Australia is right. Facebook should pay up

News organisations long ago misread what the internet's arrival meant for their business models. They also made the fundamental mistake of posting hard-won content online for free. Seeing the web as just another information channel, rather than as a revolutionary reordering of communication and distribution, they underestimated how abruptly and monumentally audiences and advertising would flee

Facebook Inc. went on the offensive last week, banning Australian news organisations from posting links to their work on the social media giant's platform. Facebook, which also blocked users from sharing the links, punched back after the Australian government proposed a law requiring it to pay publishers when links to their content appear on its site.

The move was gutsy - and brazen. In addition to blocking larger, traditional publishers in Australia, it also cut off sites offering public health information, assistance for victims of domestic violence, the national weather service and other niche providers. Facebook has endured years of criticism for its privacy practices, for a muscular presence so ubiquitous it has invited federal and State antitrust lawsuits and for allowing disinformation and extremism to flourish on its feeds, undermining democracy. Most companies might walk softly amid all of that. Not Facebook.

"The proposed law fundamentally misunderstands the relationship between our platform and publishers who use it to share news content," said William Easton, managing director of Facebook's operations in Australia and New Zealand. "It has left us facing a stark choice: attempt to comply with a law that ignores the realities of this relationship, or stop allowing news content on our services in Australia. With a heavy heart, we are choosing the latter."

Cutting off publishers seeking compensation for expensive work that helps Facebook build and retain its audience - even as it helps publishers build and retain theirs - has already attracted attention outside of Australia and is likely to open another front in the Facebook wars. It's also revivified the debate over the internet's broader character and future.

Sir Timothy Berners-Lee, the computer scientist who invented the World Wide Web, has argued that requiring payment for news links will wreak havoc on a global network that has thrived on freely exchanged information. On the other side of the argument are people like Representative David Cicilline, a Rhode Island Democrat, who is chairman of a House Judiciary subcommittee focused on antitrust issues.

"If it is not already clear, Facebook is not compatible with democracy," Cicilline tweeted last week after Facebook imposed its Australian ban. "Threatening to bring an entire country to its knees to agree to Facebook's terms is the ultimate admission of monopoly power." Facebook doesn't see it that way.

Easton noted that Google, the Alphabet Inc. subsidiary, sweeps up content publishers don't willingly provide, whereas publishers enthusiastically pursue Facebook for its reach. (Google agreed last fall to begin compensating publishers for their work and is also subject to the Australian proposal.) He said publishers benefit more from the relationship than Facebook, noting that the platform generated about 5.1 billion 'free referrals' to Australian news outlets last year worth an estimated A$407 million ($320 million). Easton also reminded publishers that while it recognises that "journalism is important to a democratic society," it's not very important to its bottom line. "The business gain from news is minimal," he said. "News makes up less than 4 per cent of the content people see in their News Feed."

That largely makes sense to Mike Masnick, the founder and editor of Techdirt, a blog that covers technology's intersection with business and economic policy. "Look, I get it, Facebook is a terrible, terrible company and deserves lots of blame for lots of bad things that it does. But this ain't it," he wrote. "The simple facts of the situation are that Australia - pushed heavily by Rupert Murdoch - has decided to put in place a plan to tax Google and Facebook for any links to news."

Masnick says Australia's proposal undermines an open internet, requires Facebook and Google to carry the burden of notifying publishers of daily algorithmic changes (which will only compel publishers to try gaming algos more than they already do), and turns Facebook into a publishing piñata - damned for both what it does and doesn't do. On top of all of that, "a bunch of lazy newspaper execs who failed to adapt and to figure out better internet business models not only want the traffic, they also want to get paid for it."

Masnick used bold type for that last bit, and I left it as such for a couple of reasons. First, Masnick asks readers at the end of his blog post to donate money or subscribe, so he also wants to get paid for it. (I work for a company that, like The New York Times, Wall Street Journal, Washington Post, CNN, NBC and others, also wants to get paid for it, so I come to this topic with baggage.) And second: How to sustainably fund news-gathering and publishing is the broader existential issue informing this head-butting, highlighted by the distinct role independent reporting plays in keeping the public educated and alert.

News organisations long ago misread what the internet's arrival meant for their business models. They also made the fundamental mistake of posting hard-won content online for free. Seeing the web as just another information channel, rather than as a revolutionary reordering of communication and distribution, they underestimated how abruptly and monumentally audiences and advertising would flee.

Rupert Murdoch didn't. His premier properties have always rejected the idea that what they funded should exist free of charge. Given that Murdoch is the steward of Fox News, an openly damaging and propagandistic outfit that serves his political and financial interests more than the public, he's a horrid ambassador on this topic. But he isn't a newcomer to the debate in Australia, and his philosophy has a track record.

With adverting revenue gutted, print publications have had to look to pricier subscriptions, paywalls or philanthropy to fill the financial void. Masnick and other smaller publishers can theoretically thrive on small donations. Large news organisations can't. So it's not irrational for publishers to want a bigger cut of the action that Facebook and Google enjoy from news without spending much to gather it. Some news organisations can monetise the traffic Facebook sends back to them. Many can't, in part because they're smaller, traffic is episodic or readers are more loyal to Facebook and its brand - rather than news organisations themselves - as their primary media conduit.

Although news may not be a huge content category for Facebook, there's money there. Audience engagement spikes during crucial news cycles, and news content often dominates discussions among Facebook users. News matters to Facebook because it matters to its audience - and to some of its regulators. News is engaging and viral, and Facebook prizes both, traffic and advertising data aside.

Sharing knowledge and information may be a special province on the web, but media is sourced in myriad ways. News publishers (unlike, say, libraries or academic institutions) aren't, for the most part, publicly subsidised for the information they collect and disseminate. As long as they are privately funded, and until that structure changes, charging readers and viewers for the work is reasonable - as is charging other platforms that piggyback on that work.

As my colleague David Fickling has pointed out, the money at stake in Australia is relatively modest for Facebook, which has only agreed to token revenue sharing arrangements with publishers elsewhere. Google threatened to pull its search service from Australia before relenting and agreeing to compensate publishers. Australia's plan may be heavy-handed, and it opens a can of worms around which links Facebook, or anyone else, should pay for (read Benedict Evans, here). But if being heavy-handed also brings Facebook to the bargaining table to craft an alternative, so be it. Perhaps Mark Zuckerberg will pull up stakes Down Under, but I doubt it.

Yes, Cicilline is overstating things when he equates a Facebook news blackout with bringing Australia to its knees. But his concern for news-gathering, and suspicion of Facebook, is entirely warranted. News publishers - in Australia and elsewhere - will continue losing a sizable share of their audience if Facebook cuts them off, and I suspect that Facebook would consider funding news-gathering itself if the current supply eventually evaporates.

Facebook is a publisher, not just a technology platform. It plays a role in society that extends beyond its income statement. And it should pay up for what it publishes. (Bloomberg)

- Timothy L O'Brien