Daniel Bernhard, from Friends of Canadian Broadcasting, joins us as we talk about an epic battle down under. The Australian government has taken on the role of David in an epic struggle with the Goliaths of Big Tech, Facebook and Google.
Australia demanded that Facebook and Google pay news organisations for use of their content. While Google finally decided to make a deal, Facebook chose to play dirty by blocking Australian news —this even included some government health and emergency pages. The world has criticized Facebook for removing legitimate news and information during the pandemic crisis.
Interestingly, Facebook has since reached an agreement with the Australian government—so what does this all mean?
Did Facebook further hurt its already tainted reputation?
What kind of impact will Australia’s new legislation actually have?
How do Canadian and American media companies feel about this deal?
Henry : Hey everyone, it's Henry, Mike, and Chris of The Decentralists and it's Hot Topix time once again. We have a returning guest, Daniel Bernhard, you might remember that we had a great chat with Daniel a couple of months ago and he's the executive director and spokesperson for the Friends of Canadian Broadcasting organization. FRIENDS is dedicated to advancing Canada's rich culture and the healthy democracy that it sustains; Daniel you'll remember is a first-generation Canadian, his parents immigrated to Canada from Chile in the seventies when the country was ruled by a military dictatorship. So, needless to say, protecting democracy is absolutely fundamental for Daniel. Daniel, welcome back.
Daniel Bernhard: Thanks for having me.
Henry : The reason that we have Daniel back is because of course what's been going on down under, as most of the world knows now, Facebook has been kicking the Aussies around primarily because they have had the gall, the nerve to ask for compensation for the media and the news that they create. Daniel, you're the expert on this? Could you perhaps give us a bit of background more than I did about what's going on and what has inflamed everyone so much?
Daniel Bernhard: So, about three years ago the government of Australia started to make rumblings that they would be forcing companies like Facebook and Google to pay for news content that appears on their platforms or to otherwise compensate journalists and journalistic organizations out of recognition that the platforms are hoarding all the ad money and yet producing none of the content.
And so, they wanted to make sure that this content could be sustained, and so what happened this week is that the government of Australia finally passed a law that would compel, Google and Facebook, in particular, to invest hundreds of millions of dollars a year in the news ecosystem and when things got pretty close to being finalized last week Facebook threw a hissy fit, tantrum in the grocery store kind of thing, and said, we're taking our ball and going home, we're pulling all the news from the platform.
Look, you guys are going to find out what a news free Facebook is like, and you're not going to like it very much, and of course, apart from the predictable political and PR backlash because this was clearly not well received, Facebook was also revealed to be pretty incompetent. They have been telling the government of Australia for years, you can't do this, you don't understand how the internet works, this is wrong, and yet what happened is that they tried to pull down news, but they also pulled down the weather service, cancer charities, police stations.
In fact, Facebook's own Facebook page was pulled down in Australia because of the news ban, so they have proven themselves to be not just politically, but also technically inept, and now they have come back to the table and recognized that they need to be part of this and they will make investments. The government of Australia, I think came up with a very elegant solution that doesn't change very much but allows Facebook to save face and we can discuss whether that's the right move or not, but it seems to have resolved the impasse.
So, that's where we are, Facebook and Google are going to be spending hundreds of millions of dollars to compensate Australian news providers and I think that's a win.
Mike : So, Daniel, let me ask you a question on this one, so one of the things that I noticed about this, so you said that they were targeting primarily Google and Facebook, so this is kind of a two-part question. So, Google's strategy when they were confronted with this law was to basically make a deal with Rupert Murdoch, with News Corp primarily, and say, we will pay your entities, your organizations in Australia for their news content.
And as we were just talking about, Facebook said pound sand, we're going to shut it all off, so the question that I have is that I've been reading some of the immediate backlashes that you got when Facebook shut everything down, is that all it did was amplify misinformation that came from other sources, non-kind of journalistic sources. So, what I'm kind of wondering is, is there truly a way to kind of regulate the way this happens, where you don't end up with the regulation favouring say, the non-traditional, self-made, self-proclaimed journalists, no matter which stripe they are.
Or kind of the selective, rich few on the other end, where now all of a sudden the mainline press that Rupert Murdoch owns and controls like Fox gets paid and the regional journalists and the independent journalists don't, so how do you walk that fine-line? Is it truly something that can be regulated at a government level?
