Battleground Australia: Mark Zuckerberg vs Rupert Murdoch. Facebook blinks for now.

Facebook has just fired the opening shot in its first major fight against a well-matched opponent, and has already made an enormous blunder. Riding on the outcome is the power of the tech companies and the future of journalism. Center director Jeffrey Cole explains.

By Jeffrey I. Cole

Facebook and Rupert Murdoch’s News Corp. are at war. The battleground is Australia. That location is serving as a proxy for all of the global battles of government vs. technology vs. traditional companies that are sure to erupt over the next few years. A lot rests on who is the ultimate winner (or suffers the least damage) in this ugly dispute.

The issue is: can Facebook and other platforms freely use publishers’ news content, or should they have to pay for the privilege?

In one of my favorite schlocky films growing up, 1962’s “King Kong vs. Godzilla” (a new version comes out this year), as the two monsters enter into combat, the nervous villagers can only stand back and wait to see who emerges as the winner they will have to contend with. For the villagers, the best outcome would be both fighting to the death — and losing.

In the battle between Zuckerberg and Murdoch it is difficult to know who to root for. Neither one is very sympathetic.

For most of his life, Rupert Murdoch has been the 800-lb. gorilla. Prime ministers and presidents cowered in his wake. Not since William Randolph Hearst has there been a media baron so willing to wield power and shape policy in Australia, the U.K., and — since the 1990s — the U.S.

But Murdoch’s power has diminished as his newspapers lost traction; at the moment, Fox News is trying to stem its recent loss of audience by painfully deciding whether it is a news organization or a forum for rumors and conspiracy theories.

Until 2019, Murdoch could rely on the other part of his empire (Fox Studios, Fox Network, Harper Collins) to smooth over losses in newspapers. But now that influence has also ended. Murdoch realized that his film and television empire could not compete with trillion-dollar entrants such as Amazon, Apple, Google and, ironically (considering the current war), Facebook.

If Murdoch remains an 800-lb. gorilla, he is now in the ring with an 8000-lb. opponent.

This is Facebook’s first major confrontation with a foe prepared to launch a full-scale battle. Zuckerberg is new to this kind of warfare. With governmental regulation and user backlash at his doorstep, this will become his new normal.

Murdoch is running a company started by his father 100 years ago and has weathered it all; 17 years ago Facebook only reached a few hundred users on the Harvard campus. It has since become one of the biggest companies in the world with more than 2.5 billion users and is, like News Corp, more influential than most governments. About to turn 90, Rupert Murdoch is seeing his invincibility decline, while Zuckerberg’s is on the rise.

Facebook takes on the home team

In the war, Murdoch has the home court advantage — not that his position is necessarily a benefit. Although Australians take justifiable pride that the most powerful media mogul on the planet is one of their own, they know his bullying, grudges, and anti-competitive practices better than anyone.

The Australian government, in an effort to protect news producers like Murdoch, has proposed legislation that would require tech companies such as Facebook or Google to compensate publishers when content created by news organizations is used on their platforms.

As we have learned in Donald Trump’s effort to punish Twitter after the service began annotating his Tweets with warnings about their veracity, tech companies are protected by Section 230 of the Communications Act declaring that they are “bulletin boards” that do not create their own content. This law provides protection against regulation.

Publishers — especially Murdoch, who controls 70% of the media market in Australia — argue that Facebook and Google have grown rich by taking the content produced by journalists and posting it on their sites without compensation.

It’s not surprising that Australia, the market where Murdoch has the most clout, is the first to seriously consider requiring online platforms to pay for content. After all, fair is fair: publishers pay to create the content, why should Facebook and other social media platforms distribute that content to billions of users without compensation?

For their part, Google and Facebook argue that they do not post the news that Murdoch publishes; their users do. To stifle that flow is to censor free speech and the kind of reading and commenting on current developments that should be encouraged.

