2020, that number had increased to $2.4 billion.
The point here is that as Google and Facebook grew in size, they took a larger and larger cut of the existing ad money circulating in New Zealand.
Sapere notes that we should be careful of challenging the market power of such massive companies because it could discourage other major companies from investing here.
But is this really the type of unchecked influence we want to see in this country?
Imagine an international firm in whichever sector, moving into the New Zealand market today, with minimal staff and convenient tax arrangements, and then proceeding to syphon millions of dollars out of the country without paying a substantial tax rate. In the years that follow, employees in that sector steadily begin to lose their jobs - and meanwhile, the companies that entered the local market employ only a handful of staff.
Yes, Facebook and Google have provided services (without providing any of their own content) in the local market - but this should not negate the impact they are having on a local industry as vital as the fourth estate. And this is precisely why countries like France and Australia have taken steps to ensure that media companies are paid for the use of their content.
Media companies aren't asking for a Government handout or a dissolution of competition law. They are simply requesting the right to bargain collectively with some of the biggest companies in the world.
Broadcasting Minister Kris Faafoi has maintained his softly, softly approach and has still not announced any legislation that would force Facebook or Google to reach an agreement.
Sapere's opinion - because that's really all it is - that news companies could simply opt out of Google and Facebook also overlooks the dire impact that would have.
What the report fails to note in making this assessment is that local news entities offer the public service of providing New Zealanders with information that is beholden to local broadcasting and publishing standards.
If the country's major news entities were to unilaterally pull their content from Google and Facebook, then what would this leave?
We've already seen the impact of local news entities trying to compete with the mass of misinformation that is allowed to travel through Facebook, YouTube and Google. And the ugly result has manifested in the nooses that have been brandished at parliament grounds.
This discussion cannot only be limited to the question of protecting competition rules or protecting the prospect of hypothetical investments that may or may not arrive in the future.
It should be based on what is in the best interests of the New Zealand public - not only today but in the years to come.
Paywalls have become a valuable tool in the battle among media companies to remain viable, but a media commentator worries that they could be locking low-income Kiwis out of the best journalism on offer.
The New Zealand Herald, BusinessDesk and the National Business Review all employ paywalls with the aim of driving revenue.
John Baker, a media commentator and founder of consultancy Conductor, sees this move as necessary in the context of Google and Facebook's dominance of digital advertising, but he's concerned about what it might mean for those who can't afford the premium subscriptions.
"Much like making ethical choices with food, making ethical choices with news is getting expensive and outside the reach of many average Kiwis," says Baker.
"Publishers sell 'premium' content and by definition premium audiences. Low-income Kiwis are progressively getting locked out of quality news and entertainment content.
"This is one of the reasons I can't see the government ever agreeing to a paid-for TVNZ OnDemand service. It's ours after all."
This is certainly valid, but it's worth noting that almost all major newspapers have historically charged for the paper version of their product. The novelty of free news is something that was born in the internet age - and should have perhaps not been embraced at all by major news publishers.
Another point is that digital subscriptions do tend to be relatively affordable. In a market where consumers have got used to paying around $14 per month for a Netflix subscription, publishers can't get away with charging too much for their news services.
That said, this is still an issue that we should be keeping a close eye on.
Baker believes a potential solution to the problem of locking out poorer Kiwis might be to involve the Government using some of the funds allocated to NZ On Air to giving New Zealanders access to paid subscriptions.
"This would have the effect of funding more and better journalism from those outlets benefitting from this support," Baker says.
Baker says that this approach could be more sustainable than funding certain bits of pieces of journalism over time.
Over time, as more companies opt for paywalls, addressing the issue of access to news will only become more imperative - lest we want to risk leaving the poorer members of our society at the mercy of the free information available on Facebook and Google.
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