The ACCC is searching for new ways to salvage Australian legacy media outlets, but innovation is no guarantee of quality, writes Michael Nguyen.
ONE COULD BE EXCUSED for presuming, given the prevailing dominance of digital advertising by Facebook and Google in the last decade, that traditional Australian journalism was facing a grim future. Not necessarily.
Last month, the ACCC released its final report on the impact of digital platforms. Within it, the Commission deliberated on supporting the Australian media industry via the introduction of a scheme that would make digital subscriptions tax-deductible. Initially proposed in its 2018 preliminary report, it was suggested that such tax incentives would facilitate a wave of new subscribers that would, in turn, provide media organisations with increased financial backing to secure their futures in an era of increasing uncertainty.
Somewhat surprisingly against the backdrop of industry-wide support, the Commission eventually dismissed the suggestion citing, among other reasons, that such a policy would disincentivise the exploration of alternate innovative revenue streams.
The ACCC has released a landmark report that examines the impact of social media platforms and search engines on the digital media and marketing space.https://t.co/mMAKPy7vMk— Australia Channel (@AustChannel) July 26, 2019
Whilst the majority of the ACCC’s conclusions reflect a measured and cautious policy approach, this particular conclusion is an overly reductive view of the contemporary media industry. Indeed, it seemingly fails to recognise the subscription business model’s capacity to remedy two significant challenges in the current digital climate: incentivising quality journalism over clickbait and maintaining a profitable business model in an era of declining ad revenues.
Innovation or journalistic quality?
A few years ago, these millennial-focused, internet-based media outlets were considered the future of journalism. Yet the layoffs amount to an admission that the apparent “innovative” business model of lightweight articles to drive click-based advertising revenue is, in fact, as precarious as the advertising model that had fuelled traditional legacy media outlets for decades prior.
The industry-wide contraction reflects two inherent vulnerabilities. The first is a reliance on third party websites like Facebook and Google, which determine the algorithms that distribute news articles. The second is the fact that their scale and market share allows these two tech giants to swallow 84 per cent of digital advertising revenue, leaving the other invested companies financially vulnerable.
ACCC Chair Rod Sims addresses the Melbourne Press Club, covering key findings and recommendations from our Digital platforms inquiry particularly relevant to media businesses https://t.co/EuwKx0vL7l pic.twitter.com/96iP7JDwru— ACCC (@acccgovau) August 13, 2019
Yet whilst the innovative model has not led to success, sometimes the old ways are best. In the same month that Buzzfeed and Vice announced layoffs, The New York Times declared that it now employed 1,600 journalists, the largest count in its history. In its 2020 strategy, it outlined how, rather than click-based low-margin advertising, its growth through its provision of high-quality journalism incentivised the support (and subscriptions) of its readers. This model, developed on loyalty and a reputation for quality, has since become the aspiration for outlets around the world.
It seems ironic that the business model consistently able to achieve profit within the modern internet era is not the once revered click-based advertising model, but instead one driven by journalistic veracity and quality.
Yet it is this “innovative” model that has also found success in Australia. The Australian was able to return to profit in 2017. Its owners, NewsCorp, have attributed this directly as a result of its growing digital subscription service which it launched in 2011. In the same year, Fairfax returned to profit for the first time since 2010 as a result of its digital subscription model which began in 2014 and has since achieved a 313,000 subscription base.
Whilst aspiring for innovation is appealing, it should not hinder the pursuit of quality reporting. Though the subscription model is hardly new, its contemporary form not only provides an opportunity for legacy outlets to continue pursuing and disseminating quality public interest journalism but to do so in a way that is potentially less vulnerable to corporate advertising influence.
The #ACCC released the findings of its investigation into the digital media landscape in July, making 23 recommendations aimed at evening the playing field for traditional media companies and curbing the power of #Google and #Facebook https://t.co/mgIZ2IWN6D— Neighbourhood Coworking Fitzroy (@NHWcowork) August 15, 2019
Therefore, whilst the ACCC’s dismissal of a tax-deductible digital subscription scheme is disappointing, its dismissal towards supporting the subscription model in its entirety is misguided.
There are, of course, several caveats.
Given that the subscription model relies heavily on an established reputation for quality journalism, this does place a high perquisite barrier for smaller, regional and prospective new media outlets.
Moreover, as the ACCC points out, improving the rate of digital subscriptions is an important consideration that tax-deductibility may not resolve. Indeed, the Analysis and Policy Observatory highlights how subscriptions are dependent on trust, literacy and the medium on which news is consumed rather than financial incentives.
Perhaps because of this, the ACCC is resigned to the conclusion that there is not yet any effective replacement to the advertising model.
Yet this would reflect a misconceived idea of what an eventual policy solution is likely to be. To expect a tax-deductible digital subscription scheme, or indeed any other proposed solution to be a one-size-fits-all model that successfully accommodates all the challenges outlined in the Digital Platforms Final Report, is inevitably fallible. It is certainly more likely to be a combination of policy approaches that build upon and complement each other.
Hence, whilst the tax-deductibility scheme has been dismissed, consideration towards increasing digital subscriptions as a whole should not be. The business model has demonstrated significant potential and thus is categorically worthy of further investigation. Ultimately, should the ACCC look to support media beyond its eventual recommendation of direct grants, digital subscriptions are the obvious choice.
Superb chart from the new ACCC report in Australia on Digital Platforms. It shows clearly that a) digital media did not grow at the expense of traditional media - just news media and b) the digital duopoly of Google and Facebook has significant, growing market power. pic.twitter.com/4UgXkDKbCp— Mark Ritson (@markritson) December 10, 2018
Michael Nguyen is a council member on the NSW board for the Australian Institute of International Affairs and has previously contributed to major policy projects both at the Lowy Institute of International Policy and Caritas Australia.
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