European newspaper publishers want a share of Google's revenue
European newspaper and magazine publishers say the internet search engine should be paying them for the links it makes a fortune from
Google got rich by selling a simple proposition - the links it provides to other websites are worth a lot of money, so much so that millions of advertisers are willing to pay the company billions of dollars for them.
Now some European newspaper and magazine publishers, frustrated by their inability to make more of their own money from the web, want to reverse the equation. Google, they say, should pay them for links because they provide the material on which the web giant is generating all that revenue.
In several of the biggest European countries, they may be close to getting their way.
A bill working its way through the German parliament would enable publishers to collect a fee from Google and other search engines and news aggregators when they display excerpts from articles alongside links to newspaper and magazine websites.
This week, President Francois Hollande of France threatened Google with similar legislation unless it came up with a way to compensate news sites by the end of the year. Last week, publishers in Italy said they would also lobby for such a law.
But Google so far is standing its ground. Already facing possible penalties from European antitrust and privacy regulators, Google says that having to pay for links could threaten its very existence.
It warned that the demands could backfire. If Google had to pay up, it "would consequently be forced to stop indexing the French sites", Google wrote in a "position paper" it sent to the French government. Because 30 to 40 per cent of the traffic on French news sites comes from Google's links, the company's threat is not an idle one.
Google said such laws would undermine its commitment to an open internet and the free flow of information. It would also invert the company's main business model. A majority of the company's US$38 billion in annual revenue comes from the sale of "sponsored links", which appear alongside free search results. Google also sells advertisements on behalf of outside partners, including news sites, and shares revenue with them.
European publishers say their existence will be even more precarious unless they can start to generate more money from their websites and other digital products, like mobile applications. While advertising revenue continues to rise at Google, it has flattened out or is falling at many European online publications.
"We effectively feed the search engine and the algorithm, constantly giving them fresh content, content that you can rely on, because it's checked and it's accurate," said Nathalie Collin, the head of IPG, an organisation of French newspaper and magazine publishers. "This is why they can sell advertising."
Hollande appears to agree with them. Meeting Eric Schmidt, the executive chairman of Google, at the Elysee Palace this week, the president "expressed his desire that negotiations between Google and news publishers begin rapidly and conclude by the end of the year", his office said.
Hollande "stressed that dialogue and negotiation between partners appeared to him to be the better option, but that if necessary, a law could be implemented on this question, following the example of Germany".
Google played down talk of an ultimatum, saying Schmidt had "been to France many times to meet government officials and discuss how the internet can help create jobs as well as export French culture globally".
The German proposal cited by Hollande would create a so-called ancillary copyright, protecting online news content and regulating secondary uses of it, including the snippets that search engines and aggregators like Google News display to detail links to other sites.
Business users, like Google, would have to pay royalties to display news publishers' material, even short excerpts.
The German government introduced the legislation last winter. The upper house of Germany's parliament has approved the measure and debate is set to begin in the lower house this month.
In Italy, discussions are at an early stage, but the main trade association for news publishers pledged last week to work with its French and German counterparts and to lobby the government for relief.