Daniel Bernhard: I think that you introduced a whole lot of issues and I'll try my best to see if I can address them in a related way. But the first thing that I want to just do is if I can correct you on one small point there, Michael?
Mike : Please do.
Daniel Bernhard: Google's first response actually was to also threaten to pull out of Australia, they threatened this and they said that they were doing some experimenting and ultimately they backed down. And actually, the first deal that they signed wasn't with Murdoch, the first deal that they signed was with a group called Seven West for 30 million and then eventually with Murdoch. So, they were not originally going to play ball, but I think that they recognized that they didn't have much leverage [Cross-Talking].
Mike : So, they have a better PR department than Zuckerberg does?
Daniel Bernhard: Oh, guaranteed. Look, they're ultimately both going to pay and the only difference is that one's got egg on his face, and the other one doesn't, so absolutely they have a better PR department, so that's the first thing. I think that the second question that you asked is about how the money gets distributed and this is one of the main points of contention. And I think that it's important to remember two things, first, this bargaining code, which is what they call it, it's not actually the government saying you should spend this much, it is actually the government saying, you need to go to the table with all of the publishers and broadcasters and make a deal and if you don't make a deal, we're going to force you to make a deal.
So, the first step is voluntary, this is actually a pretty right-wing, free-market fundamentalist government in Australia, so they are very reluctant to step in if they don't have to, but they have created a threat. Now, the threat, that mandatory bargaining code, if it is applied, a couple of interesting things; it says, first of all, you need to make a deal with everybody or you cannot use content from anybody, it has what's called a Poison Pill Clause.
And the minimum revenue threshold for being included in the everybody column is $150,000 of revenue, so it's not every Tom, Dick, and Harry with a blog, but it's a pretty low bar to being included, so that's the first thing. But the second thing is, yeah, Rupert Murdoch will get the most money out of this, and Rupert Murdoch has been driving this and everyone's like, well, Rupert Murdoch is Uncle Satan, why are we doing this? And that's a fair point, I think that we need to separate these issues, we cannot solve all the problems with the media the same way and these deals will be revised every year.
And if there are other companies that have better content that is attracting audiences, their share of the payments will also increase. So, the consolidation problem in media, the fact that nobody likes Rupert Murdoch, this is not the vehicle for solving that problem, this solves a different problem, which is that companies cannot possibly have a successful digital business model based on advertising when Google and Facebook are playing. And so, if that is not possible, if you cannot conceivably compete, then that's why the competition regulator, in this case, is saying, okay, Google and Facebook have to make payments.
They have recognized a new public good in the law called public interest journalism and they say, if the market dynamics do not allow for public interest journalism to be produced, then we will force these dominant companies to pay for it because we can't live without it, that's it, that's all they have done. And so, the people who have the most reporters are going to get the most money, but the Murdoch problem is a different problem, but the poison pill, everyone is missing this, all the critics, especially in Canada, who are driving me nuts, are like, this is a scam screwing independent publishers, read the code.
Now, it's true that there's some wiggle room, there's always wiggle room, but read the code, the code very clearly states it's all or nothing, and this is designed to prevent the platforms from engaging in a divide and conquer strategy to pay off a couple of the big ones and leave everyone else high and dry.
Mike : Wow that sounds like a really awesome and elegant solution.
Daniel Bernhard: Yeah, they thought about it, the other part, and this is the part that Facebook really hates, is that the bargaining code has a mandatory arbitration clause and this is called Last Best Offer Arbitration. I don't need to get into the super details, but basically, you give me your final offer and I'll give you my final offer and the arbitrator picks one or the other, nothing in between. So, let's say the fair price is a hundred, if Facebook comes with 10 and the publisher says, I want 120, they're going to get 120 because it's closer to the fair price, and this is another incentive for the companies to hash out fair deals because they don't want to roll the dice at arbitration.
So, the Poison pill plus the Last Best Offer Arbitration are threats of last resort that should never be used because they want the market to just sort of do its own thing. So, that's how the deal was always constructed and we're just going to have to see how it plays out and maybe it'll need to be modified, but for now, the win is Google and Facebook have acknowledged that they can be legally obligated to spend money on news. That's a big change, so there's the Murdoch issue, there's distribution, there are a lot of unknowns, but that principle is a game-changer.
