Google’s attention-grabbing announcement that it will spend $1bn over three years on licensing material from news publishers has been greeted by many with enthusiasm (including Press Gazette).
It’s easy to understand why: new sources of revenue for publishers have been thin on the ground for a very long time. Not only that, but Google’s refusal to pay news providers has been a long-standing bone of contention for a news industry which has seen its content exploited extensively as its revenues have continued to collapse.
Google is positioning this as a business deal. Their new service, the Google News Showcase, will use content in a way which requires permission under copyright law. Such permission is not needed, they would argue, by their regular search and Google News services, but this product is new and different. So, just like any other responsible and law-abiding business, they’re acquiring the supplies they need for their new product: licences to use publishers’ content.
As business deals go, though, it’s an unusual one. There seems to be no business rationale for Google at all. Google frequently says it doesn’t make money from news, and, I’m told, it is not planning to charge users for their Google News Showcase nor sell advertising within it. There appears to be no particular customer or competitive demand they are responding to with this new product, no business opportunity they have identified. They’ll also still be offering their unlicensed Google News product alongside the Showcase.
So, what is Google actually buying? And what are publishers selling? And, more importantly: what sort of business invests $1bn in content for a product which addresses no commercial opportunity and will make no money?
The news sector complains that they are the victims of the way Google operates, accusing them of taking too much from publishers, giving too little back and refusing to negotiate. This has contributed to the pressure Google and other platforms are now under from governments, regulators and the media – pressure which is now beginning to translate into new regulations in major markets, impacting on the ways Google gather and exploit content and user data.
Google clearly needs to do all it can to relieve this pressure, because these new regulations threaten not just to undermine its news operations but could easily introduce restrictions or conditions on Google’s hitherto almost completely unfettered right to crawl, copy and exploit content on the web. This would put the core of its business at risk.
Reducing or eliminating that threat is imperative for Google. Calling it a deal, not just a handout, answers the charge that Google won’t sit down and negotiate terms – something the Digital News Initiative, which hands out money as grants, doesn’t address.
So, Google isn’t just buying content licences. What exactly are publishers giving it in return for their money?
The simple deal sounds like the sort of syndication deal I used to do early in my career (as group syndication manager at News International). The publisher supplies a selection of stories, which Google includes in its News Showcase. It puts some publishers’ content in a different place, for readers to enjoy, just as my deals meant our content appeared in newspapers all over the world (but never newspapers competing with us for the same audience).
The bigger part of what they’re giving Google is the unwritten part: a big PR coup, which might help them achieve their hugely important regulatory goals and remove a persistent thorn from their side. “Google pays for news” is a headline they badly need.
For publishers, obviously, the revenue is much-needed. Are they getting anything else that’s valuable? Does this deliver a sustainable, long-term, new revenue stream for them? Does it engage people more deeply with their product and build audience loyalty? Does it make negotiated licences and payments the norm for online services? Does it encourage readers to spend money directly with publishers? What’s different and compelling about this compared to other aggregated news services like Google News?
One of the best bits of negotiating advice I learned early in my career is always negotiate by understanding the value the other side puts on what’s being negotiated. You might be offering something which is incredibly cheap for you, but very valuable for the other side. Make sure you price according to the value to them, not the cost to you, otherwise you risk underpricing. Likewise they might be giving you something you value highly, but which costs them little.
One of the strange things about companies like Google is that money is one of their most plentiful commodities. Their revenue and profit figures are so eye wateringly high that they have huge amounts of cash on hand. Cash is cheap for Google, and in desperately short supply for the publishers.
My advice to publishers would be to remember the relative value of what’s being traded here. If you’re selling something which helps the other side mitigate a very real risk to their business, bear that in mind when considering the amount being offered in return. Friendly relations with the news industry are worth an immense amount to Google right now.
To put it more colloquially: take whatever amount you would otherwise consider, and multiply it by ten.
My other advice has always been to know your bottom line and don’t cross it. Be sure you actually want the deal. If you don’t get the deal you want, be willing to walk away.
Any publisher negotiating with Google has to decide what it is they need – not just financially, but for the ongoing health of their business – for the deal to work for them. Anything short of a permanent and widespread re-set of the relationship, I would argue, will not deliver the long term impact they desperately need.
Whatever their bottom line, if they can’t get it, they’ll be better off without the deal.
Dominic Young is founder and chief executive of casual payment tool Axate and a former head of IP and strategy for News UK