Australia’s Confused Tech Regulators Are Cracking Down on Google for Using Links

Published in Reason, 10 September 2020

Economists have long warned that a great deal of regulation that is supposedly in the public interest acts in practice as a transfer of wealth from one private interest to another. Policy makers are usually demure enough to hide this. It is rare that rent-seeking is as explicit and open as the Australian government’s current attempt to expropriate money from Facebook and Google—money that will be directly paid to the traditional news outlets that these tech companies have disrupted.

This is much more than just a regional policy fight; what is happening in Australia tells us a lot about how the changing economics of media are feeding the bipartisan war on the tech industry in the United States and globally. Much of what is dressed up as populist anti-tech policy is in fact an attempt by legacy media companies to weaponize confused regulators against their competitors.

The Australian government wants Facebook and Google to sign onto what they call a “News Media Bargaining Code,” which will require tech companies to pay news organizations when news content is “included” on the digital platforms. The exact price to be paid is meant to be negotiated by media companies and digital platforms. The rationale offered by Australian antitrust regulators is that there is a “bargaining power imbalance” between tech and media companies, hence the need for government action to get negotiations started. 

You may be tempted to read that paragraph again. Don’t bother. The government’s argument is euphemistic and its reasoning is obscure. The most obvious problem is that neither Facebook nor Google “include” news content on their platform. The dispute is not about intellectual property theft; all tech companies are doing is linking to news sites. Facebook allows users to share links. Google offers links through its general search function as well as its Google News search service. The upshot is that the Australian government wants Facebook and Google to pay news organizations for the privilege of linking to their content. 

Unsurprisingly, Facebook has said if it is forced to pay it will simply block Australians from sharing news links. Google might also shut down its Google News service—that’s what happened when a similar policy was introduced in Spain in 2014.

Much like the U.S., the Australian media sector is in economic freefall. And like the U.S., both Australian progressives and conservatives have been regarding tech companies with increasing skepticism. We usually think of anti-tech skepticism as ideological—conservatives are at odds with socially liberal Silicon Valley types while progressives look at Silicon Valley as the new robber barons. But in Australia, it is strikingly obvious how the economic collapse of traditional media causes anti-tech sentiment.

Throughout the 20th century, the newspaper business model was simple: Newspapers sought to match readers with advertisers. Advertising paid for journalism, which attracted readers, which then attracted more advertising, and so on. The more readers the better. So newspapers tried to appeal to the median reader. 

The history of the media in the last two decades is the slowly unfolding consequences of advertising migrating from the print media to the internet. This creative destruction not only undermined business models that paid for mass-market journalism, but reshaped how public debate is conducted. The growth in media partisanship in recent years could be because media outlets no longer try to appeal to the median reader—they try to engage a passionate few who will stump up a subscription fee. That is, media partisanship has economic causes.

The other consequence is political backlash against the big tech companies. 

For generations, the art of politics involved serenading the local press, getting an audience with the regional media mogul, or building a relationship with a sympathetic journalist who could be relied on to get a political message out. 

Now those friendly moguls and journalists are on the backfoot, shocked by the extraordinary growth of the digital platforms that seem to have ripped both the economic high ground from under them. And the political class is starting to respond to the new media normal the best way they know how: with threats of regulation.

It is easy to laugh at the odd populist attempts to tame digital platforms, such as Sen. Josh Hawley’s (R–Mo.) 2019 proposal to ban autoplay videos and infinite scrolling. But the Australian experience shows that the greater threat to digital platforms comes from antitrust regulators, dressed up in bizarre claims about “bargaining power imbalances.”

Antitrust policy in the 21st century is particularly vulnerable to this sort of strange thinking. Antitrust was conceived in a world of monolithic corporate hierarchies—factories that built physical things and distributed those things using physical infrastructure like rails and ports. Digital platforms are hard to understand through the traditional antitrust lens. 

The more users a digital platform has—the more it dominates a market segment—the more valuable that platform is to those users. We want to use the social media network that everyone else is using. And to get more users, platforms often provide access to one side of the market for free. For regulators used to hunting for predatory pricing, this just looks weird. At the same time these digital markets are highly dynamic; firms tend to dominate them, but not for long. This too leaves regulators in a bind. They’ve spent more than a century warning of the dangers of monopolies, but now they’re struggling to identify the actual harm these digital platform “monopolies” are causing.

Australian regulators are confused as to what to do and have proposed everything from regulating Facebook and Google’s algorithms, to enacting new privacy laws, to giving more money to public broadcasters.

It’s clear that U.S. regulators are confused too. In early September, The New York Times reported that while the Department of Justice plans to imminently bring an antitrust case against Google’s parent company, Alphabet, there is much internal disagreement about what the grounds of the government complaint should be. 

