New Zealand media argue that Facebook and Google have become too dominant in the New Zealand digital media market, harming the sustainability of newsrooms, and hindering the quality and diversity of local journalism. The Commerce Commission and the High Court, meanwhile, have refused to let media companies Fairfax NZ and NZME merge in order to gain scale to help combat the power of these platform giants.

‘Platforms’ are sites that enable intermediation between different user groups, such as Facebook users and news groups. They don’t produce any news content themselves, but offer news companies a platform to distribute their content and build audiences. Platforms collect a vast amount of data about their users, which they monetise, and this gives them both economic and political power. Google dominates search on the internet while Facebook dominates social media.

But just how big an effect are platform companies such as Facebook and Google having on news media in New Zealand? A new report I have authored looks at the relationship between web platforms and New Zealand news organisations. It includes an overview of Facebook and Google’s position in the New Zealand media market, media companies’ website traffic patterns, and an assessment of media companies’ dependency on traffic from search engines and social media. The report also provides an overview of some of the debates and responses to the issue of platform power in other countries, to help inform our debates on this issue in Aotearoa New Zealand.

It is clear that platforms and news media companies are mutually dependent, but what makes the relationship problematic is that news companies are failing to monetise the traffic and attention they gain on platforms; this risks destroying their business model and raises questions about how content is to be funded. NZME managing director Shayne Currie told the Commerce Commission that Facebook’s primary objective was to keep readers to itself rather than feeding them to news companies, and this was impacting NZME’s ability to monetise audiences. Facebook and Google have not invested any money in New Zealand journalism, despite benefiting from the content.

What I found

Facebook and Google are major players in the New Zealand news media scene:

• Google dominates New Zealand digital advertising with 60 percent of the digital advertising spend in the country
• On average, over 53% of news sites’ traffic comes from search and social media sources
• Facebook is the third largest news consumption platform in New Zealand behind online news sites and television
• While declining in some other parts of the world, Facebook user and revenue growth is strong in the Asia-Pacific region

Potential remedies

There are both business and regulatory responses to this problem. News companies have applied to merge, arguing that the extra size will help them stave off the devastating impact of lost revenue on their finances for a little while longer. A number of companies have, or are about to, introduce paywalls for their business news: The NBR, Newsroom, and the New Zealand Herald. I do wonder if the New Zealand market for business news is large enough to sustain three paywalled operations. My earlier research shows that paywall revenue alone does not offer a sustainable revenue model for newspapers.

News companies could also pull out of Facebook, and some have already done so. They have trapped themselves in an economy that does not deliver them any substantial revenue. Why be complicit? Karin Pettersson, director of public policy at Norwegian media company Schibsted recently said that, “We can’t say that Facebook is destroying democracy, but then have our newspapers collaborate with them very, very closely, and rely on them for traffic and distribution.” I could not agree more.

There are a range of possible regulatory responses including breaking up Facebook and Google in a modern anti-trust move; taxing or levying of social media platforms and search engines, and possibly using that tax revenue to fund local public-good journalism; or forcing Facebook and Google to pay directly for news publishers’ content.

Radio New Zealand Chief Executive Paul Thompson has urged authorities to act to constrain Facebook and Google, saying that “fair taxation of the multinationals’ profits would be a good start”. Internationally, both News Corp’s Rupert Murdoch and BuzzFeed’s Jonah Peretti have suggested that authorities should force Facebook and Google to pay news companies for their content. Murdoch has urged Facebook to pay ‘trusted’ publishers “a carriage fee similar to the model adopted by cable companies”. He argues that this kind of payment would have very little impact on Facebook’s profit, but a major impact “on the prospects for publishers and journalists”.

The Australian Senate’s inquiry into the future of public interest journalism suggested that the Australian government could consider tax breaks for subscriptions to reputable news. Additionally, the inquiry proposed that the government could introduce a special levy for the duopoly (Facebook and Google), stating that “a levy may be a useful policy mechanism in the future”. Pickard (2018) suggests that the United States government should introduce a ‘public-media tax’ on Facebook and Google’s earnings, and this tax “would generate significant resources for a journalism trust fund”. He calculates that one percent of the two companies’ 2017 net income would amount to US$286 million, and ‘this money could seed an endowment for independent journalism’.

Facebook and Google insist that they provide news companies plenty of opportunities to monetise their audiences as they offer them massive audiences and website traffic. They argue they don’t need to be regulated as they are aiding and investing in journalism; globally, Facebook and Google have introduced multiple ‘journalism initiatives’, new subscriptions services as well as partnerships with media organisations, to reduce the threat of regulation. But none of these have been announced specifically in New Zealand.

Another consideration is to let news outlets, platform companies, and search engines solve market-related problems between themselves. But as Paul Thompson said, letting the market sort this out could be costly:

The likes of Google, Facebook, Apple, Amazon and Netflix provide valued services but they will never make significant investment in local content or journalism, including local, regional or national news. Governments and policymakers are obliged to develop policies that address these widening gaps or risk losing an essential element of nationhood.

It would be wise, therefore, for New Zealand authorities to at least examine how search engines and social media platforms shape digital media markets and the local journalism ecosystem, especially when platforms have not invested in any specific journalism projects in New Zealand. Before considering taxes, levies or forms of regulation for platforms, authorities should have a clear picture of the ‘platform problem’, and what measures may best support local journalism and media sustainability.

This Briefing Paper is based on Merja’s longer report and includes extracts from that report, which can be found here.