Last week Google warned its search engine could stop
linking to news stories and would scrap its existing deals
with media companies if New Zealand’s government passes a
law making it pay for news.
It is a blatant threat
that shows who holds all the cards. Let’s call it what it
is: bullying.
New Zealand’s media will
struggle to survive without money from Google and other tech
giants. The tech giants will do just fine without New
Zealand’s media.
The link tax
The
government’s Fair Digital News Bargaining Bill plans
to make Google and others pay what amounts to a ‘link
tax’. It’s a simple sounding solution, but it’s not
the best answer.
If you want to read about a better
way of getting tech giants to contribute, impatient readers
can skip down to the section marked How to fix
this, but that would mean missing some important
background.
Follow the money
There’s no
question that Google, and to a lesser degree Facebook
and Amazon,
have captured most of New Zealand’s digital advertising
revenue.
The tech giants extract more than a billion
dollars a year from the local economy by selling
advertising.
Much of that money would formerly have
gone to media companies. They, in turn, employed local
journalists and other media professionals.
New
Zealand media in decline
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Search engines, social media
and international online shops have hollowed out New
Zealand’s media sector. You don’t need to look any
further to understand why many regional and local newspapers
no longer exist or why TV3 can no longer sustain its own
news operation.
It’s why your favourite magazine
stopped printing and explains the lack of media
diversity.
At the same time, those large technology
companies exploit the work produced by media companies. When
a NZ Herald journalist writes a popular story, when a TVNZ
news reporter exposes some dark doings, the tech companies
profit from that labour without paying for it.
The
fact that tech giants extract hundreds of millions of
dollars in profit from New Zealand and barely pay anything
in tax does not help their case.
An understandable
approach
Which means it’s understandable that
politicians and media industry leaders want companies like
Google to pay up.
Things are only going to get worse
now that the same technology giants, along with a few
others, are exploiting the same work for their AI engines.
And once again, they get to use that work for
nothing.
Apparently stories I write are fair game for
feeding, say, Microsoft’s AI engine, but if I were to use
a copy of Microsoft Word without paying, that would be
copyright theft.
It’s asymmetric.
New Zealand
is not alone
Other countries have gone down this
path. Four years ago in 2020 the Australian government asked
its competition regulator, the ACCC, to develop a law that
would force tech giants to pay for the news that appears on
their feeds. It came up with the “news
media bargaining code”.
Other countries had
tried similar ideas and got nowhere. Spain tried to get
Google to pay for news in 2014. Google simply shut Google
News down in that country for the next seven
years.
Google’s response to the Australian
code was a threat to pull all its services from the
country. Facebook went beyond threats, it wiped all
Australian news from its pages for eight days.
What
happens when governments force big tech’s hand?
In
Australia, traffic to news websites dropped overnight. It
was exactly what the government feared could happen. But it
didn’t back down.
Google and Facebook didn’t leave
Australia, they paid up. The code meant they had to strike
individual deals with publishers to use their content. If
they didn’t reach an agreement, a government appointed
organisation would step in and set the price.
For a
while the deal seems to work, the ABC’s deal with Facebook
and Google have provided funds to hire 50 regional
journalists covering local stories in parts of the country
that might otherwise be neglected.
News
Corporation
News Corporation said last year the deals
are worth $100 million to its Australian
business.
Rupert Murdoch’s News Corporation is a
special case, unlike many media companies it is global and
has a level of negotiating clout New Zealand firms like NZME
can only dream of. Its dominant position in Australia means
that country has more negotiating clout than, say, New
Zealand. Yet even now that is unravelling.
One of the
criticisms of Australia’s moves is that it
disproportionately benefits News Corporation compared with
smaller publishers and the smallest operations get
nothing.
Canada passed an Online News Act in 2023 in
the face of similar opposition from Google and Meta, which
blocked news access. TechDirt
says the Canadian legislation backfiredwhich should be a
warning for New Zealand.
There’s a big problem with
link taxes
As mentioned earlier, the problem with
link taxes is that publishers need links. They need tech
giants to deliver readers to their sites and stories.
Without those links traffic drops.
Companies like
Google make money from showing news headlines and directing
traffic to newspaper or other media sites. But the amount of
money they make is tiny. In the cases where they flexed
their muscles to show who is boss and temporarily removed
those links, their revenues didn’t alter.
In other
words, media companies need technology giants, the tech
giants don’t need media companies.
If governments
tax links, the tech companies can simply stop providing them
without any loss. It’s another asymmetry.
How to
fix this
New Zealand already has a tool that would
work in this context. Money raised by the Telecommunications
Development Levy (TDL) is used to pay for essential but
non-commercial services that were once considered the duty
of our nationally owned monopoly telephone business. It has
also been used in the past to finance rural networks in
areas that might not be attractive investments for privately
owned telcos.
Companies who make money selling
telecommunications services in New Zealand contribute
towards the TDL an amount based on their total
revenue.
We could establish a Media
Development Levy which is funded by revenues from
selling digital advertising in New Zealand. Companies would
contribute an amount based on their total digital
advertising revenue.
The detail of what happens to the
money raised is beyond the scope of this post, but I’d
like to think it could pay for more regional journalists,
more training and something for those of us who are
independent of the big media firms.
Media Development
Levy
The beauty of a Media Development Levy is that
it is not tied to any specific activity beyond selling
digital advertisements. Which means it doesn’t give Google
or Facebook an incentive to stop linking.
It’s also
broad enough to include Amazon, which sells huge amounts of
advertising but flies under the radar. Variety
reports Amazon earned US$12.8 billion from advertising in
the second quarter of 2024. A broad levy also drags in
Microsoft.
In his blog, former
New Zealand Herald editor Gavin Ellis says we need to
tell Google to “sod off”. He suggests: “New Zealand
should play Google at its own game. The country should
boycott its search engine and move en masse to the many
alternatives.”
We should also dump the Fair
Digital News Bargaining Bill and move to a way of making
tech giants pay that stands a chance of working.
A better way of getting Google to support NZ
media was first posted at
billbennett.co.nz.
Freelance journalist.
Auckland-based Bill Bennett writes technology and business stories that are directly relevant to New Zealand readers.
His emphasis is on telecommunications, but he also covers other aspects of technology and business. You can find his features in the New Zealand Herald and hear him regularly on RNZ Nine to Noon and the NZ Tech Podcast.
Bennett’s The Download Weekly newsletter is published every Friday. You can sign up for it here.
If you want to support his work, you can make a donation to his PressPatron account.