Mike : So Daniel, let me ask you this, so what's to stop them from doing this again. Part of the reality is that you have Australia much like a lot of other countries in the world, sadly, potentially, have these large numbers where something like 70 or 80% of the average Australian gets their news from one of these social platforms or Google or somebody like this, so there's that reality. And so, you could see how this law is awesome but at some point, if Google decides they go through these arbitration things, they say 10, the reporter or the news agency says 120, and the arbitrator gives them a hundred, at some point, do they just threaten to pull out again?
Daniel Bernhard: Well, they can pull out; this is the part that I never really understood. People are saying, oh, this is terrible, Facebook is pulling out news from Australia, what are we going to do? That's not really the problem with Facebook pulling out, my personal view is that they're a private company, if they don't want to carry a certain kind of content because they don't want to pay for it, fine. If they don't want to operate in a certain country, fine, that's up to them, the problem is that they do want to operate in the country and they do want to carry the content, so Google and Facebook between them earn in Canada about 6 to 7 billion, depending on who you ask, that's how much they make.
Mike : You have to be kidding me, how much in Canadian taxes do they pay?
Daniel Bernhard: Zero.
Henry : It makes my blood boil.
Daniel Bernhard: It does so. So, they're making billions and billions of dollars here, so imagine that they had to spend a billion dollars between them on news in a year in Canada, so a billion down six to go. Nobody walks away from $6 billion because you have to pay a billion in tax, nobody does that. So, the problem with them pulling news is not that they didn't have news it's that they were trying to turn the citizens against the government and negotiate as a co-sovereign with Australia.
Mike : Which drove me nuts when they reported that, Zuckerberg gets on the phone and says, it's Mark Zuckerberg calling and he gets on the phone and talks one-to-one with the finance minister of a sovereign nation to negotiate their access to news on a social platform. That is a disgrace, Daniel.
Henry : Yeah, what really happened?
Daniel Bernhard: Well, who knows, but the point is this if these guys want to go, let them go, in the first couple of days after Facebook pulled news from Australia, the ABC, the public broadcaster in Australia, their app shot up to number two in the app store because they were smart and they took out a bunch of Facebook ads saying, missing your news, download our app. And it worked people will get this information, it'll just take a little bit of time for them to adjust, so if Facebook wants to pull out, Google wants to pull out, that's on them and Microsoft was there, who owns Bing one of the main competitors, although, a very, very minor player right now, saying we would gladly pay for this news content, if Google doesn't want to be here, we'll be there.
Henry : And they can make Bing work well, sure.
Daniel Bernhard: So, we don't owe them anything, but they don't owe us anything and if they want to leave, let them leave. But if they want to stay, then they have to follow the rules and they need to be put in their place and I think that's what really this is about.
Chris : So, Daniel I just want to comment on something very insightful that you said. You said that Mark Zuckerberg is trying to negotiate as a cosovereign and from my observations, Facebook kind of does look at itself as a country, they're issuing currency, Libra, they decide who gets to be a citizen on their network. I think that when Mike tried to end his Facebook account, they asked for his passport, believe it or not.
Henry : Oh, and they also silence presidents, Chris, don't forget that.
Chris : That's, true. So, they definitely do see themselves as kind of an internet nation.
Daniel Bernhard: A sovereign company.
Chris : Exactly. So, I'd love to hear more of your insight, Daniel, on this whole idea of Mark Zuckerberg, seeing himself as a co-sovereign.
Daniel Bernhard: Yeah. Well, I think that's the important part and when we say that this was a win for democracy; we don't mean that it's a win for democracy because people have news on Facebook again. We mean that it's a win for democracy because the parliament of Australia said, this is what we're going to do, and they did it. And that is, I think really important to remember, this company said, I know that you have a parliament that represents 25 million people in an advanced developed country.
And I know that the opposition agrees with the government and that there's unanimous support in the houses of parliament for this, but screw you, we think that you should do it differently. And so, the fact that they stuck with it is why this is good for democracy, not even because there's going to be money for news and all that stuff, that's true also, but the fact that they stuck with it is the important part. And so, what we now have is this showdown between these companies and sovereign countries and there's a question as to who's going to blink first and who is a stronger player, the fact that people are talking about Australia and Facebook as David and Goliath should be troublesome to anybody that, that is even possibly true.
