SteveJ-on-IT: 2021-01

Let's not beat around the bush, this latest draft legislation is a "Fox News Tax", nothing less.

Consider:

The Flow of Value

Google, even with 96% share of "Search", gains no revenue from collecting, indexing, curating & presenting "news" content. It's a Free service, a true 'loss leader'.
Aus Media sites, esp newspapers, gain significantly from the massive amount of traffic flow ('clicks') driven to their sites.

Google & Facebook do not compete in the Advertising segment, Classifieds, where Aus newspapers lost 92% of their revenue since 2002, when Google entered the new segment, online advertising market.

The impact on Aus Newspapers if Google withdraws from Australia, or simply stops indexing Aus Media sites.

Newspapers will lose traffic (= page views = revenue) immediately, until perhaps, other search engines take over.
No Media or newspaper will increase their revenue from Display or Classified Ads if Google withdraws.

Foreign Political Interference

Rupert Murdoch is a Foreign citizen, yet isn't just allowed to own media all across Australia, isn't confined to one media type, print, he's allowed to dominate - even monopolise - large media markets: News Ltd are the only daily newspapers in multiple Capital Cities and along with Nine-Fairfax come close to an effective media monopoly with 80-90% of readers/viewers in most media markets.

Murdoch's holdings alone account for at least two-thirds of Capital City and National newspaper "circulation", the most politically influential market.

Since 1972, Murdoch's media holdings have taken a vociferously, even violently, anti-ALP stance. In a global media empire with a decidedly Extreme Right bias and a reputation for editors being fired for not toeing "the party line", protestations of "Editorial Independence" are meaningless and hollow. All Murdoch's media holdings operate as his personal mouthpiece, even anonymously publishing his opinions.

In his personal tweets, Murdoch is uncompromisingly anti-ALP, anti-"left" / anti-"progressive. The editorial stance of News Ltd and Sky News is consistent with Murdoch's personal views.

Murdoch's father, Keith Sr, was a founder of the highly secretive, ultra-Right Wing lobbyist grop, IPA ("Institute of Public Affairs", self-styled as "the voice for freedom since 1943"). Murdoch continues to be closely associated with the IPA, who use their platform to directly, or via the media, influence politicians at every level, even openly "suggesting" 100 policies (first 75, another 25) for Tony Abbott as PM, to reverse Gough Whitlam's policies from decades earlier, now part of bedrock of Australian society. The number of IPA policies Abbott "ticked off" should concern anyone interested in an Open & Transparent Democracy, unpinned by free and fair elections, not run by shadowy, "faceless men" in back rooms, doing deals with mates.

There were strict "Foreign Interference" laws introduced for elections, but seemingly don't apply to a Foreigner with effective media monopolies across Australia, who's blatantly and unabashedly pushed hyper-partisan Right-Wing editorial policy for the last 16 federal elections on the trot.

Just for good measure, Murdoch's media in Australia pays almost no tax here, alone has had multiple multi-million grants, without public reasons, from the Federal Government to support it. While in 2014, the Abbott Government directed the ATO to "rebate" News Ltd $882 million after a long running $2 billion law suit.

Problems with the Proposed "Tax"

The idea of taxing some, not all, online advertising businesses and arbitrarily transferring those taxes to some (large) private companies should ring alarm bells. There is no precedent for this type of anti-"Robin Hood" tax transfer in any Western Democracy.

Once this tax transfer mechanism is established, where does it end? Will Gerry Harvey ask for a cut of Kogan, e-Bay and gumtree revenues?

How is this even legal, taxing selected entities for the enrichment of particular commercial concerns?

There seems no basis for selecting recipients, other than "Have a Go, Get a Go".

There's two other elements that the current draft legislation does not address:

the mechanism limited to "news" by journalists, does not scale to other content creators who have no means to charge fairly for their work. This should be a universal micro-payments scheme, open to all content creators equally.

The Copyright Council already collect and distribute fees for use of many types of copyright material. The concept of "fair compensation" for Intellectual Property is already well established & tested, yet ignored by this highly targeted, highly selective and asymmetrical proposal.

The scheme does not recognise Copyright or help to enforce any sort of Content Classification system. There is no way to discern "original news content" from "newswire material" or "edited media releases", let alone opinion pieces, sports or entertainment commentary. Or various types of restricted material, including pornography.

HTML has "meta" tags, meant for exactly this purpose.
The obvious technical implementation is for Content Creators to "tag" their pages, allowing Aggregators and Search Engines to automatically process it, and if required, pay for "using" it.
The same technical solution of tagging content, especially "Adult Material", would make the operation of a National "black list" trivial - all untagged content is assumed to be "restricted". In parallel, it'd be possible to provide specific User X.509 certificates allowing access to "Adult Material" in Australia.

Just the Facts

Google didn't steal revenue from newspapers

There's any amount of hysterical 'reporting' in the mass media proclaiming, with no basis in fact, that if Google & Facebook don't acquiesce to this tax, it will be "the end of democracy" as we know it.

The economic analysis firm, AlphaBeta, has released a comprehensive report on the "Australian Media Landscape", specifically addressing the evolution of Google's on-line advertising versus print advertising from 2002 to 2018, plus 2017-2020 data for preferred method of consuming news.