Furthermore, Facebook says it serves publishers by promoting content to massive audiences. That kind of promotion, Facebook argues, is a service so valuable that perhaps the publishers should pay them for the privilege. And, all that promotion leads many Facebook and Google users to publishers’ websites with advertising messages.

Facebook argues that even if it wanted to, how could it ever regulate what its users post? (More on that later.)

Last month the Australian government rattled its sword and threatened that tech companies would have to pay.

Google decides to settle

Google, partially to annoy and frustrate its arch-rival Facebook, significantly weakened Zuckerberg’s case by settling with the Australian publishers and paying when their content is used. Robert Thompson, CEO of News Corp., was quick to thank Google and took a swipe at Facebook, calling Google’s decision a “thoughtful commitment to journalism that will resonate in every country.”

Millions have asked that Facebook do something about terrorists, insurrectionists, racists, and scurrilous conspiracy theories. But the company has defended its inaction, claiming the job of policing itself is simply too big. Facebook promises it is working hard, but editing takes enormous effort and time — except when money is concerned: then Facebook moves quickly.

The damage to Facebook’s reputation at a time when governments around the world are looking at curbing its power, and making it pay taxes and other fees is enormous. Google quickly became the good guy. It showed it could peel off a small slice of the billions of dollars it earns and share it with publishers. In the process, Google proved that compensating publishers is neither too expensive nor logistically impossible.

Facebook, with more users who share news and more to lose (or pay), decided to go to war. Faced with having to pay for the news its users share, Facebook exercised the nuclear option: it halted the free flow of information by declaring their users would no longer be able to share or see any news from local or international outlets.

Facebook Australia CEO William Easton explained “the proposed law fundamentally misunderstands the relationship between our platform and publishers who use it to share news content.” Easton went on to say the legislation “has left us facing a stark choice: attempt to comply with a law that ignores the realities of this relationship, or stop allowing news content on our services in Australia. With a heavy heart, we are choosing the latter.”

So much for Facebook’s commitment to its users. Unlike Google, Facebook was not willing to share a small slice of its revenues – even after Google showed it can be done.

What happens in Australia is far more than a local event 8000 miles away.

The fallout for Facebook has been devastating. Facebook demonstrated the massive arrogance of the tech companies that has so alarmed governments and citizens across the globe: it proves what happens when one company grows too large. Facebook’s actions in Australia practically demand that the company be regulated, which will inflict far more costly consequences than joining Google in a settlement.

Facebook can regulate when it wants to

But a much larger problem has emerged for Facebook: its actions make clear that it has surgical control over its users’ feeds; when its economic interests are endangered, Facebook can act quickly and decisively.

Millions have asked that Facebook do something about terrorists, insurrectionists, racists, and scurrilous conspiracy theories. The company has defended its inaction, claiming the job of policing itself is simply too big. Facebook promises it is working hard, but editing takes enormous time and effort — except when money is concerned: then Facebook moves quickly.

Facebook’s actions in Australia not only bar traditional news from being shared, it also halts critical content, such as medical news during the pandemic.

In the first skirmish of the war, Facebook has clearly lost. Google looks like the cool-headed, reasonable good corporate citizen, while Facebook comes off as the greedy, self-centered hothead.

Belatedly recognizing that it seriously overplayed a bad hand by overreacting to the proposed Australian legislation, Facebook looked for a face-saving exit. Google’s concessions and Facebook appearing to all the world as an arrogant bully forced it into a corner.

Trying to avert a war, the Australian government gave tech companies additional time to reach a deal with publishers.  Nothing changed, but Facebook now had cover to look like it wasn’t completely backing down, although that is exactly what it did. The company found a much-needed offramp to hastily shutting down news. On February 23, Facebook blinked and temporarily restored news feeds.

If you want to prove that the tech companies have become too powerful and represent a threat to freedom and competition and must be reigned-in politically and economically, you couldn’t build a better case than Facebook is making in Australia.


Jeffrey Cole is the founder and director of The Center for the Digital Future at USC Annenberg.



See all columns from the center.

February 24, 2021