Chris : And the fact Daniel, the subtle fact is that when people, even us, when you talk about David and Goliath, David is not Facebook, David is Australia. No, seriously, this is like a subtle thing, when we're talking about a David and Goliath struggle, we're talking about David being a country and Goliath being a company.
Daniel Bernhard: That's exactly right. But you know what? They showed actually that they are strong and that Facebook is no match for a democracy with a bit of spine, that is ultimately what we saw, they called their bluff, the so-called changes or compromises that Facebook negotiated were basically nothing. They agreed that they would add a two-month mediation period before arbitration kicks in but so what; they give them a bit more time to make deals, cosmetic things like this.
So, the fact is that the government of Australia recognized, you make a lot of money here, you have a lot of customers here, you want to walk, that's fine but you are walking away from a huge market that is very profitable for you and they held their ground and they won. And so, Facebook wants to bully everybody and say, oh, I don't know if we can do this, you don't understand the internet, we're going to walk, but actually they don't have that much power when it all comes down and we need to keep it that way.
And what the Australians did was that they just stared them down and said, yeah, nice try, guys and it worked, and so I think that the lesson for Canada is that we need to do the same thing. Facebook is going to take a different tack now, they have come out and said that they are happy to pay for news, but what they're going to try and do is lowball the whole thing and get it to be voluntary and whatever. And so, I think that the lesson from Australia is not that they will pay, the lesson from Australia is we do what we want and if it passes parliament, and if Canadians want this to happen, then that's going to be the law of the land.
And if Facebook doesn't like it, they can go home, but if they want to stay, they're going to have to play by the rules; that is the lesson here. And so, we need to make sure that we hold the line and show the same resolve the Australians have shown, that's the admirable part here.
Chris : Facebook, it's no secret, they're in the crosshairs of multiple regulators in multiple sovereign jurisdictions, I think that 48 state AGs in the United States want to split them up and the EU is putting the clamp down on how Facebook manages data as well. I think that France recently said that GDPR is not enough for combating Facebook, so what I would be curious about, Daniel with the events happening in Australia and what Australia was able to get out of Facebook. What does this signal to every other country on the planet looking to regulate and possibly dissolve Facebook?
Daniel Bernhard: Well, only the Americans can dissolve Facebook, ultimately, so that's really something for the United States to do, and we'll see if they end up doing it or not. And they should because when Facebook bought Instagram and especially when they bought WhatsApp, they made all these promises to the regulator, as a condition of the acquisition, to keep the data separate and never to consolidate them. And they have broken all of those promises.
Henry : Did they really say that they would keep it separate?
Daniel Bernhard: Yeah. So, they have made all these promises and then they have broken them, the $5 billion settlement that they signed with the federal trade commission last year was actually for lying about something that they had done in the past. They said that they had fixed a problem that that was compromising people's privacy that had been found out in 2011, I think, and low and behold, it was found that they never did, so lying to regulators is really what's nailed them.
And actually, fun side factoid, there's a rumour now that Facebook's activist investors are investigating whether or not the board increased that settlement from 3 billion to 5 billion in order to provide a personal indemnity for Mark Zuckerberg in the deal which would be a huge waste of the shareholders' money. So anyway, that's currently a rumour, anyway, so the point of the Australian legislation is exactly, as you said, we can do what we want we're sovereign here, and it's not that anyone wants to punish Facebook necessarily, or inflict some kind of punitive regime on them.
It just makes sense that they follow the rules of the countries where they operate; I don't know why that's so much to ask, and so if there are countries that want to strengthen their data protection regimes, Facebook needs to comply with it. If there are countries rather that want to ensure that their news media survives, Facebook needs to comply with it, and if they don't then they should just go somewhere else, that's what any other business would do. And I don't know why we're treating them any differently to anybody else, and so hopefully this will start to normalize the way that governments treat this company, they're just any other company.
Mike : So, Daniel, one of the interesting things that I think is a nuance of this Australian thing, and I want to kind of just talk about it in the context of Canada. But one of the things that I like about this is that it almost seems like by going in and setting a bar and forcing arbitration, and as you said, it's a low bar and all this other kind of stuff, what you can in effect do is kind of institute a direct tax on these guys. It's almost like if you can't tax them because there was a story last year where the French wanted to tax Facebook and Google and all these folks for the money they made in France, in effect saying, you make 6 billion in France, we want a piece of that.