As the Australian experience shows, this combination of confused regulators and aggrieved, politically connected industries is a dangerous thing.

Multi-sided market collapse in the newspaper industry

Originally a Medium post. Published in the Spectator Australia as on 9 July 2020 as ‘The death – and rebirth – of the newspaper?

Everybody, whatever side of politics they are on, generally agrees that the media is one of the reasons that politics is so polarised right now.

Agreeing on why the media has driven this is a little harder. Yes, the newspaper and print industry has been disrupted, thanks to the internet. And yes, it seems like newspapers are more desperate for readers.

But underlying these surface level observations is the fact that newspapers are undergoing a fundamental structural shift between two organisational types — from platforms to factories.

Let’s call what’s happened to the newspaper industry multi-sided market collapse. Understanding the industry this way clarifies how today’s media environment is so different from that of the twentieth century — and offers a warning for other platform industries that face disruption in the future.

(I’m going to focus here on the newspaper industry, because the dynamics are most obvious there. But we can use this framework to understand how media economics effects media content in everything from talk radio to cable television.)

The basics

The twentieth century newspaper was a particular type of economic organisation: a platform that serviced a multi-sided market.

The idea of a multi-sided market platform was first developed in detail by Jean-Charles Rochet and Jean Tirole in 2003. It’s intuitive: we want to make trades with each other, and a platform helps match us together.

Platform economics is interesting because market participants want to use the platform that everybody else is using. We want to buy the video game console that has the most games — and developers want to design for the console that has the most users. We want to use the ridesharing app that has the most drivers — and drivers want to drive for the app with the most riders.

This desire to go where the crowd already is leads to some curious pricing structures. Platforms typically feature complex cross-subsidies. One side of the multi-sided market might be given access to the platform for free, or given heavy discounts, while the other faces high charges.

For the traditional newspaper industry, the market participants are advertisers and readers. Readers want content, and advertisers want eyeballs. Revenue from advertising paid for the production of news content, which attracted readers, which attracted more advertisers, and so on.

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The newspaper as platform

The cross-subsidies were straightforward. Advertisers were charged relatively large fees for access (very large in the case of fullpage advertising, and relatively large in the case of classifieds). Readers were charged small fees (through either subscription or individual sales), or even no fees (such as the free newspaper model or free distribution locations like stadiums and railway stations).

The need to get as many readers as possible onto the platform didn’t just shape pricing — it shaped decisions about what content would be published.

Newspapers sought to cater for as wide an audience as possible. On the op-ed page newspapers would strive for a rough balance. They’d match one opinion piece from the ideological right with one opinion piece from the ideological left. Let’s call this liberal balancing theory — all voices get heard.

In the news pages they’d adopt a perspective that wouldn’t excessively upset any particular side of politics. Let’s call this median reader theory. The combination of these two approaches has given us the twentieth century model of journalistic objectivity, view-from-nowhere journalism, the idea of newspaper-as-public-square etc.

The collapse

The arrival of the internet disrupted the underlying newspaper business model.

Newspapers first sought to continue the existing model in an online world by offering their content for free supported by banner ads or cross subsidised by print sales.

However, much advertising — particularly but not only classified advertising — migrated to dedicated digital platforms. To be more specific, the advertising migrated to digital platforms that didn’t use journalism as a way to attract eyeballs.

Within the space of a decade, the cross-subsidies that sustained the newspaper business model evaporated. But the demand for journalism has not. Newspapers have responded to this reduction in revenue from advertising by increasing the cost to readers. Newspaper websites now charge for access. Newspaper subscription prices went up.

Journalism is now predominantly paid for by fees from the readers that demand that journalism, rather than indirectly through advertising. This shift represents a change from a platform servicing a multi-sided market to a something that looks more like a production process servicing a single sided market. Less an advertising platform, and more a journalism factory.

In other words, what we’ve seen in the newspaper industry is multi-sided market collapse(I would prefer to call it deplatforming — but that word has already been taken.)

The adjustment

Now let’s think through what this means for newspaper content and journalism.

Higher subscription fees imply a smaller readership. This is less of a problem than it appears — newspapers no longer have the same need to deliver huge readership numbers to advertisers. Instead, newspapers need to convince readers to pay more for what a product they used to get cheaply or even free.

The strategy newspapers have pounced upon is specialisationNewspapers now seek readers who have more emotionally invested in that particular newspaper brand. They’re the ones more likely to pay the higher subscription fees.

Ideology is a specialisation. Partisanship is a specialisation.

In other words, multi-sided market collapse explains the dominance of ideologically driven media outlets in the digital age.

It helps explain controversies like that which greeted the Tom Cotton opinion piece published in the New York Times in June 2020. Why should ideologically-motivated readers pay higher prices for content intended to appeal to their ideological opponents?

