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Facebook strikes first deal with Seven West (ASX:SWM) as media bargaining code looms large

Facebook strikes deal with Seven West

ASX media shares will be in the spotlight after Facebook Inc (NASDAQ: FB) struck a deal with Seven West Media Ltd (ASX: SWM).

The Aussie media group is believed to be the first to sign a letter of intent with the social media titan, according to the Australian Financial Review.

It isn’t only Seven West that likes the deal. The Facebook share price broke its four-day losing streak last night.

Seven West first but not last to strike deal with Facebook

Nine Entertainment Co Holdings Ltd (ASX: NEC) and News Corporation (ASX: NWS) are believed to be close to penning their own agreement with Facebook.

The news should keep the Seven West share price close to its two-year high even as the S&P/ASX 200 Index (ASX: XJO) is set to open lower this morning. The company, which owns the West Australian newspaper and Channel Seven free-to-air stations, closed at 54 cents yesterday.

The Nine Entertainment share price and News Corporation share price are also hovering close to multi-year or record highs on the belief that Silicon Valley tech giants will inject more than $200 million a year into local journalism.

Facebook throws a tanty

The proposed media bargaining law has dragged Facebook and Google’s owner Alphabet Inc (NASDAQ: GOOG) kicking and screaming to the negotiation table.

Google was the first to capitulate but Facebook played hardball and blocked Australian news organisations (and then some) from posting on its platform. That wasn’t to be a well calculated move as Facebook underestimated the public backlash.

It has since promised to restore access to its service to all Australian organisations.

Facebook share price jumps on media bargaining code compromise

Facebook’s three-finger salute to Australia also didn’t help the Facebook share price. It tumbled for four straight days before news that it struck a compromise with the federal government sent the shares jumping over 2% to US$265.86 last night.

The stumbling block that stopped ASX media groups from striking a deal with Facebook was the “poison pill” clause that gave Facebook the right to immediately terminate deals.

But Facebook has dropped that after the federal government agreed to amend its media bargaining code.

The changes mean that the government will need to consider existing commercial deals between the platforms and media companies before applying the media bargaining code.

The government also has to give the US giants at least a one-month warning before enforcing the code.

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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.

Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (C shares) and Facebook. The Motley Fool Australia has recommended Alphabet (C shares) and Facebook. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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