And Trump freaked out and said, we're going to put taxes on wine and cheese and all the other French things, and we're going to bury you guys if you think that you can tax our companies. So, if you look at this thing in Australia, what in effect you could do is if I'm a journalistic outfit that currently does a hundred thousand dollars a year in advertising, and I can get to 150, so I can get that bar to 150, now I start getting money from Facebook and from Google. And so, is this really an ingenious way to kind of tax these folks without actually calling it a tax and giving the benefit right back to journalism and journalistic outfits?
And is it something that we should be looking at doing in Canada? Because I know that you have been leading this charge in Canada, so I want to kind of say, what do we do? Do we adopt this and say, we haven't had the spine to kind of tax them or we're worried about if we tax them, then all of a sudden, maybe the Americans stop advocating for the two Michaels or some other thing? Like what do we do in Canada?
Daniel Bernhard: Well, I think that the point about Donald Trump was a fascinating one, what the Australians are going to get out of Google and Facebook is probably four to five times what the French have gotten because of the way that they have structured the rules. And I don't know if you noticed, but Joe Biden has said nothing, and so I think that the politics of this are now also maybe a little bit more favourable, the argument that we shouldn't force them to pay the news media. We should just tax them and put that into a public fund for journalism; kind of like the Canadian Media Fund or that it would go to the CBC or something like that, that is another way to do it.
Again, as I said, the government of Australia is a pretty hardcore free-market bunch, right of centre, conservative government, so they wanted to make sure that the money never touched the government's balance sheet even for a second and that it was just going to enforce the creation of private deals. That was their politics and their ideology and what they wanted to do but another way to do this and there have been people in Australia who have said this just tax them and put it into public service media, put it into non-profit media, put it into whoever wants to be playing this role.
But don't pay Murdoch who will just put the money in his pocket, which he can't but anyway, that's another story, so the general taxation, either through taxing their income or by having just a special tax on behavioural advertising and just funnelling that money into public interest journalism, that is another way to do it. So, there is more than one way to get to this point, I think that what the Australians though, have done is by actually making this work they have kind of created a default model, and so this is sort of the only game in town, Canada could try something else, but we'd have to kind of start from scratch.
Henry : Daniel, there is another way of doing it, the collective model much like performing rights societies for music, like, SOCAN, BMI, ASCAP and PRS, Facebook and others pay them and they distribute to authorized legitimate news services. Is that a possibility?
Daniel Bernhard: Well, that's a copyright model, and that's what the French have done and the problem with that is twofold; one, it's piece by piece, so it's difficult for a company like Facebook to know in advance what their exposure is, that's one of their big complaints about all this. You notice that the Australian payments are forward-looking, we pay you now for next year based on last year and that's it, so that's the first thing. The second thing though, is that if there are disputes under copyright, the copyright holder has to go and pursue them one piece at a time and the payments that are involved for copyright are pretty low.
So, the French went the copyright route and Google will pay 60 million, well, I think that it might be 60 million euros, so 70-ish million dollars, something like that for the entire news industry. Whereas in France with 65 million people or something like that, and they will pay in Australia to one broadcasting and media holding group in a country of only 25 million people, they'll pay 30 million dollars, so the amounts are way bigger under this model, this is a monopoly penalty, that's how you have to think about this.
It's not a link tax, it's not a tax of any kind, it's a monopoly penalty, that's how they've structured it, so we could go the SOCAN route, I have thought about this actually, about doing it that way because in some sense it's fairer, it's just that the people who get the most traction, get the most money and it allows independence and startups to come through. And there's definitely some merit to that, but the enforcement is difficult and clearly, the companies prefer to just cut their checks at the beginning of the year and know what it is.
Henry : And administrative costs in the collective are a lot too, but it doesn't surprise me that France went the copyright way because they invented copyright.
Daniel Bernhard: There you go, I didn't know that, that's a fun fact.
Mike : So Daniel, if you're in charge of the Canadian response.
Daniel Bernhard: Finally someone put me in charge, that's great.