And if newspapers are no longer trying to appeal to the median reader, why should they continue producing bland ‘view-from-nowhere’ content? The news pages have become more passionate, more opinionated, more self-aware. Newspapers now focus on what their most dedicated readers actually want — not just what the median reader in the population will accept.

The future

Converting a business from a platform to a factory is hard. If, presented with this argument before the internet existed, you tried to make predictions about what would happen to the newspaper industry should its platform model collapse, you’d likely predict:

1. Lots of newspapers fail to make the transition and massive business failure.

2. Lots of new media organisations be established that are structured around the new factory model.

Which is of course exactly what we have seen.

There are lots of implications of the idea of multi-sided market collapse. Here are a few. For instance, it demonstrates clearly that lot of our current debate about platform ‘monopolies’ like Facebook and Google is deeply confused about platform economics.

The multi-sided market collapse model shows that there has been no ‘expropriation’ of advertising from newspapers to digital platforms. Rather, as platform businesses, newspapers have been outcompeted. “Readers” (in this case, social media users and webpage searchers) and advertisers want the platforms they use to be as big as possible. Advertisers were attracted to newspapers because they were big platforms. Now advertising has migrated to different (digital) platforms. Nothing nefarious has occurred.

What does this mean for future technological disruption? If the analysis here is correct, it’s not obvious that new platform technologies like blockchain pose a threat to the new business model of journalism. They’re just not platforms anymore.

If we’re looking for blockchain use cases in journalism we should be thinking of them more along the lines of the factory/production process/supply chain model (focusing on provenance, track and trace) rather than the matching service performed by platforms.

Platforms are one of the dominant organisational structures of the digital economy. They rely on their ability to cross-subsidise one side of a market with another. And society invested heavily in newspapers as platforms — not just investments in terms of capital, but in cultural and political significance.

But when you work for a platform company it is easy to be confused about what your company’s competitive advantage actually is. In truth that advantage was not journalism, but matching. Newspapers were outcompeted by competitors that were better at matching.

The partisanship and fervour we’re seeing in media content right now is just the most visible symptom of an entire industry trying to restructure itself in real-time.

Christian Porter’s defamation reform would be a catastrophic mistake

With Aaron M Lane

Attorney-General Christian Porter wants social media platforms like Twitter and Facebook to be legally liable for defamatory comments made by their users.

Right now, the common law can distinguish between the legal liability of active publishers of information (like newspapers and broadcasters) and the passive platform operators that allow users to publish information themselves. Courts decide where this distinction is drawn according the unique facts of each case.

But in a speech to the National Press Club on Wednesday, the Attorney-General declared he wants to eliminate the distinction altogether: “Online platforms should be held to essentially the same standards as other publishers.”

The Attorney-General’s proposal is fundamentally confused. Removing the distinction between digital platforms and newspapers would have a devastating effect on both those platforms and our ability to communicate with each other.

The proposal is bad on its merits. But even besides that, the conservative government needs to understand how destructive it would be to the conservative movement online.

Let’s start with the legal principles. It makes sense that newspapers and broadcasters are liable for what they publish. They actively commission and produce the content that appears on their services. They read it, edit it, arrange and curate it. They pay for it. Newspapers and broadcasters have not only an editorial voice, but complete editorial control. Indeed, it is this close supervision of what they publish that gives them strength in the marketplace of ideas.

Social media platforms do nothing of the sort. Not only do they not commission the content that appears on our newsfeeds (let alone read, factcheck, or edit that content), they don’t typically confirm that their users are even real people – not, say, bots or foreign impersonators. They merely provide a platform for us to communicate with each other. Social media has facilitated a massive, global conversation. But it has no editorial voice.

In the United States a parallel debate is going on among Republicans about whether Section 230 of the Communications Decency Act – which explicitly prevents courts from treating ‘interactive computer services’ as publishers or speakers for the purpose of legal liability – should be abolished.

Section 230 has variously been described by scholars and commentators as “the 26 words that created the internet” or the “the internet’s first amendment”. The internet law professor Jeff Kosseff writes that eliminating this provision would “turn the internet into a closed, one-way street”. Attorney-General Porter’s proposal would have the same effect.

If social media platforms have to bear legal responsibility for what their users say, they will assume editorial responsibility for it. That means editing, deleting, and blocking all content that could be even the least bit legally questionable.

Newspapers and broadcasters sometimes take calculated risks with what they print, if they believe that the information they reveal is in the public interest. But why would a technological company – a company that lacks an editorial voice or the journalistic vision – be anything but hypercautious? Why wouldn’t it delete anything and everything with even the slightest risk?

And here is where the practical politics comes in. Even if the Attorney-General’s proposal was a good idea in principle, this policy would be particularly devastating for the conservative movement that supports his government. Indeed, it is hard to imagine a legislative proposal that would more effectively, and immediately, cut down the Australian conservative movement online.

