Illustration: Sarah Grillo / Axios

A new draft code of conduct released on Thursday by officials in Australia would require tech giants like Google and Facebook to start paying news companies to distribute their content.

Why it matters: If Australia adopts the plan and it becomes a model for others around the world, such measures could offer a significant boost to the news industry, especially local news, as it faces financial decline.

Details: Under the proposed new code, the Australian government says it will give U.S. tech companies three months to negotiate terms with publishers over how they will compensate them for their work.

  • If publishers and tech companies fail to come to an agreement in 45 days, which is very possible, a third-party arbitrator will be assigned by the government to make a binding decision on behalf of the two parties, per Reuters.
  • The code requires tech firms to not only pay news companies for their content, but also to provide them with access to their user data and be more forthcoming about how their algorithms are used to rank news content on their platforms, per AP.
  • Violations could cost tech companies up to 10% their annual gross revenue or a $10 million fine in Australian dollars ($7.2 million USD).

The rule has been in motion for a while. The Australian government said in April that it would be developing some sort of mandatory order for tech giants to pay news firms.

  • At the time, the country's treasurer told the New York Times that it would be enforcing a mandatory code after months-long talks with Google and Facebook about establishing a voluntary system to compensate the news industry failed.
  • The two tech giants at the time expressed disappointment with the decision, and said they had been trying to create a voluntary system.

Context: History shows that tech giants, and Google in particular, don't take well to these types of measures.

  • Spain passed a similar measure in 2014 that ultimately caused Google News to leave the country.
  • France is considering a related law, one that would require Google to pay publishers for featuring "snippets," or small previews of their content, in search. Like Australia, it's ordered tech firms to negotiate with publishers or risk being regulated.
  • The EU passed a sweeping copyright law in 2019 that would require its member countries to adopt rules that would force tech giants to pay publishers. Google has threatened to pull Google News from the EU if member states comply.

The tech industry's argument against such laws is that because they're too broad, companies would end up overpaying and decide to quit the markets they cover. That could harm local publishers who depend on distribution from the tech firms.

  • The news industry disputes this claim. As Axios noted last year, a report from the News Media Alliance, a U.S. newspaper trade group, challenged Google's assertion that traffic to Spanish publishers plummeted after Google News shut down in Spain.
  • The group's CEO, David Chavern, said in an interview with Axios at the time that Google is using this narrative to lobby against future copyright rules in other countries that would require them to pay publishers.

Be smart: Many in the media industry argue that companies like Google and Facebook use its content to make their services more valuable to users and rake in billions of dollars in ad revenue as a result. The tech platforms say the media companies freely provide them with headlines and snippets to share because they want the traffic the platforms send them.

  • Paying media companies to summarize and index their content could be prohibitively costly for the tech giants, if the terms are set too broadly.
  • Regulators argue they wouldn't have to set broad terms if the tech firms were able to negotiate fair distribution terms with publishers.
  • With traditional media, like television and movies, regulators don't typically intervene in distribution negotiations between distributors and content companies.
  • But the internet's vast scale has made it a difficult market for content creators to negotiate fair terms absent government intervention, especially at the local level.

The big picture: The plan is part of a larger global effort to tilt the scales back in favor of content creators and away from tech companies as the pandemic continues to eat at the advertising market, putting thousands of local and national media companies out of business.

  • Neither Google or Facebook immediately responded for request for comment.

What's next: The draft plan will be open for comment for a month, after which it will move to consideration by Australia's parliament.

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