Microsoft (MSFT) believes tech giants should pay for news

Microsoft Corporation (MSFT) has registered support for pending legislation in Australia that would force technology companies to pay for content they copy from Australian news sites. That puts Microsoft in direct opposition to the Google division of Alphabet Inc. (GOOG, GOOGL) and Facebook, Inc. (FB), which threatened to shut down operations in that country if the law was enacted. In addition, Microsoft supports the adoption of similar legislation in other countries, including the United States.

Microsoft’s position

Microsoft’s position is presented in a long comment from company president Brad Smith, published in “Microsoft On the Issues: The Official Microsoft Blog.” The main passages are presented below:

The internet has eaten away at the news market.

“[I]Independent journalism is vital to the social cohesion that is essential to democracy. ”

“In the early 21st century, the Internet eroded the news market, as dot-coms like Craigslist disrupted advertising revenue, news aggregators attracted readers, and search engines and social media giants devoured both. Many other factors were in action and there is an urgent need for innovation across the news industry. But one thing is certain – the internet and social media have not been kind to the free press. ”

“Since 2000, newsroom revenue in the United States has fallen by 70% and employment has halved. More than 2,000 newspapers have closed completely. In many places, local news has been decimated. News deserts – communities with no local newspaper at all – if spread across the country, with terrible effects. ”

News content creates significant value for search sites and social media.

“About half of American adults (53%) say they receive news from social media ‘often’ or ‘sometimes’.”

“[N]The ews content generates significant indirect value for search engines and social media – up to $ 4.7 billion annually for Google, according to a recent study – although people often don’t click to read the original story. This means that news organizations are not compensated, even when all this traffic feeds into platforms that have become profitable technology gateways on which companies must advertise to reach consumers. ”

Australia seeks to correct a competitive imbalance.

“In Australia, Prime Minister Scott Morrison has put forward legislation that was being drafted two years ago to correct the competitive imbalance between the technology sector and an independent press. The ideas are straightforward. Dominant technology properties like Facebook and Google , will need to invest in transparency, including explaining how they display news content. ”

“Even more importantly, the legislation will correct the economic imbalance between technology and journalism, requiring negotiations between these technology gatekeepers and independent news organizations. The goal is to provide news organizations with compensation for the benefit obtained by technology gatekeepers by including news content on their platforms. ”

Microsoft shares revenue with news publishers.

“In October [2020], we launched a new initiative to invest in and support local news and, through Microsoft News, we share a large portion of the revenue with news publishers. ”

“[Microsoft CEO] Satya Nadella and I spoke to Prime Minister Morrison. It was an opportunity to combine good business with a good cause and, as we explained, even if Google wanted to leave Australia, we would stay. ”

“[W]we feel comfortable with a high quality research service [Bing] with lower economic margins than Google and more economic returns to the press. ”

Google partially backs off.

“Our endorsement of Australia’s approach had an immediate impact. Within 24 hours, Google was on the phone with the prime minister, saying he didn’t really want to leave the country after all. And the link on the Google search page with its threat to It disappeared overnight. Apparently, the competition makes the difference. But still not enough. Google continues to fight Australia’s proposal. ”

The need for new competition rules, including in the United States.

“Google and Facebook have shown that they are prepared to stop their services or leave a country entirely if the legislatures force them to share more of their revenue with the press in terms of what they dislike. This creates a new vulnerability for the democratic world. and highlights the need for new competition rules in relation to the opening of digital markets, something that more governments are now considering. ”

“The United States should not oppose an Australian creative proposal that strengthens democracy by demanding that technology companies support a free press. Instead, they should copy it.”

Significance for investors

In taking this position, Microsoft is clearly differentiating itself from Google and Facebook. While Microsoft positions itself as a good public-spirited corporate citizen, the last two tech giants see themselves as copyright infringers and intellectual property thieves hoping to profit from the work of others.

Microsoft is taking an insightful approach that is sure to be positive from both a public relations and governmental perspective. In addition, this controversy has raised the profile of Microsoft’s search engine, Bing, which may gain more use as a result. Meanwhile, Google and Facebook are increasing an already large reservoir of ill-will towards themselves.