Last week Google warned its search engine could stop linking to news stories and would scrap its existing deals with media companies if New Zealand’s government passes a law making it pay for news.
It is a blatant threat that shows who holds all the cards. Let’s call it what it is: bullying.
New Zealand’s media will struggle to survive without money from Google and other tech giants. The tech giants will do just fine without New Zealand’s media.
The government's Fair Digital News Bargaining Bill plans to make Google and others pay what amounts to a ‘link tax’. It’s a simple sounding solution, but it’s not the best answer.
If you want to read about a better way of getting tech giants to contribute, impatient readers can skip down to the section marked How to fix this, but that would mean missing some important background.
There’s no question that Google, and to a lesser degree Facebook and Amazon, have captured most of New Zealand’s digital advertising revenue.
The tech giants extract more than a billion dollars a year from the local economy by selling advertising.
Much of that money would formerly have gone to media companies. They, in turn, employed local journalists and other media professionals.
Search engines, social media and international online shops have hollowed out New Zealand’s media sector. You don’t need to look any further to understand why many regional and local newspapers no longer exist or why TV3 can no longer sustain its own news operation.
It’s why your favourite magazine stopped printing and explains the lack of media diversity.
At the same time, those large technology companies exploit the work produced by media companies. When a NZ Herald journalist writes a popular story, when a TVNZ news reporter exposes some dark doings, the tech companies profit from that labour without paying for it.
The fact that tech giants extract hundreds of millions of dollars in profit from New Zealand and barely pay anything in tax does not help their case.
Which means it’s understandable that politicians and media industry leaders want companies like Google to pay up.
Things are only going to get worse now that the same technology giants, along with a few others, are exploiting the same work for their AI engines. And once again, they get to use that work for nothing.
Apparently stories I write are fair game for feeding, say, Microsoft’s AI engine, but if I were to use a copy of Microsoft Word without paying, that would be copyright theft.
It’s asymmetric.
Other countries have gone down this path. Four years ago in 2020 the Australian government asked its competition regulator, the ACCC, to develop a law that would force tech giants to pay for the news that appears on their feeds. It came up with the “news media bargaining code”.
Other countries had tried similar ideas and got nowhere. Spain tried to get Google to pay for news in 2014. Google simply shut Google News down in that country for the next seven years.
Google’s response to the Australian code was a threat to pull all its services from the country. Facebook went beyond threats, it wiped all Australian news from its pages for eight days.
In Australia, traffic to news websites dropped overnight. It was exactly what the government feared could happen. But it didn’t back down.
Google and Facebook didn’t leave Australia, they paid up. The code meant they had to strike individual deals with publishers to use their content. If they didn’t reach an agreement, a government appointed organisation would step in and set the price.
For a while the deal seems to work, the ABC’s deal with Facebook and Google have provided funds to hire 50 regional journalists covering local stories in parts of the country that might otherwise be neglected.
News Corporation said last year the deals are worth $100 million to its Australian business.
Rupert Murdoch’s News Corporation is a special case, unlike many media companies it is global and has a level of negotiating clout New Zealand firms like NZME can only dream of. Its dominant position in Australia means that country has more negotiating clout than, say, New Zealand. Yet even now that is unravelling.
One of the criticisms of Australia’s moves is that it disproportionately benefits News Corporation compared with smaller publishers and the smallest operations get nothing.
Canada passed an Online News Act in 2023 in the face of similar opposition from Google and Meta, which blocked news access temporarily. TechDirt says the Canadian legislation backfired which should be a warning for New Zealand.
As mentioned earlier, the problem with link taxes is that publishers need links. They need tech giants to deliver readers to their sites and stories. Without those links traffic drops.
Companies like Google make money from showing news headlines and directing traffic to newspaper or other media sites. But the amount of money they make is tiny. In the cases where they flexed their muscles to show who is boss and temporarily removed those links, their revenues didn’t alter.
In other words, media companies need technology giants, the tech giants don’t need media companies.
If governments tax links, the tech companies can simply stop providing them without any loss. It’s another asymmetry.
New Zealand already has a tool that would work in this context. Money raised by the Telecommunications Development Levy (TDL) is used to pay for essential but non-commercial services that were once considered the duty of our nationally owned monopoly telephone business. It has also been used in the past to finance rural networks in areas that might not be attractive investments for privately owned telcos.
Companies who make money selling telecommunications services in New Zealand contribute towards the TDL an amount based on their total revenue.
We could establish a Media Development Levy which is funded by revenues from selling digital advertising in New Zealand. Companies would contribute an amount based on their total digital advertising revenue.
The detail of what happens to the money raised is beyond the scope of this post, but I’d like to think it could pay for more regional journalists, more training and something for those of us who are independent of the big media firms.
The beauty of a Media Development Levy is that it is not tied to any specific activity beyond selling digital advertisements. Which means it doesn’t give Google or Facebook an incentive to stop linking.
It’s also broad enough to include Amazon, which sells huge amounts of advertising but flies under the radar. Variety reports Amazon earned US$12.8 billion from advertising in the second quarter of 2024. A broad levy also drags in Microsoft.
In his blog, former New Zealand Herald editor Gavin Ellis says we need to tell Google to “sod off”. He suggests: “New Zealand should play Google at its own game. The country should boycott its search engine and move en masse to the many alternatives.”
We should also dump the Fair Digital News Bargaining Bill and move to a way of making tech giants pay that stands a chance of working.