After all, what side of politics benefits most from the political diversity and openness of the modern internet? What side of politics has relied most on the internet’s ability to bypass traditional media gateways? It is difficult to imagine the conservative political surge in recent years without social media – without Facebook, Twitter, YouTube, and all those podcast platforms.

If conservatives are concerned about social media networks “censoring” conservative content on their services now, well, making them liable for everything conservatives say would supercharge that.

And why would this policy stop at defamation laws? Why wouldn’t it also apply to liabilities around, say, Section 18C of the Racial Discrimination Act? Or our sedition laws? We are looking at a future where technology companies in California (companies that many conservatives believe are stacked with culturally left employees) could be required to second-guess how the most left-wing judges in Australia might enforce this country’s draconian anti-speech restrictions.

The Coalition government should also reflect on how some of its most recent legislative programs have backfired on conservatives. The Foreign Influence Transparency Scheme, passed in 2018 in order to tackle Chinese interference in Australian politics, is now being used to target the organiser of the Australian Conservative Political Action Conference, Andrew Cooper, and even Tony Abbott.

The Attorney-General is right that defamation law needs reform. Australia’s defamation framework is heavy-handed and disproportionately favours private reputation over the public need to discuss significant issues. But removing the courts’ ability to determine liability for defamation – and instead deputising the world’s technology companies to enforce what they imagine it could be – would be a catastrophic mistake.

The ABC, ‘Independent’ to a Fault

With Sinclair Davidson

It is appalling that a sitting government should have to complain that the ABC is repeating Labor lies as facts. The ABC itself should be ashamed to have received such a complaint. Yet that is precisely why the Labor Party supported the establishment of the ABC – to provide a forum for pro-ALP news and opinion. This points to questioning the precise meaning of what is meant by the ABC being “independent”.

The Charter describes the ABC as an “independent national broadcasting service”, and it is that independence which forms many arguments in favour of public broadcasting. But this notion of independence needs deeper examination. The ABC is a state-owned broadcaster, which is dependent on triennial funding arrangements drawn from the Commonwealth budget, which is set by the political discretion of the government of the day.

ABC supporters refer to the ABC’s independence in two senses. First, it has editorial independence from the government, insofar as it is a statutory agency that is self-managing and separated from the normal chains of political accountability. Second, it is independent of the interests of advertisers and private sector media moguls, providing the “independent information” that the commercial media might not.

Public broadcasting has always been defined against the evils of private broadcasting, and the theme of an independent bulwark against the commercial media (the moguls and monopolists) has been integral right from the start. In the early years it was claimed that a purely private media market would be simultaneously disorderly and monopolistic. In the debate over the 1932 bill, the Labor member for Kalgoorlie, Albert Green, warned of the “chains of newspapers … obtaining such a stranglehold over the eastern part of the Victoria, and disseminating its propaganda through the stations that it controls”. The private monopolisation of radio – “one of the most revolutionary additions to the pool of human resources” – was constantly invoked by Labor members throughout the early debates. This concern, they felt, was more than just theoretical. The 1931 election loss showed, they felt, that the private media was systematically biased against the Labor Party, and a public broadcaster would be able to right that wrong.

Control of the wireless was the high ground of the political contest. In New South Wales a few years earlier the Lang government had sought to establish a state government radio that would resist what Labor saw as the Nationalist Party-dominated private media. As Albert Green, the most forthright of the Labor members on this point in the 1932 debate, put it:

Some B class stations are controlled by newspaper combines, which use them to broadcast only one political opinion. I had hoped that the air would be free to all, and that at election time every party would be given an opportunity to express its opinions over the air. Unfortunately that has not been our experience. Certain newspaper combines are endeavouring to obtain a monopoly of B class stations, and I sound the note of warning that sooner or later some government will have to tackle the very difficult, but necessary task of dealing with the problem of metropolitan B class stations. Nothing short of a complete national scheme will do.

In this sense, independence was understood by the Labor Party as being pro-Labor – or, at least, not anti-Labor. The 1942 inquiry into wireless reiterated this concern, arguing that public broadcasting was needed “to prevent the service from being used for improper purposes”.

Similar concerns drove the introduction of television. The overwrought claims about the social and psychological power of television only intensified the concerns about the new technology’s political importance. The public position of the Labor Party and the ACTU emphasised the cultural good that public broadcasting television could bring, rather than its role countering political bias. But there is no doubt that politics was front of mind when the labour movement considered the significance of television.