Since 2002, when Google entered the advertising market here, the whole market has nearly doubled.

So what could News Ltd and friends in print media stand to gain, if their business had grown commensurately?

Which is the point.

News Ltd advertising revenue has collapsed and they are looking to the Government to tax Google for them.

While the rest of the Australian Advertising Industry has gone ahead in leaps and bounds, newspaper revenues have declined by ~30%.

But this wasn't Google "eating their lunch".

92%, $1.3B of $1.4B, of the collapse of Australian newspaper revenues is in an advertising segment that Google (and Facebook) don't even participate in:

Classified Adverts: the sort that individuals use to advertise their car, boat, old computer or house.

The same revenue stream that Murdoch himself once referred to as "Rivers of Gold", yet collapsed under his stewardship.

Google invented a whole new class of advertising:

tied directly to the content, selected and served in real-time and often finely targeting the individual.

Mass media - radio, TV and print, by definition "fixed" and "uncustomised", have never been able to come close to this level of targeting or reporting outcomes to buyers of advertising.

It's irrational and faulty logic to argue that "Google increased their advertising revenue and newspapers lost out, therefore, Google 'stole' their business". That's false attribution.

In 2000, the mass media companies understood that "The Internet" was going to change Sales and Advertising from traditional "physical" or off-line models. Online Sales have boomed and alongside that, so has the new online Advertising.

Australia Post has ridden this boom in Online Sales, vigorously competing with other private courier companies. It's proof that "Old" model businesses are able necessarily to transition to new business models.

In 2000, those mass media companies were flush with cash. They had all the time, money and resources to not just participate in these new markets, but to leverage their existing customer base and their loyalty, into the new on-line world. There is no good commercial reason for Mass Media companies to have not translated to the new, online advertising world and to fail to leverage their existing customer bases.

If Newspapers are owed restitution, then by whom?

The bias and irrationality of this proposal is clear when looking at the segment that lost everything over the last 15 years: print directories were $1.2B segment in 2002 and have since disappeared.

Why hasn't the government, Productivity Commission, ACCC or News Ltd & Nine-Fairfax mentioned fair restitution for print directories? If any industry segment is deserving of compensation, it's the one that's been obliterated by online services.

The AlphaBeta data & analysis clearly shows that Newspapers over the last 15 years presided over the collapse of their own business. They had the Means, Motive and Opportunity to translate from major players in "Old" Advertising to being the major on-line Advertisers.

The collapse of the Print Media business model is solely due to their failure to compete in an open marketplace. The disruption in their business model wasn't due to a change in licenses, like the Dairy or fishing industries, others ignoring the law, like ride-share, nor leveraging a monopoly, like Windows, but the very definition of competition on a level-playing field. This is no precedent for businesses, large or small, to be compensated for failing to be competitive.

Contrary to assertions in government reports to the contrary, in 2002 Google was not the dominant online advertiser. In 2002, Google was a young upstart business with little revenue and zero profits. Google's business and future in 2002 was anything but certain, against the Big Media Players, who had always been very good investments, with deep pockets and a seemingly certain future.

It is simply incorrect to characterise Google, who worked hard to attract 96% of search requests in 2018, as a dominant and highly-funded operation in 2002, or even the decade leading up to 2018.

The majority of lost print media revenue came from the move of Classifieds from print to online. If anyone had the foresight and capability to build a comprehensive Online Classifieds system for Australia, it was the Trading Post and the large print media operations. Yet they sat on their laurels.

We've seen Shareholder Class Actions for lesser reasons in Australia. Perhaps those who've been suckered by the indolence and incompetence of the Mass Media companies might now take a renewed interest.

I'm at a loss as to why Print Media, who sat idly by as their self-described "Rivers of Gold" were taken from them by Cheaper, Better, Faster on-line alternatives, are owed anything. Why should Google and Facebook be targeted when they don't even compete in that market segment?

Since when do businesses in a Free Market Capitalist system have the right to a tax or levy on competitors who've beaten them fairly & squarely in the market place?

Irony upon Irony

It's more than a little ironic that the heroic supported of The Free Market, Rupert Murdoch - as we know from his association and accolades from the IPA, has somehow contrived to create a law that penalises those who win in equitable deregulated market competition and rewards Murdoch's businesses for failing to compete.

The ultimate test of the "Google stole my lunch" theory is if they leave Australia, will Print Mass Media fortunes be magically reversed? Absolutely not - because Google & Facebook didn't take their Classifieds revenue.

I guess this is the central question to ask Murdoch and his Political Allies:

What does "the Free Market" mean if the Government can swoop in and tax legitimate winners who's only crime is out competing sluggards, then transferring their hard won profit to those who lost?

Google wasn't issuing a threat when it said its business model could not support paying an unfair, unjust and undeserved tax. It was stating a business reality. For anyone without full access to its books and Business Plans to say otherwise is being presumptuous, disingenuous and mendacious.

Nobody but Google knows their financial position and the strength of their position. Any politician or arm of government to presume this was a "threat", not a statement of fact, is being foolish in the extreme. The stakes for Australian business are very high and should be idly disregarded for some imagined political benefit.

The only people issuing 'threats with menaces' and attempting to bully others is Morrison and his band of unaccountable ministers.