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Nine and Seven West take on ‘Big Tech’

In the old-fashioned world of television, you would think that hundreds of millions of sets of eyeballs would guarantee you a healthy stream of advertising revenue. But according to the Australian Financial Review (AFR), industry group Free TV is claiming that Aussie producers of media content might be getting the raw end of the deal from the big US tech giants Alphabet, Inc. (NASDAQ: GOOGL) (NASDAQ: GOOG) and Facebook, Inc. (NASDAQ: FB).

The report notes the hit TV show Love Island, produced by Nine Entertainment Co Holdings Ltd (ASX: NEC), gets hundreds of millions of views on Alphabet’s YouTube platform, yet only receives compensation in the “low hundreds of thousands” from the advertising giant. It’s a situation Free TV says is all too common in today’s media landscape.

Free TV represents Nine as well as other commercial broadcasters such as Seven West Media Ltd (ASX: SWM), the Ten Network and Prime Media, and is pushing the Australian Competition and Consumer Commission (ACCC) to force Alphabet and Facebook to negotiate fairer revenue and data sharing arrangements, in order to ensure the traditional media companies continue to be viable in the brave new world they find themselves in.

The ACCC has been hosting a 2-year enquiry into the modern Australian media landscape, which Free TV is hoping will end with an ACCC-monitored industry ‘code of conduct’ that codifies a revenue/data sharing arrangement that will level the playing field with ‘Big Tech’.

However, Alphabet and Facebook have hit back, saying that their platforms drive billions of referrals to Australian publishers every year.

In addition, Facebook has also recently entered into agreements with major Aussie producers like Nine, Ten and Seven as well as Junkee and Pedestrian.TV to host original content on its Facebook Watch platform.

Australian-owned Nine and Seven have been rapidly evolving to stay relevant in the digital age, which has seen a move away from traditional TV viewing as well as newspaper readership. The Ten Network was acquired by US media giant CBS in 2017.

Nine in particular has expanded its Stan and 9Now streaming platforms, which it expects to become profitable during this financial year. When the ACCC finalises its code of conduct, it will likely guide Nine and Seven’s earnings model for the coming decade, so it’s a space worth watching if you are a shareholder in either company.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Sebastian Bowen owns shares of Facebook. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares) and Facebook. The Motley Fool Australia has recommended Alphabet (A shares), Facebook, and Nine Entertainment Co. Holdings Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.