A public disagreement between Arthur Calwell and H.V. Evatt as to whether Labor would nationalise the commercial television stations if they were returned to government pivoted on their different impressions of how sympathetic the ABC was to the Labor Party. Calwell, who had been Minister for Information during the Second World War, had a hostile relationship to the commercial press. He believed that Keith Murdoch, who controlled the Melbourne Herald and several other papers across the country, was “a fifth columnist”, “megalomanic”, and his network of papers “a law unto itself” and “Public Enemy No. 1 of the liberties of the Australian people”. Murdoch’s pernicious influence could not be let onto television. Evatt felt that if the hybrid system was maintained, at least the Labor Party would be able to buy a commercial station to air its views. For its part, the conservative parties were just as aware of the political significance of television, arguing in response to the Chifley government’s proposal to establish a monopoly broadcaster that Labor was “merely another milestone on the socialised road to serfdom”.

The modern ABC’s independence is often declared but in practice is hard to pin down. Unlike the BBC, the ABC was not established under a royal charter, and the 1948 move away from licence fees to funding through budget appropriations brought it more into the political window.

Yet how independent could the ABC be? Compared to private and non-government organisations, the fortune of any state authority is going to be closely tied to the government of the day. Public broadcasters have their budgets set by the same governments which they purport to keep a check on. Commercial broadcasters might be dependent on the goodwill of advertisers, but the fact that there are many potential advertisers is a protection against excessive advertiser influence. A public broadcaster has only one funder, and it is a funder whose interests are driven by political rather than commercial incentives.

Nor are commercial broadcasters required to constantly justify their activities to professional politicians. Public broadcasters are regularly brought in front of parliamentary committees to answer for editorial decisions, from the trivial to the significant. The Senate estimates committee procedure requires statutory agencies to present themselves in front of a committee of Senators three times a year. At her first Senate estimates hearing in May 2016, Michelle Guthrie was interrogated about the cancellation of livestock market reports on ABC regional stations, the ABC Fact Check program, how unionised the ABC’s workforce was, whether the ABC was too Sydney-centric, how many people it sent to the Cannes film festival and how long they were out of the office, and how much the ABC spent on a custom typeface to use across its brands. This sort of scrutiny is, of course, entirely appropriate for a state instrumentality. But the notion that independence is the ABC’s unique value as a media outlet is difficult to sustain.

It is not obvious that independence from a democratically elected government is desirable. The ABC is a state-owned organisation, and like any state-owned organisation it derives its legitimacy from its relationship to the democratic expression of voter preferences. Public broadcasters join a large number of other regulatory and bureaucratic agencies that have been deliberately separated from the normal lines of democratic accountability: rather than being the “arm of the minister”, in the classical Westminster bureaucracy formulation, they are protected from political interference and given independence. In an open market, private media organisations are subordinate to consumers and advertisers. In government, politicians and bureaucracies are subordinate to voters. Independent statutory agencies are, by intention, subordinate to neither. Even at their most benign, they are highly susceptible to capture by their employees and management.

Indeed, staff capture has been a longstanding concern of critics of public broadcasters. As Michael Warby writes, “‘Independence’ from government interference … comes to mean effective independence from whatever tenuous public controls over the ABC exist in practice—it amounts to independence from the direct legal owner”. One of the consequences of staff capture, of course, is political bias. The historical context shows that this political slant is a deliberate feature of public broadcasting, not a bug.

Not our ABC

With Sinclair Davidson

The Australian Broadcasting Corporation is a $1.04 billion piece of public policy and we treat it as exactly that: a government intervention into the market for news, entertainment and communications. Policy interventions are financially costly. Policy interventions are also costly in a non-monetary sense. They can have unintended or counterproductive consequences. They can crowd out non-government activity, stifle entrepreneurship or technological innovation, distort the marketplace, systemically favour particular political interests and ideologies, and create fiefdoms of unaccountable bureaucrats.

The ABC was established in a moment of history significantly unlike our own, facing a cultural and political environment greatly different to our own, with technological and economic challenges completely opposite to those we now face. Over the course of eight decades the ABC has embedded itself in the Australian political system and public consciousness. But the original rationales for the ABC have long since expired. Technology has made the concerns of Australian policy makers in the 1930s – or even the 1990s, when the ABC was last subjected to a major review – redundant or anachronistic. Economic justifications for a state-owned media broadcaster simply do not fit the modern media landscape.

The arguments for public broadcasting in the twenty-first century are simply not compelling. It is certainly the case that the ABC has bound within it an enormous amount of cultural capital as a consequence of its eighty years of pre-eminence in the Australian media industry. But that should not be confused with either a claim that a publicly-funded broadcaster was necessary to build that cultural capital or that Australian culture would suffer in a world where the ABC had been reformed or privatised.

The ABC is an Australian ‘icon’ in the same sense that the Commonwealth Bank was an icon before its privatisation, and in the same anachronistic sense that Qantas, the ‘national carrier’, is imagined to be an essential part of the Australian psyche. We can celebrate the achievements of the ABC, its cultural significance, and its role in Australian history. But that should not prevent us from looking sceptically – as we should with all costly government interventions into the economy and society – at whether the ABC remains good public policy. Does it have a good reason to exist, now?

