For Google, it started as a small problem in a small, distant market: a public inquiry by the Australian Competition Commission into big tech and media.
But four years later, Australia is at the forefront of a global regulatory response that threatens to reset the terms of trade between technology platforms and news media, and more importantly for Google, erode the fundamental pillars of the Internet that have helped it thrive.
The Australian parliament is getting closer to a statutory code that sets many precedents. This is the first law requiring Google and Facebook to pay publishers they connect to for content, and the first time they would be required to report significant changes in their algorithms to them.
The stakes are so high that Google has threatened to pull its search engine out of the country, in a test of strength with a midsize government trying to harness its commercial freedom.
Despite intense lobbying in Canberra to delay or change the code, a key parliamentary committee on Friday recommended that MPs enact it to “help protect public interest journalism.”
“It feels like what we’re seeing in Australia is the end of a discretionary phase of Google’s news funding and the start of a new regulated phase,” said Matt Rogerson, director of public policy at Guardian Media Group. “They are going to become more responsible for the value they get from using publisher content.”
Australia’s proposed bargaining code would dramatically shift the balance of power between Big Tech and the media, potentially even giving large publishing groups like News Corp the power to make global content deals.
Under a so-called final offer system – the most famous used to agree on baseball wages in the United States – this would require each side to present their proposal to an umpire, who would then choose which one should go into force.
News organizations could also bargain collectively, thus increasing their strength.
Other countries are watching. Canada said it was preparing similar legislation. EU and the UK is considering incorporating some elements of the Australian measures into future laws.
And this week, Microsoft urged the United States to follow Australia’s lead. Microsoft’s Bing search engine would be affected by such a move, but that didn’t stop it from jumping at the chance to undermine Google.
“We are prepared to run our search business with lower margins than Google,” said Brad Smith, president of Microsoft. “We are ready to share more revenue with publishers.”
Google recently ignored its threat to leave Australia, but reiterated that the code was “unworkable”. The company said the code would set a precedent for paying for its search engine links to outside content, striking at the heart of its business.
Kent Walker, general counsel, said the plan would expose the company to “unknown payments”, and give the “privileged few” an early view of changes to its algorithms – things he said would “fundamentally change the internet” .
Some argue that Google has overstated the point. The Australian code does not mandate a pay-per-link system, and Microsoft’s Smith said arbitration was more likely to lead to deals in which media companies receive a share of the revenue or a fixed fee.
A CEO of a news publisher compared it to how content is licensed to the Factiva media database, which pays publishers a fee whether the content is read or searched.
This could set a dangerous precedent for Google when it comes to linking to other forms of online content – although any other industry looking to follow in news publishers’ footsteps should persuade governments that they deserve. they too get special treatment before they can hope for similar bargaining power against the tech giants.
The momentum in Australia has applauded many executives in the news industry, after years of uncomfortably relying on Big Tech for online traffic.
Robert Thomson, chief executive of NewsCorp, told investors last week that he was finally starting to see a “brighter future for content creators” after a long campaign against Google. “It’s fair to say that regulators around the world have joined the digital dots.”
Publishers have long argued that Google unfairly benefits from showing headlines and story excerpts in its search engine. But they haven’t had the bargaining power to recoup some of those profits for themselves, and the lack of data has made it difficult to say who benefits most from the symbiosis between the research firm and publishers.
At the end of last year, he announced that he would pay publishers around the world $ 1 billion over the next three years and that he has made deals with around 450 “press partners” in more than ‘a dozen countries, including the United Kingdom, Japan and Brazil.
The only significant deal in the EU, for example, was signed last month in France, but Google has agreed to pay just € 22 million a year to a group of publishers.
Negotiations with Google are generally handled under wraps with individual publishers, country by country – an approach described by news executives as “divide and conquer”. The offers are typically multi-million dollar payments spread over several years, in exchange for a promise not to file antitrust complaints against Google.
But it’s unclear exactly how much news agencies stand to gain, or who will benefit most. Critics warn that the Australian code will particularly favor a handful of powerful companies, starting with Rupert Murdoch’s news empire.
“My concern is that the big guys get all the money. This is an asset extraction by politicians and big media organizations, ”said Aron Pilhofer, former digital director of the Guardian and now associate professor at Temple University.
If Google leaves Australia, publishers can suffer as well. An academic study led by Stanford University economist Susan Athey on what happened when Google News pulled out of Spain in 2014 found that traffic to news sites had dropped by about 10%.
But it also highlighted a more insidious impact on the information business. Aggregators like Google News direct readers to individual articles rather than publisher homepages, undermining the “bundled” business model many rely on and weakening their individual brands. Search engines also favor small publishers to the detriment of large ones.
Difficulties in putting a price on the news’s value to Google may ultimately deter publishers from making it to arbitration in Australia, fearing the final decision will be disappointing.
Regardless of Australia’s outcome, news executives don’t expect license revenues from Google and Facebook to turn a struggling business model for publishers.
When Google was founded in 1998, newspapers and magazines accounted for nearly one in two dollars of advertising worldwide. By 2020, according to GroupM, publishers accounted for an incredibly small share of the $ 578 billion advertising market: 8.3%.