Australia Proposes New Digital Ad Levy for Big Tech to Fund News

Big tech companies that fail to strike commercial deals with Australian media organisations will face a 2.5 per cent levy on their digital advertising revenue under the federal government's proposed amendments to media bargaining laws, with legislation expected to be introduced to parliament within weeks.

However, the companies have secured a key concession, successfully arguing the levy should apply only to their digital advertising revenue.

That means while the penalty rate for failing to reach agreements with news organisations is higher than originally implemented, the amount companies would ultimately pay would be calculated on a much smaller portion of their overall revenue.

In the existing incentive structure, big digital search companies like Google would have paid a fee of 2.25 per cent of their revenue if they did not pay at least four local news companies under commercial agreements.

But they could avoid paying the fee if they entered into tax-deductible agreements worth about 1.5 per cent of their revenue.

The government has now changed the fee to 2.5 per cent of advertising revenue if companies do not come to agreements with at least six local news services.

AI companies will continue to be excluded from the scheme.

Assistant Treasurer Daniel Mulino said big tech companies should provide compensation to the organisations who provide them content through news.

"That will mean that we have a news production ecosystem that is more sustainable going forward," he said.

"This reflects the fact that what we are really trying to target here is the part of the business that uses the news."

Will big tech pay up?

Past attempts by the government to require big tech companies to pay for news have prompted threats to pull platforms from Australian users altogether.

Meta, which owns Facebook and Instagram, previously refused to renew deals with news organisations initially made under the News Media Bargaining Code, first introduced in 2021.

Meta instead effectively sidestepped the code by removing and de-prioritising news rather than being forced to pay for the content.

To address this loophole, the incentive scheme applies to major platforms regardless of whether they hosted news.

Mr Mulino said the scheme was designed to ensure that companies would end up paying more if they refused to strike deals, regardless of whether they hosted news on their platforms.

He also said he was "confident" that the companies would not choose to walk away altogether.

"Australia is one of the largest economies in the world, it's very profitable for them, and we are hearing no indications that would be their reaction," he said.

The amendments also mean the definition of journalists will be extended, broadening to include essential production roles and freelancers.

Start-ups have also gotten a nod, with 5 per cent of any fund raised through the News Bargaining Incentive to be funnelled into a grants program for small publishers and new starters.

The government has also increased the offset for deals with small publishers from 170 per cent to 200 per cent.

Communications Minister Anika Wells said journalism was the "lifeblood" of a robust democracy.

She said the doubling of the distribution of scheme loading was critical to support regional publishers.

"This acknowledges both the challenges smaller outlets face, but also the incredible contribution they make to the communities they serve," she said.