Facebook and Google will be forced to pay news outlets under a mandatory code designed to rebalance the “unequal bargaining position” held by digital platforms.

Treasurer Josh Frydenberg says the draft code put forward by the ACCC on Friday will ensure a “fair go for Australian news media businesses”.

Under the code – tapped to be legislated in October this year – digital platforms must pay news outlets to publish their content.

The code was developed by the ACCC amid concerns major digital platforms were taking vital advertising revenues away from news outlets while also publishing the content produced by those same companies.

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In 2019, Australian online advertising revenues totalled $9.3 billion according to the IAB Australia Online Advertising Expenditure Report compiled by PwC.

And according to UNSW associate professor Rob Nicholls, an increasingly large share of that amount is going to digital platforms.

That’s badly undermined news organisations, which have traditionally relied on advertising revenue to cover their costs.

“The policy problem from that is that advertising revenue supports news media businesses, and in the absence of that there’s a risk news won’t be funded,” Dr Nicholls said.

“One way to balance that out is to say that if there’s advertising value being generated by that for Google or Facebook, some of it should flow back to news media businesses.”

Mr Frydenberg reflected that sentiment when he unveiled the draft code, telling media the policy wasn’t supposed to “protect” media businesses.

“What we’ve sought to do is create a level playing field to ensure a fair go for Australian news media businesses and that when they generate original content, they are fairly paid for it,” he said.

Josh Frydenberg wants digital platforms to fairly compensate news outlets. Photo: AAP

Platforms expected to play ball

Previously, Facebook resisted the ACCC’s efforts to rebalance the relationship between digital platforms and news media companies.

In June, the social media juggernaut said cutting news entirely from its platform would not have a significant impact on its business or revenues.

“News content is highly substitutable, and most users do not come to Facebook with the intention of viewing news,” the company said in its submission to the ACCC’s initial draft code.

“But the absence of news on Facebook would mean publishers miss out on the commercial benefits of reaching a wide and diverse audience, and social value would be diminished because news would be harder to access for millions of Australians.

Given the social value and benefit to news publishers, we would strongly prefer to continue enabling news publishers’ content to be available on our platform.”

Such an extreme step is unlikely, according to University of Sydney associate professor Tim Dwyer.

Speaking to The New Daily, Dr Dwyer said despite their initial resistance, the big digital platforms have seemingly come to accept these sorts of changes are inevitable.

In the last two years, most have been more proactive in negotiating deals with content producers as scrutiny from regulators around the world increases.

“The platforms recognise that this is going to happen because they’ve been making a lot of efforts to have dialogue and agreements with news organisations already,” he said.

“That’s an indication that they recognise that things have changed.”