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Monday, March 08, 2021

Explained: Tech giants v regulators

Google and Facebook have locked horns with Australian govt over laws that propose to make them pay news organisations for using their content. The outcome of the fight will have implications for India as well.

Written by Pranav Mukul , Anil Sasi | New Delhi |
Updated: January 25, 2021 3:23:38 pm
Mel Silva, managing director of Google Australia and New Zealand, appears via a video link during a Senate inquiry in Canberra on Friday. (Mick Tsikas/AAP Image via AP)

Parliament in Australia is debating legislation that would require Google and Facebook to enter into payment negotiations with media companies for using their content, with an arbiter mandated to adjudicate in the event an agreement cannot be reached.

The Internet companies have pushed back against the legislation — and the fight is being watched around the world, given the impact the outcome could have across geographies, including in India. There is also renewed focus on a template that has been rolled out with some success in South Korea.

Nearly four years previously, Naver, South Korea’s most popular news site and biggest search engine, had thrashed out an unusual model for working with Korean news publishers — designating some 125 outlets as “Naver News in-link partners”, and paying them for published stories on Naver. Another 500 odd news outlets are unpaid “search partners”. The total payout was over $40 million in 2017.

While this may not be the perfect model — news outlets have generally been unsatisfied with their share; also, there has been controversy recently over allegations that Naver manipulated the ranking of articles critical of South Korea’s top football association on the latter’s request — the template remains operational in a nation where nearly 85 per cent of the population accesses news online.

The fight in Australia

Google last week threatened to remove its search engine from Australia. Facebook said it could block Australian users from posting or sharing news links if the proposed norms on royalty payments were put into operation.

Representatives of the tech majors appeared at a Senate hearing in Canberra last Friday. They argued that the media industry was already benefiting from traffic routed to them by the digital platforms, and that the proposed rules would expose them to “unmanageable levels of financial and operational risk”.

Firms’ response elsewhere

Bloomberg and some other media outlets have reported that Facebook plans to launch its news tab feature (available in the US since 2019) in the UK, with likely tie-ups with The Guardian, The Economist, and The Independent. And Google is rolling out its news offering platform, Google News Showcase.

Both these platforms aim to formalise payment pacts with news outlets. In a statement last week, Google said that News Showcase —which features story panels that allow participating publishers to package the stories that appear within Google’s news products – has on board more than 450 publications across a dozen countries, including Le Monde, Le Figaro, and Libération in France; El Cronista and La Gaceta in Argentina; TAG24 and Sachsische Zeitung in Germany; and Jornal do Commercio from Pernambuco in Brazil.

Google had announced in December 2020 that it would “soon start offering people access to paywalled content in partnership with select news publishers”. It had said it would pay participating partners to provide limited access to paywalled content for News Showcase users.

Last Thursday, Google said it will pay news publications in France for the use of their content online. The tech major and APIG, a French news media group, said in a joint statement that after months of talks, they had agreed on the principles on which news publications should be compensated for the distribution of their content on Google platforms.

However, Google’s first response to France adopting the EU copyright rules was to stop displaying news snippets – until the French competition regulator stepped in, in October last year. Google also pulled the plug on its Google News service in Spain, which made payments to publishers mandatory.

The core issue

Paying for news feed in itself appears to be less of an issue for the tech giants, given that Google entered the agreement to pay news publications in France just hours before threatening to remove its search functions in Australia. The fight in Australia is evidently centred on how much control these companies would be able to retain on their payout process — operational aspects such as deciding the quantum of payments for news feed sources, and having to reveal changes in their algorithms. The hefty fines proposed by Canberra are being seen as an added problem.

There is no denying that tough action by regulators has been behind the moves by Facebook and Google to launch platforms such as the proposed news tab and Showcase, unlike Naver’s largely voluntary action in Korea.

European authorities have specifically linked payments to copyright, without putting a forcing device into the agreements. Australia’s code, on the other hand, is almost entirely focused on the bargaining power of news outlets vis-a-vis the tech majors, and has some coercive features as well. It is more of a competition issue in Australia, of power equations between traditional news outlets and tech platforms, with the question of abuse of dominance by the latter hanging in the balance.

Australian regulators had initially proposed a voluntary code of conduct, but have since stepped up pressure. Australia’s competition regulator has warned that the planned laws to force Google and Facebook to pay for news content were “likely just the start of more regulation for digital platforms”.

“This bargaining code is a journey, if we see market power elsewhere, we can add them to the code,” Australian Competition and Consumer Commission Chairman Rod Sims said in an interview to Reuters. In France too, the competition watchdog FCA had last year issued strictures to big tech companies. FCA had deemed Google’s move to withdraw news snippets as “unfair and damaging to the press sector”, and also likely to constitute an abuse of market dominance.

The debate in India

Policymakers in India have so far focused on the dominance of intermediaries such as Google and Facebook, which are positioned in a way that service providers cannot reach customers except through these platforms.

The tussles in Australia and elsewhere could have broader implications for the regulation of the digital economy in India in the longer term. A substantial discussion on the impact of intermediary platforms on the health of news media outlets is yet to commence in any meaningful way here.

According to a FICCI-EY report on India’s media and entertainment sector for 2020, there are 300 million users of online news sites, portals and aggregators in the country — making up approximately 46% of Internet users and 77% of smartphone users in India at the end of 2019.

With 282 million unique visitors, India is the second largest online news consuming nation after China. In India, digital advertising spends in 2019 grew 24% year-on-year to Rs 27,900 crore, according to EY estimates, and are expected to grow to Rs 51,340 crore by 2022.

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Globally, Facebook and Google together command 61% of the market share in digital ad spends, according to Edelweiss Research; Google leads with 37%. In a separate note, Edelweiss said it expected digital spends to be further accelerated, led by a substantial jump in online activity accentuated by Covid-19.

Other major news aggregators in India are Dailyhunt, the parent company of which (VerSe Innovation) has raised funding from Google and Microsoft, and the Tiger Global-backed InShorts. According to a January 2020 report by Harvard University’s Nieman Lab, publishers were initially paid between Rs 5-6 lakh monthly for content hosted on Dailyhunt — but they started going off the platform after terms were changed. The report noted that Malayala Manorama was one of the first big publishers to exit Dailyhunt in 2017. Even without the conversation in India reaching the point where news aggregators are mandated to make payments to publishers, startups such as Dailyhunt and InShorts are yet to find a sustainable revenue model.

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