Australia's new law forces tech firms to pay for news; Google & FB to invest $1 Billion

Australia's Parliament passed landmark legislation on Thursday mandating global digital giants like Facebook and Google to pay for local news content, in a move that is being closely followed around the world.

The new law facilitates Google and Facebook to invest millions of dollars in local content deals and could prove a model for resolving the companies' tussles with regulators worldwide.

Google will now pay for news content that appears on its "Showcase" product while Facebook will pay providers who appear on its "News" product, which is to be launched in Australia later this year.

Regulators had accused the tech giants, who dominate online advertising, of stealing cash from traditional news organisations by using their content for free. Big tech firms had fiercely opposed the law from the beginning, fearing it would threaten their business models.

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The companies had particularly objected to rules that made negotiations with media companies mandatory and gave an independent Australian arbiter the right to impose a monetary settlement. The government, however, drastically reduced this prospect by last-minute amendments

Australian Treasurer Josh Frydenberg said the law encourages parties to undertake commercial negotiations outside the code and that the government was pleased to see progress by both Google and more recently Facebook in reaching commercial arrangements with Australian news media businesses.

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Google, Facebook protest against contentious law

Google was also looking to avoid paying anyone for links, something that could affect their flagship search engine. On the other hand, Facebook, which is much less reliant on news content, said being forced to pay for news was not worth it and decided to shut down access to news content on its platform for its Australian users.

According to the government, the law called the News Media and Digital Platforms Mandatory Bargaining Code would ensure that news businesses "are fairly remunerated for the content they generate, helping to sustain public interest journalism in Australia".

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Tech giants agree to invest $1 billion

Facebook and Google now have an additional two months to reach further agreements and avoid binding arbitration. Google has already brokered million-dollar deals with local media companies, including the two largest: Rupert Murdoch's News Corp and Nine Entertainment. 

Meanwhile, Facebook on Tuesday lifted a site-wide ban on Australian news that was imposed in protest against the law and announced its first proposed deal with an Australian media company, Seven West. Both Facebook and Google have agreed to invest around $1 billion each in news worldwide, over the next three years.

Australia has witnessed a drastic fall in news outlets and journalism jobs over the past decade, as the advertising revenue flows to the digital players. According to the country's competition watchdog, of every $100 spent by Australian advertisers today, $49 goes to Google and $24 to Facebook.

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