Why a fair licensing deal would see Google and Facebook pay news industry $2bn+ a year

European publishers are to file an ad tech lawsuit against Google — ||||||||

Andrew Hughes is secretary general of the Press Database and Licensing Network, a global trade body for organisations that collect payments for news content from press cuttings agencies and other companies.

Here, he uses his industry expertise – and knowledge of global licencing arrangements – to explain how much Google and Facebook should be paying news publishers for the use of their content. His suggestion: at least $2bn a year between them.

He says the current offers on the table – amounting to $1bn each over the next three years – are unfair, but claims publishers that speak out, or lobby against the tech giants, risk missing out on payments.

Now that the principle of some payment to publishers has been conceded by Google and Facebook, it’s time to talk about how much.

Winning a principle – payment – may be satisfying, but if the steady drain in journalistic enterprise that underpins a free society is to be slowed or reversed, especially at a local level, it’s the amount of cash that matters.

The value of the Google deals reached is still fairly obscure. With non-disclosure agreements in place we can only rely on indirectly reported numbers, which need to be treated with caution. In Australia, rumours are Google committed to A$30M annually for Nine and the same for Seven West Media.

Rumour also suggests News Corp got US$50-100m for all Australian, US and UK titles – plus some extras on advertising. It may be that Australian publishers are getting A$80m (£45m) in total. Will News Corp now re-open the circa 100 regionals they closed last May? I don’t think so.

In France, Reuters reports $76m payments over three years from Google to publishers. That may sound good but divided (by Google) between 300 titles and 121 publishers, the numbers become rather less impressive.

A starting point for any analysis has to be that both Facebook and Google are monopolies.

The nature of social networks is that, like a telephone exchange, scale embeds itself as everyone has to be on the same system.

After seeing off MySpace, Bebo and others, Facebook became ubiquitous, powerful and very profitable. Similarly in search, with some questionable deals along the way, Google has dominated and become a monopoly with 90% plus shares in some markets.

Both systems capture user data on a mind-bogglingly intrusive scale which dooms newspaper efforts to compete on advertising sales. And they have over weaning negotiating power.

The Independent is the UK’s most popular digital-only publisher with 100m unique users per month and annual income of £30m versus Google’s $182bn. Unless and until those monopolies are regulated with vigour, or broken up and privacy laws that bite their advertising power are applied, licensing income won’t ever match the publishers’ revenue loss.

In my view, Google is far more commercially valuable as a newspaper licensing partner than Facebook, even if the latter’s sharing function represents a greater threat to society through the spread of disinformation and state-sponsored propaganda.

Facebook could probably manage without news, given the volume of asinine, creative and sometimes dangerous nonsense its users generate. Google may add to the distribution of fake news, but it is bigger than Facebook (which had revenues of $86bn in 2020) and its search service, which generates 90% of its revenue, would be greatly weakened without news.

Google has tried to buy off regulation with its News Showcase product, which will see it give publishers $1bn globally over three years for News Showcase deals. That’s $333m annually shared between, say 100,000 newspapers worldwide, so $3,333 each (India alone has 25,000 titles).

This money is divided unequally and arbitrarily. And Google gets rights to host the news and keep users on its platform rather than linking back to the publisher. The deal is constructed to tuck in search rights under the cover and can be cancelled if the publisher lobbies against Google.

If $333m is not enough, what is?

Google generates most of its revenue from search advertising ($104bn in 2020).

NMA US and other research suggests that news is around 10% of search results (which is where Google makes most of its money).

Why Duopoly should pay more under the ‘relevant turnover’ rule

The copyright licensing rule of thumb used in adjacent markets like music suggests a licence fee of 10% of relevant turnover – which for Google would amount to $1bn annually (triple what it is current spending).

The quality of professional news and newspaper brands argues for a bigger number as news is the more interesting part of search returns. Corint Media argues that an 11% rate should apply to gross search revenue of $100bn+ and there are cases that support that view.

Competition authorities and analysts like to study comparable markets for precedents.

The obvious news licensing comparisons for newspapers are to LexisNexis and media monitoring. If the 25% plus royalties on news revenues publishers get from LexisNexis or Factiva were applied, the number Google should pay would be $2.5bn a year.

The UK’s NLA Media Access sends around £50m to UK newspapers annually, suggesting media monitoring pays publishers around 40-50% of relevant revenue in royalties.

As in many European countries, French publishers also get cash from media monitoring companies like Kantar and their clients through a licensing body – CFC in the French case. Two major titles report their share of the Google revenue is less than royalties they receive from CFC. So the $182bn gorilla (Google) pays less than the press cuttings services.

Whichever number you use, Google’s $333m a year is a lot less than the fair rate.

When you reflect on the fact that Google will use news content to build an advertising business that competes (unfairly) with the same newspapers, it is time to stop the steal (to coin a phrase).

If Google is (my estimate) about two-thirds of the licensing market that could be addressed with appropriate Australia-style legal frameworks, and we add back Facebook and the other smaller platforms, the fair licensing income is well over $2bn annually.

But to achieve that would require very firm government legislation and a determined collective approach. Behind the nationalist outrage, the Australian government blinked when Facebook pulled the plug. The resulting deal is not enough to finance journalism as we knew it.

Newspapers are rightly celebrated for independence from government and collective action. But these traits add to the incentive for more powerful titles to grab what they can when Google and Facebook dangle some cash.

Google is in the happy position of getting commitments in News Showcase not to challenge the deals. They can point lawmakers – who know their voters like ‘free’ services from the platforms – at payments made.

In Australia, by making some News Showcase payments Google has not been ‘designated’ as a relevant platform so is sitting outside the new Australian regulations to force payments, and Facebook has forced a change that opens the same door wider.

Try and get a fair News Showcase deal if you are a small regional title.

Try and tell another redundant ex-journalist in three years’ time that the platforms did their best.

Possible global licensing schemes for Google at a glance

Licensing Scheme	Annual Google Payment
Corint – German precedents 11% total Google revenue	$11bn
Using LexisNexis Factiva 25%	$2.5bn plus significant copyright fees
Low fair value- 10% relevant revenue	$1bn plus significant copyright fees
Google’s declared payment target News Showcase	$333m – includes copyright fees