Mike : I'm putting you in charge, Daniel, this is what we do; we put people in charge of things. So, you're in charge, you have Canada's response, you have now seen what's happened in Australia, there are crises in Canada around the CBC being privatized, that's a real bug bearer of yours, things like this. What do you do if you're Canada as a next step? Because I have to think now that because of this Australian thing and the agreement to pay, there are a lot of countries out there that are going to be looking at this and are going to be looking at getting onto this bandwagon as soon as possible, especially because they're just writing basically blank checks for the COVID. If you have a chance to get in there and now the Australians have proven a way to make it work, what do you do for Canada right now?
Daniel Bernhard: Well, I think that the simple answer is, you just get on with it, the government of Canada and Minister Guilbeault has done this really excellent job from a communications perspective of positioning himself as the next man up. Like we are next in line to slay the dragon and then Trudeau, and the Australian Prime Minister Morrison announced that we will coordinate efforts and work together, and I'm thinking like you can't stand shoulder to shoulder with someone who's a hundred miles ahead of you, it's just physically impossible.
And so, one country has actually gone and done it and the other country says we intend to do it someday, they say that they're going to bring legislation this summer, they're starting consultations with the industry, I don't know when there's going to be an election. So, I think that the answer is just let's go guys and I believe the minister to be sincere, but until you have done it, you haven't done it, so I think that time's a ticking here and the answer is to just get on with it, I think that's the answer.
And what Facebook is going to do is say, oh, well, the situation's different here, we have to talk about context and they're going to try and run out the clock on the parliament.
And so, the answer is to just put something in place, even if you say this is a provisional agreement for one year until we can figure some other things out, is to just the principle because once it's in, it's harder to get out. And so, my advice to the government of Canada is, let's go fellas.
Mike : Just cut and paste, it's that simple.
Daniel Bernhard: More or less.
Mike : That's what we have word processors for, surely just to get a copy of it, say, Hey buddy, can you send me one? And make a copy.
Daniel Bernhard: And actually not even that because now that this Australia model has been proven the government could start by just threatening Google and Facebook with a law, they could just say, start doing deals or we're going to do what they did. And that might be enough to get it started because again, the Australian law gives the government a measure of last resort if the private negotiations are unsuccessful.
So, any country in the world could now point to the Australian model and say, you guy’s better start doing deals, or this is in your future over here too, that's all that they have to say. Not we're going to come soon, just you wait but you guys better get the money flowing.
Henry : Daniel, I tell you what I elect you minister of IT and communications for life.
Daniel Bernhard: Well, I don't know if that's a good idea, first of all, we have to create the ministry and second of all, well, I don't know if I should be doing anything for life. But I think what the government needs now is to just find its spine and just, don't be afraid of these guys and just go, just do it.
Mike : Amen.
Henry : Absolutely. Daniel, thank you so much for your insight considering that we had you on a few months ago, after watching this transpire in Australia, we had to get your thoughts. And actually, now I'm far more prepared to watch what happens next, so thank you very much.
Daniel Bernhard: Hey, it'll be fun, and, oh, I forgot to mention this, for anyone who has listened this long, first of all, thank you but second of all we've put up on our microsite for this campaign. We had this wanted campaign, you guys got the posters, Zuckerberg on a wanted poster, so you can go to newsthief.ca and download the poster as you could before, but now you can actually buy a print too.
Henry : Oh, it's about time, I've been wondering when you were going to do that.
Daniel Bernhard: Yeah, that took us a little.
Mike : I'll tell you it makes my living room, it’s awesome; everybody who walks by on the street can see it. The only problem is that I have to look at Zuckerberg's face all day long.
Henry : It's behind my back so I don't worry about it.
Daniel Bernhard: We can get you like a curtain or something to put over it.
Mike : Exactly. You should do that; sell them with little curtains that you could put over it.
Daniel Bernhard: But anyways, you can head over there, so if there are listeners who want to support the campaign or check out these posters, they are pretty good looking and newsthief.ca, you can download an image of it for free, or you can buy a print and we'll send it to you and please send us a photo of it hanging on your wall, you can tag us at friends CB on Twitter.
Henry : Oh, and not to mention that you can be a monthly supporter of Friends of Canadian Broadcasting and you'll get it that way too.
Daniel Bernhard: I didn't come to solicit, but you can do that also, that's right.
Henry : Thank you very much, Daniel.
Daniel Bernhard: Thank you very much, gentlemen.
Mike : Thanks, Daniel.
Chris : Take care.