Why taxing Google News is a terrible idea for newspapers

In 2009, Rupert Murdoch famously called Google News and other news search engines, “content kleptomaniacs”, before denying them access to his publications the next year. In September this year, he changed his position and decided that news snippets from his publications should reappear. Of course, traffic was going down, meaning a loss of income. Now new ideas are emerging at the headquarters of cash strapped newspapers. “Couldn’t we start taxing Google and the others for publishing our content by creating an extension of the copyright?” is the musing of media CEOs. By creating a collecting society for Google tax, newspapers could join forces in their fight against the “digital thugs”.

The German Bundestag leads the charge
At the end of this month German politicians in the Bundestag will discuss a first draft of an extension of copyright, called the Ancillary Copyright Bill.

The money from this Google tax could stop the drop in revenue of the German newspaper industry, which between 2000 and 2009 fell 20% to 11-billion Euro. Critics of the proposal argue that this will not solve the financial problems of the newspaper industry. It is like “asking a fine dining guide to pay for the privilege of listing a restaurant” says Jimmy Schulz, a Free Democrat.

France follows suit
Germany is not alone either. France also thinks Google should cough up for hurting the newspaper industry. French president François Hollande demanded compensation for the French newspapers from Google Chairman Erich Schmidt. Failure to do so, he said, would see France draft a similar extension of copyright law to that of Germany.

The problem is of course that the French newspaper industry is far from profitable despite more than 1.2-billion Euro worth of government subsidies. Where France and Germany take the lead, others will follow. If Italy and Austria stop hesitating to jump on the copyright bandwagon, then we are not far away from a ‘harmonised’ European copyright law. Such an issue that is already on the ‘Digital Agenda for Europe‘ of Neelie Kroes, the vice president of the European Commission.

Emerging markets picture different…for now
The Google tax will for the moment stay a European affair, because in other parts of the world comparable initiatives are not present. In the US, for example, publishing news snippets qualifies as ‘fair use’, and is not considered to be an infringement of the copyright.

In countries like South Africa meanwhile newspaper sales and circulation are dropping, but the situation is not as catastrophic as in Europe. Newspapers in emerging markets countries also have more time to focus on their online presences, and can get more readers from their digital editions.

That said, Brazilian newspapers have abandoned Google News en-masse, claiming that it drives traffic away from their sites.

It’s all about the business model
The argument that Google dissuades readers from clicking through to the newspapers websites is not very solid in the light of the facts.

Google argues that it directs four-billion clicks monthly to the newspapers’ sites, adding that about three-billion will actually read the complete article.

Therefore newspapers should not block Google from indexing their news. Murdoch’s already figured it out: if traffic falls so does revenue from online advertisements.

A Google tax would have the same consequences, because if it is accepted, Google will remove the newspapers’ pages, (to avoid taxation), with the same result.

So the emerging business model is not taxing Google, but creating revenue from content. It would be wise for newspapers in emerging market countries to think about a metered paywall (a few articles for free, but payment is required for more). The Economist and the New York Times are already doing so successfully.

People are becoming more willing to pay per article, or consider a digital subscription to the newspaper. And through it all Google will continue to direct users to their stories.