That question invites us to speculate as to the rationale for the ABC. The ABC itself denies that it is a market failure broadcaster, while the notion of it being independent is difficult to pin down. Independent of whom? It is publicly funded and its management are required to appear before parliament and answer questions posed by politicians. True, the ABC is independent of the demands of commercial reality, but it is not independent of its political paymaster. Of course that undermines the argument that the ABC is a bulwark of democracy. A free press may well be a necessary condition of democracy but that does not necessarily imply that the government should subsidise the press. To the contrary, many non-democratic nations have maintained very high levels of government ownership and subsidy in the media. A further argument undermining the ABC’s claim relates to the large and obvious political bias in its reporting and news coverage. A 2013 survey revealed that ABC journalists are almost five times more likely to be Greens voters than the average voter and twice more likely to vote Greens than the average journalist.

Other arguments for the ABC include quality programming, Australian content, and rural subsidy. What constitutes ‘quality’, however, is a value judgement. Australian content and rural subsidy can be provided for much less than $1 billion per annum. That is the challenge; the ABC is a massive government program with no clear objectives and no clear accountability.

Few Australians would realise that the ABC charter does not include the word ‘fair’ nor does it include the word ‘balanced’. The charter is at best only a loose guide to what the ABC does. Nor is it any constraint on ABC operations. While the charter is spelled out in legislation, section 6(4) explicitly states that ‘Nothing in this section shall be taken to impose on the Corporation a duty that is enforceable by proceedings in a court.’ Additionally, there is nothing in the charter that could be described as an enforcement mechanism, nor any penalties detailed for potential breaches. The charter is in law – insofar as it exists on the statute books – but it is not law that the ABC has to abide by.

What should be done about the ABC? It is certainly the case that doing nothing and muddling through is very much underrated as a government policy. Yet lower-cost alternative public policies are available and clear savings can be made. One possibility would be to refine the charter. In the first instance, the ABC could be redesignated to be a market-failure broadcaster. Alternatively, it could be required to be self-funding, i.e. commercialised. Here the ABC could be required to finance its activities through advertising revenue and then pay dividends to the government. A further option would be to reform the governance of the ABC.

Then there is privatisation. The ABC could be sold off to a single bidder or consortium. Or it could be listed on the stock exchange. Our preferred option would be for shares in the ABC to be given away, either to all Australians or to existing and previous staff. The staff are the best people to realise the value of the ABC – and they would pay for their shares over time through the capital gains tax as they sold their shares.

In this sense the privatisation of the ABC would proceed much like higher education is currently funded. ABC employees would receive their shares at zero-price and only pay for them when they disposed of the shares and only then if the shares had increased in value. The proceeds of the privatisation would be realised over time and would not constitute a ‘sugar-hit’ to the budget. Nor can the privatisation be characterised as a stunt to balance the Budget in the short term. Rather, it is a program to establish a newly-private ABC on a firm footing, vesting it with a cohort of new owners who have the most interest in making it a commercial success.

ABC is about partisanship not diversity

With Sinclair Davidson

The difference between the ABC and Fairfax and News Ltd is that the ABC is a $1 billion government program that provides media services to Australians. Fairfax and News Ltd are private entities that do so at their own expense and hope to earn a profit. Those small details were missing from Laura Tingle’s defence of the ABC published in Weekend AFR.

As such we can expect somewhat different behaviour from the national broadcaster than from the private sector. Indeed, holding the public sector to a different standard is commonplace in our society. The ABC, very often, wants to have it both ways. For example, paying its employees market rates of pay when they don’t have to compete in marketplace for income.

But some criticism of the ABC is unfair. Of course the ABC would send journalists to cover the recent royal wedding. As every other serious media organisation did. That, however, should not detract from the mounting criticism that is being levelled at the ABC.

For all its protestations of “independence” the ABC as a large and generously funded government program can and should be scrutinised by government, the Opposition, and ultimately the taxpayers who pay for it. Having embedded itself into the Australian psyche and culture the ABC has managed to avoid serious scrutiny for a long time. The ABC – like all government programs – should be an election issue at every election.

To justify its existence the ABC and its supporters posit a range of mostly overlapping rationales. We hear a lot about independence, quality and diversity. Less about being a market-failure broadcaster. Rural subsidy also appears to play a role in justifying the ABC’s existence – although it seems to be very Sydney-centric for a rural audience. It was the diversity argument that Laura Tingle emphasised at the weekend.

