For Google, this started out as a sting in a small, distant market: a public investigation by the Australian competition commission about Big Tech and the media.
But four years later, Australia is at the forefront of a global regulatory reaction that threatens to redefine terms of trade between technology platforms and news media and, more importantly for Google, erode the fundamental pillars of the Internet that helped it prosper. .
Australia’s parliament is approaching a statutory code that sets many precedents. It is the first law that requires Google and Facebook to pay publishers to which they link for content, and the first time that they would be forced to notify them of significant changes in their algorithms.
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 control its commercial freedom.
Despite the strong lobby in Canberra to delay or amend the code, an important parliamentary committee on Friday recommended that parliamentarians convert it into law to “help protect public interest journalism”.
“It looks 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 for the Guardian Media Group. “They will become more responsible for the value they derive from using publisher content.”
Australia’s proposed bargaining code would shift the balance of power between Big Tech and the media dramatically, even giving major publishing groups like News Corp the leverage to do global content business.
Under the so-called final offer system – best known for setting baseball wages in the United States – this would force each side to present its proposal to an arbitrator, who would then choose which one should go into effect.
News organizations could also negotiate collectively, increasing their muscles.
Other countries are watching. Canada said it is preparing similar legislation. The EU and the United Kingdom are considering introducing some elements of Australian measures into their future laws.
And this week, Microsoft asked the US to follow Australia’s example. Microsoft’s own search engine, Bing, would be hit by such a move, but that hasn’t stopped it from taking 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 prepared to share more revenue with publishers”.
Google recently fell silent about its threat to leave Australia, but repeated that the code was “impractical”. The company said the code would set a precedent for paying its search engine links to external content, reaching the heart of its business.
Kent Walker, general counsel, said the plan would expose the company to “unknown payments” and would give “favored few” an early look at changes to its algorithms – things he said “would fundamentally change the internet.”
Some argue that Google exaggerated this point. The Australian code does not impose a pay-per-link system, and Microsoft’s Smith said the arbitration would likely lead to deals in which the media companies receive a share of the revenue or a flat fee.
A chief executive of a news publisher compared the way content is licensed to the Factiva media database, which pays publishers a fee regardless of 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 the news publishers’ footsteps would have to persuade governments that they too deserved special treatment before they could similar bargaining power against tech giants.
The boost in Australia cheered up many news executives after years of Big Tech’s uncomfortable reliance on online traffic.
Robert Thomson, chief executive of NewsCorp, told investors last week that he was finally starting to see a “more fruitful future for content creators” after a long campaign against Google. “It is fair to say that regulators around the world have joined digital dots.”
Publishers have long argued that Google profits unfairly from displaying headlines and snippets of stories on its search engine. But they do not have the bargaining power to recover some of those profits for themselves, and the lack of data makes it difficult to say who benefits most from the symbiosis between the search company and the publishers.
At the end of last year, she said she would pay $ 1 billion to publishers worldwide in the next three years and reached an agreement with some 450 “news 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 saw Google agree to pay just € 22 million a year to a group of publishers.
Negotiations with Google are usually handled in secret with individual publishers, country by country – an approach that a news executive described as “divide to rule”. The offers are generally multimillion-dollar payments spread over several years, in exchange for the promise not to file antitrust complaints against Google.
But it is not clear how much news organizations can earn or who will benefit the 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 players keep all the money. It is an extraction of assets by politicians and major media organizations, ”said Aron Pilhofer, former Guardian digital director and now associate professor at Temple University.
If Google leaves Australia, publishers may also suffer. An academic study conducted by Stanford University economist Susan Athey, about what happened when Google News left Spain in 2014, found that traffic to news sites fell by about 10 percent.
But it also pointed to a more insidious impact on the news market. Aggregators like Google News direct readers directly to individual stories, rather than the publishers’ home pages, undermining the “clustered” business model that many rely on and weakening their individual brands. Search engines also favor smaller publishers over large ones.
Difficulties in putting a price tag on the value of the news to Google may ultimately dissuade publishers from going to arbitration in Australia, fearing that the final decision may be discouraging.
Whatever the outcome of Australia, news executives do not expect the revenue from licensing from Google and Facebook to transform a struggling business model for publishers.
At the time that Google was founded in 1998, newspapers and magazines accounted for nearly one in two dollars in advertising worldwide. In 2020, according to GroupM, publishers accounted for a dizzyingly modest share of the $ 578 billion ad market: 8.3%.