Google vs Media

More on the Fair Digital News Bargain Bill (or should that be the Coerced and Compelled News Media Subsidy Bill)

The skirmishing between Mainstream Media (MSM) and Google (along with other major platforms) about the Fair Digital News Bargaining Bill (FDNBB) continues.

The latest incident in this continuing contretemps occurred on 4 October with the publication in the Google blog which was picked up by the redoubtable Shayne Currie of the New Zealand Herald and Tom Pullar Strecker of the Post. The reporting is reasonably balanced but skewed in favour of the FDNBB as might be expected.

The current position regarding progress with the FDNBB according to the Minister of Communications Mr Paul Goldsmith is that there are a range of views throughout the sector which he is considering. The matter is still in the consultation phase and announcements will be made in due course.

He also said:

“My officials and I have met with Google on a number of occasions to discuss their concerns, and will continue to do so.”

Mr Currie considers that Google’s latest moves will represent a “stern test of the  Minister’s mettle and his legislation.”

There can be no doubt that that is a loaded statement intended as a challenge to the Minister. He has shown his “mettle” in that when the Bill was reported back from the Select Committee, the recommendation was that it go no further. Mr. Goldsmith ignored that advice and decided to go ahead with the Bill, much to the consternation of the large digital platforms and the undisguised glee of MSM.

So what is Google’s latest salvo? Its position was stated in its blog and by way of comments from Google New Zealand country director Caroline Rainsford.

The blog post (which is quoted by both MSM publications as attributed to Ms Rainsford) states:

“We’ve been transparent with the Government that if the Bill were to proceed on its current trajectory and became law, we would be forced to make significant changes to our products and news investments. Specifically, we’d be forced to stop linking to news content on Google Search, Google News, or Discover surfaces in New Zealand and discontinue our current commercial agreements and ecosystem support with New Zealand news publishers.

These are not outcomes we want for New Zealanders, news publishers, or our business. We believe there is a sensible path forward and have proposed reasonable alternatives to the Government that do not harm smaller, local or regional publishers and maintain the principles of the open web, in line with recent agreements we've reached elsewhere.”

In a nutshell if the Bill is enacted Google will remove itself from the playing field and will hide news stories from search results. In this way it will place itself beyond the reach of the propose Bill.

Google would also discontinue its current voluntary agreements through which it partners with and provides some financial support to news publishers

Google’s attitude has been variously described as “hardball” or bullying. Yet the comments that are made by Stuff owner Sinead Boucher suggest that the power imbalance implicit in bullying rests with other than Google and the digital platforms. She said that the Bill sought to bring “the largest and most powerful companies the world has ever seen” to the negotiating table to pay for the “local content they profit from”.

“It will ensure they are not above the law of New Zealand, as they have tried to be in other jurisdictions including Australia and Canada,” she said.

“We are asking them to pay for the utilisation of our journalism that drives vast profits into their businesses through their ability to generate content, data and sell advertising around it. They earn $1 billion from the New Zealand market in this way every year.”

This statement makes it clear that the FDNBB is coercive in nature. It compels platforms to negotiate with MSM for a means of payment for linking to or aggregating their content. If agreement cannot be reached a regulator steps in and determines what payment should be made. Failure to comply attracts civil penalties.

This is neither fair – in that it is compelled and is backed by coercion and the power of the State – nor is it bargaining in that in the final analysis a regulator may fix a payment by diktat.

Ms Boucher attempts to scale the moral high ground by asserting that the Platforms are not above the law of New Zealand but perhaps in her arrogance or over-confidence she is overlooking the fact that the Bill is not yet law. But in some respects, and perhaps this time in a demonstration of her ignorance, there is a legal solution to the problem to which I have referred in other articles and which I shall outline shortly.

Google’s position is further clarified by suggesting that the proposed “link tax” model was fundamentally flawed and would generate unintended consequences.

Such “taxes” were in conflict with the principles of the open web, and had not proven effective in supporting journalism.

In a riposte that characterises the approach of MSM (and of many other organisations) and which ignores the main argument and focusses on semantics (as a lawyer I recognise this ploy immediately having used it myself) News Publishers Association public affairs director Andrew Holden said the Bill was not a tax.

“It creates the environment for New Zealand media companies to sit down and have a proper commercial negotiation with big tech companies about their use of our journalism. This has only become necessary because the likes of Google have distorted the market, and become some of the largest and most powerful businesses in corporate history.”

That is a rose-tinted spectacle description of the Bill if I ever saw it. What the Bill does, as I have pointed out above, is that it uses the coercive power of the State to compel a negotiated settlement and payment figure and, if that cannot be reached, results in a regulator fixing payment.

Semantically, Mr Holden is correct in that what is proposed is not a tax. It is a subsidy. The Platforms will pay MSM to use their content.

Why do I describe this as a subsidy? One only has to look at its origins. Before the FDNBB was the Public Interest Journalism Fund (PIJF). This involved the payment of over $100 million to subscribing MSM outlets. Of course there were conditions attached and the optics of the scheme were appalling. The perception was that MSM had sold its soul, independence and integrity for substantially more than 30 pieces of silver. Is it any wonder that the recent Stats New Zealand survey demonstrates that MSM has the lowest public trust rating.

As the PIJF was coming to an end, the Ardern/Hipkins Government (some might call it a debacle – I could not possibly comment) realised that a compliant media was still required but that there would have to be the appearance of distancing between Government action and the payment of money to the media. Hence the FDNBB which was modelled on similar efforts elsewhere.