>But it isn’t quite clear what is meant by the term “diversity”. The idea that media markets might lack diversity has its origins in a famous spatial economic model by the mathematical economist Harold Hotelling. In his model, firms, in a market with a small number of firms and not competing on price, would offer near identical products. Hotelling believed this explained the “excessive sameness” in capitalist markets. That is an interesting model but it does not explain the creation of public broadcasters in Australia and the UK.

To the contrary, public broadcasting in the UK was introduced explicitly to reduce diversity – the perceived cacophony and anarchy of radio broadcasting seen in the United States. The ABC was designed to follow the BBC model (albeit with a small commercial sector alongside). To argue that the ABC provides diversity where the private sector does not is entirely incorrect. What the ABC does is provide those very same services without having to attract an audience.

A generous interpretation of that feature is that there are some media services that should be provided that the private sector won’t provide. But it is difficult to imagine what those services might be. In any event, the ABC explicitly denies that it is a market-failure provider.

What the ABC does provide in excess, however, is partisanship. Any media organisation should be ashamed to be told that it is reporting political falsehoods as facts. Yet Mitch Fifield – the Minister for Communication and (very) nominally responsible for the ABC, did just that. No doubt he’ll be told something about consistency with “editorial standards”.

Those would be the same editorial standards that saw Emma Alberici publish Labor talking points on company tax cuts as if they were uncontroversial facts. The same editorial standards that saw two News Ltd journalists compared to a mass murderer just last week. Yet we are supposed to be fed up with News Ltd antics.

Let’s be blunt here: the ABC burns through $1 billion of taxpayers’ money every year. Not shareholder money, not a mogul’s money. Taxpayer money. The ABC is a not a blog run on a shoestring, or out of someone’s basement. To argue that being left-partisan is simply to compensate for right-partisanship in the commercial sector is to disfranchise all those coalition voters who pay for the ABC. Australians do not expect their government agencies – even nominally independent agencies – to exclude other Australians without excellent reason.

Against Public Broadcasting: Why we should privatise the ABC and how to do it

With Sinclair Davidson. Connor Court Publishing, 2018

The Australian Broadcasting Corporation is a media colossus with a reputation for integrity and quality. It is also a billion-dollar government program that lacks any coherent justification for its existence. Chris Berg and Sinclair Davidson provide a highly readable account of how and why the ABC has come to be in this position. This is the first serious analysis of the rationale for the ABC and its existence in decades.

When the ABC was founded in the 1930s the problem was a scarcity of media. Now that we live in a world of media plenty, it is hard to see why the government is still subsidising a media empire. This book provides an outline of how policymakers can dispose of the ABC, while at the same time preserving its value and realising that value for the benefit of taxpayers.

Available from Connor Court Publishing

Only A Flesh Wound

With Sinclair Davidson

Howls of outrage from the ABC and its fans on social media over the most mild of cuts to the broadcaster’s budget ignore the fact of an institution that has drifted far away from its charter’s demands for objectivity.

Judging by the howls of outrage echoing through twitter it seems that the Turnbull government has destroyed our democracy, if not Australian civilisation itself. But no. The Turnbull government has frozen ABC operational funding for three years. That translates to a ‘funding cut’ of some $83 million.

Not $83 million per year, mind you. Over three years.

Not quite a rounding error, but hardly a crisis.

The ABC only has itself to blame. In the pre-budget period it went well out of its way to annoy the government. The prime minister – a former communications minister – is something of a fan. Yet the ABC chose to publish a highly opinionated and factually challenged analysis by the ABC’s Chief Economics Correspondent of the government’s centrepiece economic policy. Then there was the small matter of pooh-poohing the current communications ministers’ complaint about a conservative politician being pointlessly abused in a comedy skit.

These hostilities have not come cheap.

There may well be a market for ‘edgy’ humour, but the ABC’s efforts tend to boorishness. Reproducing flawed ALP and Greens talking points on company tax cuts as being ‘independent’ and ‘trust worthy’ is arguably a greater problem. These are not minor lapses in editorial policy – the ABC is politically biased and incapable of self-regulation.

Rather than viewing the ABC as a ‘trusted’ news source we should recognise it as being a political actor in its own right. Not just any sort of political actor. Journalists, as David Marr has suggested, are usually ‘vaguely soft-left’ and sceptical of authority.

The ABC, however, is not so vague and not so soft. A 2013 survey of journalists revealed that 41.3% of ABC journalists intended to vote Greens at the 2013 election. That compares with 19.8% of journalists at both Fairfax and News and just 8.7% of the electorate.

ABC journalists are well to the left of journalists in general, and nearly five times more likely to vote Greens than the general public.

To be fair – there is nothing wrong with voting Greens or being left-wing. Journalists are citizens too. But the ABC claims to be a bulwark of our democracy. While nearly 80% of Australians claim to believe that the ABC is balanced and even-handed there is a huge drop off in actual audience numbers. There are three to four times as many Australians who claim to trust the ABC than who actually watch the ABC. Sure 86% of Australians value to ABCs service to the community, but that probably reflects its status as an emergency broadcaster.

