In some much-needed good news for Australian media companies, tech giants like Facebook and Alphabet (better known as Google) will be forced to pay for publishing news stories on their platforms.
According to reporting in the Australian Financial Review (AFR), Treasurer Josh Frydenberg and Communications minister Paul Fletcher have directed the Australian Competition and Consumer Commission (ACCC) to establish a ‘mandatory code of conduct’ that will regulate the balance of power between Australian local media companies and the global tech giants.
ASX media shares are diverging in the response to this news today. Nine Entertainment Co Holdings Ltd (ASX: NEC) shares are up 4.35% at the time of writing to $1.20 a share, whilst Seven West Media Ltd (ASX: SWM) and News Corporation (ASX: NWS) are both marginally down after posting large gains this morning after market open.
A shot in the arm for ASX media shares
Media companies have been amongst the hardest hit ASX shares during the recent stock market crash. Advertising revenues have significantly dried up after the country (and world) went into economic shutdown in response to the outbreak of the coronavirus.
Nine (which publishes the AFR as well as The Age and The Sydney Morning Herald mastheads) has already cut costs dramatically and has suspended the publication of several magazines. Seven and News Corp have also initiated similar measures, including (in News’ case) suspending dozens of regional newspapers.
As such, today’s decision by the government is a much-needed shot in the arm for these media companies.
Previously, tech giants like Alphabet and Facebook shared news articles from local producers at no cost, but the new ‘code of conduct’ will include enforcement, penalties and arbitration mechanisms to facilitate ‘revenue sharing’ from publication of media content as well as collection of data.
The government is coming in with this bigger stick after the negotiations it ordered in November last year between local media companies and the tech giants broke down, with the ACCC accusing the tech companies of “dragging their feet”.
The AFR references a University of Canberra study, which found that “46 per cent of surveyed consumers used social media such as Facebook for news and 18 per cent said it was their main source of news” – highlighting the significance of this move.
“It’s only fair that those that generate content get paid for it,” the AFR quotes Mr Frydenberg as stating.
It’s a hard statement to argue with!
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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 Alphabet (A shares) and 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.
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