Google has settled with French publishers who wanted to be paid for the privilege of having their content linked to – handing over €60 million (£52 million) for an “innovation fund” to help publishers make more money online, and agreeing to help them use its ad tech more effectively.
Everyone seems to think the deal is significant, but no one can agree on what impact it will have.
Some have hailed it as a victory for capitalist common sense – halting French government attempts to force Google to effectively pay a commission for driving traffic to French news sites.phyrric
Others have warned it sets a dangerous precedent – arguing that once Google has shown it is willing to hand over cash when threatened, there’s nothing to stop governments and publishers coming back for more on the grounds that Google has already concluded its business model hurts newspaper publishers.
Drop in the ocean
On a purely financial basis, it seems the French publishers have won a pyrrhic victory at best. With combined revenues of €9.15 billion (£8 billion) in 2011, that €60 million is a drop in the ocean for the French media. To pick just one example, Figaro Group, owner of Le Figaro, generated revenues of €550 million (£469 million) in 2011.
That rather begs the question – if a €60 million fund is going to make much difference, why weren’t the publishers already pumping money into it?
And what does it mean for Google?
Chairman Eric Schmidt may hope the deal will mark the high-watermark of Google’s tussle with European governments over its impact on journalism, but he’s undoubtedly aware the next battleground is Germany where things are likely to get a lot more bloody.
German publishers have already indicated they won’t accept a similar deal to the one the French have negotiated, in part because they (sensibly) argue the issue of who makes money from links isn’t restricted to Google alone.
But is it wise for publishers to try to use governments to squeeze money out of Google – or any other internet firm delivering an audience to their websites? I’d argue no – in fact I’d argue it’s a dangerous game which risks undermining the independence they hold so dear and cutting what little solidity there is in their business strategies.
Continental publishers are involved in a risky balancing act. As Peter Littger argues on TheMediaBriefing here, German newspapers are caught in a dilemma, behaving like publicly funded organisations but relying on their financial independence from the state to back up claims to be democratic watchdogs. That disconnect between behaviour and business model threatens many of them with oblivion.
The situation in France is similar, even though some publications, such as Le Monde, are in fact part-owned by the state.
But how does getting the government to force another outside entity, in this case a corporate behemoth, to fund journalism maintain that independence? Could newspapers really say they were independent when one of the world’s largest companies was subsidising journalist salaries?
And it’s not like Google isn’t doing newspaper publishers a few favours. Its algorithms favour established news sites, and give higher rankings to stories which appear first – something newspapers have spent years prioritising.
More pertinently, newspapers need Google a lot more than it needs them. Its search ads are best-suited to consumers looking for things to buy, where the link between intent and sale is strongest. The extra ad inventory and data from consumers looking for news content is useful for Google, but by no means central to its business (just look at our analysis of how small a proportion of time online is spent on news sites).
Google doesn’t need publishers, but most publishers definitely need Google. Without those links, publishers would see significantly less traffic to their sites. If they have a traditional ad-based model that would have a precipitous impact on revenue, and if they are charging for people to look at the content, what’s the problem?
Despite losses and comments like thesefrom Rupert Murdoch, this kind of battle is unlikely to take place in the UK. Not only do we have a culture where publishers are generally more accepting of Google’s role (you don’t find the Guardian attacking Google, despite its huge losses), but it’s unlikely fleet street would look to the UK government to legislate in their favour against a large corporation when they are trying desperately to assert their independence in the face of statutory regulation.
And the French aren’t completely unaware of the realities either.Louis Dreyfus, president of the executive board of the French newspaper Le Monde, sums up the situation lucidly: “This has come at the right time for the weakest daily newspapers and small magazines… But it doesn’t change the media business model and those who rely on government support to avoid failure are wrong. The media will only be able to count on itself and on the renewal of its offerings.”