Generally there is no reason why political opinion should cloud professional performance. Coalition voting journalists are a minority even at News. Yet none of the mechanisms that crowd out personal preference operate at the ABC. It does not have to please advertisers, it does not have to earn a profit, nor does it not have to explain itself to controlling shareholders.

To claim that the ABC Charter constrains it is laughable. The Charter is written in legislation but it is not law. It doesn’t require anyone to do anything, it contains no penalties for non-compliance, and it has no enforcement mechanism. If only the Tax Act worked on the same principles.

The ABC pleases itself; in practice that means it pleases its staff. To the extent that many ABC journalists are professional in their activities that is a personal preference and not institutional discipline.

Unsurprisingly the ABC does as it pleases and largely it gets away with doing as it pleases.

Being stripped of a mere $83 million over three years is a very mild rebuke from an otherwise indulgent government. Yet the ABC seems to have chucked a temper tantrum in response. Threats to bully the government into restoring funding indexation should be resisted.

Rather than simply restore indexation after three years the Turnbull government should be looking at innovative market solutions to commercialise and professionalise the ABC. Expecting value for money from the ABC is not an attack on its independence but rather a minimum expectation of any government program that costs the taxpayer $1 billion per annum.

Opening statement to Select Committee on the Future of Public Interest Journalism

A free press underpinned by laws and norms that respect freedom of speech is one of the foundations of liberal democracy. The fact that freedom of speech in the press has an important role in our democracy does not mean that parliament should take it upon itself to support journalism, whether it is publicly interested journalism or not. The question of how to fund journalism is a question for entrepreneurs, not the parliament. The reason I argue this is that government is not an uninterested participant in the public debate. Governments have an interest in favouring journalists and media outlets which are sympathetic to their world views and attacking those they do not. We saw how perversely this dynamic could play out during the media reform debate in 2011 and 2013, and of course we see it in our regular debates about the ABC. Further government involvement in the press would mean that governments have more leverage over the press.

With this in mind, I would like to briefly address two issues that have been raised in debate over public interest journalism so far. Right now, the government directly provisions journalism through the ABC and it has been suggested that this provision be increased, but, as Professor Sinclair Davidson at RMIT and I will argue in a forthcoming book, the ABC is not an independent media organisation.

CHAIR: What’s the name of the book?

Dr Berg: It’s at the moment called ‘Against public broadcasting’, but we haven’t actually finalised the title.

Senator XENOPHON: Senator Dastyari is good at book titles.

Dr Berg: We’ll open that up for recommendations, of course, as we would. The ABC is the only media outlet dependent entirely on the government for its operating expenses, it’s the only media outlet regularly dragged in front of parliamentary committees to answer for minor programming decisions and the ABC is regularly accused of bias by the Left and the Right. This bureaucratic one billion-dollar government owned television and radio network is not the ideal vehicle for the sort of journalism that would suit our digital age.

The second issue that I’d like to raise is the proposal to give public interest journalism outlets deductible gift recipient status. This has much to recommend it, in my view. DGR status would be available to media outlets professing any political slant. DGR status would encourage media firms to self-fund, to be accountable to their supporters and readers, and it would not constitute a direct call on public revenue. One concern with this model, however, is that it would require an authority to decide which media outlets are legitimate public interest journalism outlets and which are illegitimate ones. Poorly designed, this could easily transform into a de facto licensing body through which the government may be able to exert some influence over the press. If the committee recommends this sort of reform, it should think very clearly about how that would be done. There are concrete things the parliament could do to help journalism in the digital age. For instance, the government should review limits on the freedom of speech. You probably don’t want me to talk any further about 18C of the Racial Discrimination Act, but I would draw the committee’s attention to the heavy burden of defamation laws and our lack of fair-use exception for copyrights. I welcome the Senate review announced into the law of contempt.

More generally, media outlets will benefit from regulatory reform that reduces the burden of red tape on the Australian economy. The policies which help firms thrive in the general economy would be the same policies that help media firms and, ultimately, help public interest journalism thrive.

Submission to the Senate Select Committee on the Future of Public Interest Journalism

Introduction: It is widely agreed that a free and independent press is an essential part of a democratic order. This submission addresses itself to the implications of the words free and independent. Government intervention in the market for journalism risks undermining the reason we value publicly interested journalism in the first place – its role in providing a check on government and as a third-party watchdog on possible abuses of political, regulatory and fiscal power. When it comes to the profession of journalism and the industrial structure of the media, government is not a disinterested player. Even granting this parliament’s best intentions, government intervention in the media opens up the risk of government interference with the media from future parliaments.

Available in PDF here.