NBI - Next Big Idea please

Déjà vu. In 2021 we said, ‘Well, we think it’s flawed, but let’s back it anyway because it might lead to lots of cash.’

That was the News Media Bargaining Code. Five years later, it’s the News Bargaining Incentive.  Like its predecessor, it should help fund journalism in Australia. But with all the experience of the NMBC behind us, could some of the flaws not be fixed?

Let’s start with the good bits. Imposing a levy on the revenue of significant social media and search services operating in Australia should mean money flows into the levy fund and out to local news businesses. That’s assuming it doesn’t run into a trade blockade from the US or some other legal obstacle, and that – as Julie explains below – we get the design of the distribution side right. Thankfully, the scheme appears relatively simple and key aspects are the same as in the model proposed by Treasury last year. The extra recognition of smaller news businesses – by way of the 170% offset – should offer some encouragement to platforms to make deals with smaller players. All good so far.

We’ll explain in our submission the long list of problems we see in the proposed scheme. For now, I’ll deal with four.  

The first problem arises from the limited ways in which investments in news businesses can be made. One way is via arbitrated agreements under the News Media Bargaining Code, which continues as Part IVBA of the Competition and Consumer Act. The other is via ‘commercial deals’ made with news businesses, under cl 18 of the proposed News Media Bargaining Administration Bill. As we’ve said before, based on Julie’s research for CMT’s recent report on news funding, there should be a third way of making contributions – via industry funds that the platforms themselves set up or contribute to and which distribute payments at arms’ length to news organisations.

The second problem is the continued existence of the NMBC. Why is there still a need for this arbitrated agreements scheme? The ‘carrot’ factor – encouraging voluntary agreements rather than formal, regulated arrangements – is now supplied by the threat of the levy being imposed in the absence of commercial deals under the NBI scheme. Unlike in Canada, Meta can’t simply walk away from the NBI with no repercussions. What’s more, the formal NMBC agreements can only come into existence if the mandatory bargaining process is first opened up by the Treasurer ‘designating’ the platform. This can happen if the Treasurer decides the platform has not made a significant contribution to the sustainability of the Australian news media. Who knows what that actually means or how the Treasurer will make the decision, but certainly no platform or service has yet been designated.

The continuation of mandatory bargaining under the NMBC seems even more nonsensical when we acknowledge that the new scheme provides its own built-in back-up – one that avoids unnecessary discretionary decisions by a politician. This is because the NBI legislation says that if a platform hasn’t made contributions that represent 2.25% of its revenue, it will need to make up the shortfall via payments to the ATO that will go into the levy fund. There is no need for a decision by the Treasurer or for penalties to be imposed on a platform for failing to comply with NMBC requirements. And in a practical sense it’s hard to see a platform enduring all the onerous requirements of the NMBC mandatory bargaining process, when it could make separate voluntary arrangements (‘commercial deals’) or just accept the levy. On the other side of the table, I suppose it’s possible to see a very small number of larger news businesses electing to force the negotiation for a deal made just for them, but for most smaller news businesses the resources drain would surely make it not worth the effort.

A final part of this problem is that neither the givers nor the takers of these designated deals are required to tell anyone (apart from the ATO) about them. Unfathomably, this flaw is not addressed in the proposed legislation, even though the concurrent paper on the distribution scheme for the levy recognises the importance of accountability and includes reporting requirements.

The third and more fundamental problem concerns the possible outcomes of the NBI scheme – ie, the number and type of news businesses that could end up being funded by the new scheme. The Administration Bill makes some attempt to spread the money around by prohibiting a platform from claiming more than 25% of its offsets from payments made to a single news business. That should ensure that at least four news businesses will be funded by each participating platform. But there’s nothing preventing the same larger, more influential news organisations striking deals with each of Google, Meta and TikTok. Worst case scenario: Google, Meta and TikTok make deals with the same four news media businesses, and that’s the end of it. And maybe I’m misunderstanding how it’s supposed to work, but on the papers released so far it looks like the big media companies who are able to secure their own commercial deals with the platform are also the first in line for distributions from the levy fund. This is because the basis of levy fund payments proposed in the accompanying distribution paper is the number of FTE journalists as a proportion of all journalists employed by participating news organisations. I must have it wrong. That would be madness, or at least grossly unfair to Australia’s smaller news producers. 

This leads to an overriding conceptual question: what are we actually seeking to achieve in this regulatory intervention? The NMBC seems designed to compensate news organisations for the use of their content by platforms. The purpose of the new commercial agreements under section 18 of the draft bill is wider because the expenditure can be either for making news content available on the platform or for the production of news by a news business. And the payments under the levy scheme are broader again. As Julie explains below, the current proposal is for the money in the levy fund to be distributed according to the number of journalists the news businesses employ. This approach is explained in the distribution paper as follows: ‘Journalists are integral in the production of news content. They play a leading role in gathering, verifying, and disseminating information to inform the public. FTE journalists provide a reasonable approximation for actual investment in news and journalism.’ 

While there may be some problems in using the FTE measure as the sole means of assessing the distribution of levy funds, I’d suggest the underlying rationale here gets closest to what we really want to achieve when we say digital platforms, as key participants in the contemporary information environment, should support the costs of journalism – just as telcos support the costs of making telecommunications services available in regional and remote areas, and as pay TV and streaming services should support the costs of making Australian content. But then this is what we’ve been saying since 2018. It’s getting harder to hide the strain in presenting a happy face.