Given that this was a Labour Bill which carried over, one would have thought that the present Government would have followed the advice of the Select Committee. That they have not, and given that the Bill seeks to set up a layer of bureaucracy which the current Government wishes to avoid, the decision to continue is surprising.

Mr. Currie’s report states that

“Act leader David Seymour - whose party does not support the Bill - said today the Government was “playing chicken” with Google and “New Zealanders stand to lose”.

“If Google make good on their threat, New Zealand audiences and media companies will be worse off. Smaller media outlets in particular would suffer as they would be denied the opportunity to connect with new audiences via search results.

“It is not any government’s job to protect businesses from customers making different choices. The internet has made it easier than ever to report news, and certain outlets need to stop blaming the internet and start looking at their product.”

In their blog post, Google makes its objections to the Bill clear. These have not been the subject of critical analysis by MSM and one wonders why.

Google considers that the FDNBB model is fundamentally flawed and would generate unintended consequences and unsustainable models. The blog post provides the following reasons:

“Ineffective and Against the Open Web: Link taxes are in conflict with the principles of the open web, and have not proven effective in supporting journalism, as seen in similar situations where other platforms have disengaged after deciding it’s no longer feasible to carry news links, including in Australia and Canada. The Ministry for Culture and Heritage commissioned an independent report from Sapere that concluded “There is no plurality justification to require digital platforms to pay news firms for linking to news content.”

Harmful to Smaller Publishers: Solutions that overwhelmingly benefit a small number of large operators at the expense of small and local language publishers are neither sustainable nor desirable outcomes for New Zealand.

Business Uncertainty: The uncapped financial exposure, an opaque political process for exemption and lack of clarity in the current Bill create an untenable level of business uncertainty for any company. This makes it impossible to plan and invest effectively in New Zealand.”

The blog post goes on to state:

“We’ve been engaging with New Zealand publishers and lawmakers throughout the legislative process and have proposed reasonable and balanced alternatives to the draft Bill. Google is currently the only tech company providing financial support to New Zealand's news industry - as we have been for over two years. Further strengthening New Zealand’s news industry will require additional public and private support from both the New Zealand Government and a broad base of private companies.”

Hardly the actions of a company that is playing hardball or is “bullying”.

What Google understands and what MSM does not is that the Digital Paradigm has completely changed the communications environment in general and the news media environment in particular. One word is used to describe what has been happening – convergence.

We are seeing the combination of text, audio and video from MSM outlets that were, in the kinetic paradigm, described as “newspapers”. RNZ and TVNZ have similarly entered different communications realms in the dissemination of content. The result is that depending upon the medium a complaint may be made about RNZ content to the NZ Media Council. If the same material is broadcast a complaint may be made to the Broadcasting Standards Authority.

But the way that MSM does business needs to reflect this Paradigmatic change and MSM needs to learn that it cannot continually go to Government for support. We already have State media (albeit with “independence”) in the form of RNZ and TVNZ and it is correct that we need a viable Fourth Estate to speak truth to power, but not one that is dependent, directly or indirectly upon State subsidies. That model can hardly be considered viable nor does it give the perception of independence.

In my view Google is quite justified in leaving the playground where it is required to keep playing by the threat of coercion to participate and compulsion to pay. This is business and the market at work. There is a theory of internet regulation and governance known as regulatory arbitrage. This was developed by Michael Froomkin, an American academic and expert on Internet law.

Regulatory arbitrage posits that because place doesn’t matter in the online space, internet entities can select the location most favourable for their business model. The proposal by Google is a variation on regulatory arbitrage in that if the FDNBB becomes law they will adapt their business model to exclude them from its operation. And businesses in the kinetic space do likewise. If the law makes it difficult to make a profit from engaging in a certain activity, the business will look for other opportunities.

So what is the solution to the problem, because there is a solution to what is being faced by MSM but it lies in existing law, rather than in the creation of a new regulatory bureaucracy backed by a Bill the name of which is in direct contradiction to what it proposes to do.

What the Platforms are doing is “free-riding” on the content created by MSM. They are using that content directly or indirectly without the permission of the “owner” of that content. Basically that amounts to copyright infringement and the Copyright Act 1993 provides for remedies for infringement as well as a licensing structure that enables a centralised body to administer payment of licensing fees for use of material. APRA for example looks after payments for the music industry. Copyright Licensing New Zealand is the Collective Management Organisation for New Zealand’s publishing industry and visual artists.

There are other advantages in this model for MSM. One is that the State is out of the picture. There is no suggestion that MSM may be beholden to the State for setting up a compelled and coercive “bargaining” process. Thus the optics are clear and the perception of MSM as lackeys of the State is avoided.

Another advantage is that there is no need for a new bureaucracy to be set up. Copyright licensing arrangements are relatively standard and have been operating for many years. There would be a more direct line for MSM to develop licensing arrangements, for which they would be in control, rather than work through a bureaucracy.

It may be that a few minor amendments would need to be made to the Act to clarify that the material used by Platforms is properly subject to copyright (my view is that in theory it is, but probably needs clarification). But from a legal, theoretical and moral point of view to address the problem via Copyright law rather than through a suspect and coercive structure like the FDNBB would be preferable.

The problem for MSM, if it insists on proceeding to support the FDNBB is that it will shoot itself in the foot. Whether they like it or not, most of MSM traffic is generated through Platforms such as Facebook or Google. Should the Platforms leave the news aggregation space traffic to dedicated MSM sites will diminish and advertisers will be less likely to place content where the eyeballs seeing it are diminishing. If the FDNBB is enacted, it may well be a Pyrrhic victory for MSM.