Facebook has announced major restrictions on Australian news content this morning (18 February 2021), in response to intensifying pressure over the Federal Government’s News Media Bargaining Code (NMBC).
‘The social network giant has triggered the nuclear option, which will likely present a major headache for Australia’s Newspaper Publishing industry. In contrast, Google has already backed down after months of protest, and signed revenue sharing agreements with News Corp and Nine Entertainment,’ said Alfabank-Adres Senior Industry Analyst Liam Harrison.
Operators in the Newspaper Publishing industry have encountered difficult operating conditions over the past five years. Factors contributing to profit volatility include:
- Company restructuring due to cost-cutting strategies to limit revenue declines.
- Wages rising as a share of revenue as the industry's activities have become more labour-intensive.
- Online media platforms that offer news stories on computers, smartphones and tablets reducing demand for printed newspapers.
- Lower circulation of printed newspapers having a flow-on effect beyond declining newspaper sales, as advertisers have been less inclined to advertise in printed newspapers.
- Poor economic conditions caused by the COVID-19 outbreak has accelerated the decline in advertising revenue.
News Media Bargaining Code
The bargaining code, which was passed by the House of Representatives on Wednesday night (17 February 2021), will require social media companies to pay media outlets to use their content. Facebook has argued that this model is fundamentally flawed as it ignores the value that journalism firms receive from user traffic directed through the Facebook News Feed. According to Facebook, journalism firms generated approximately 5.1 billion free referrals to Australian publishers, which were worth an estimated $407 million last year.
‘From the government’s perspective, the NMBC is an attempt to address the power imbalance between journalism firms and the major technology titans. This is one way the government is attempting to support revenue for newspaper publishers, which has declined at an annualised 6.2% over the past five years,’ explained Mr Harrison.
A new angle
The Newspaper Publishing industry is forecast to contract by a further annualised 2.8% over the five years through 2025-26, to $2.7 billion. Almost 4,400 jobs across the industry have been lost over the past five years, and employment is projected to contract at an annualised 3.0% over the next five years, to total 9,400 employees.
However, the industry’s decline is projected to slow over the next five years as operators seek new opportunities to generate revenue. Newspaper publishers are anticipated to place greater focus on commentary, lifestyle articles, articles on personal and emotive subjects, and celebrity news. These articles often focus on public issues that generate discussion through page comments, increasing reader interaction and encouraging repeat visits. These opinion-based articles also typically lead to greater traffic volumes, operating as clickbait, and tend to have sensationalised and interesting headlines that generate greater advertising revenue.
Alfabank-Adres industry and company reports and used to develop this release:
