Google's relationship with South Africa's leading publishers has turned hostile, potentially sparking an aggressive showdown between the two parties as the Competition Commission's Media and Digital Platforms Market Inquiry (MDPMI) gains momentum.
The rivalry continues after long-running negotiations between Google and individual publishers to reach commercial agreements over Google's use of news content hit a wall last year. Google's final settlement offer was derogatory and the industry believes Google negotiated in bad faith, according to multiple sources.
Read: Why you can't trust Facebook and Google
After negotiations broke down, Caxton, Media24 and the Campaign for Freedom of Expression (CFE), an organization set up to protect press freedom in South Africa and led by veteran journalism professor Anton Haber, went on the offensive.
They wrote to Google saying its dominance in the digital space is distorting South Africa's media environment and threatening the sector's financial viability and press freedom.
We also provide Google with information about our local operations and from aggregating news content, as we believe this is important to ensure that future negotiations take place on a fair and level playing field. Requesting disclosure of exact amount.
However, Moneyweb can confirm that Google has declined to release any information, making MDPMI a beachhead for future efforts.
Read the letter from Caxton, Media24 and CFE.
request information
These three characters are generally similar.
“For South Africa's press to continue to fulfill its constitutional role and for South Africans to enjoy an open and free media, it is vital that these market distortions do not persist,” Haber said in the CFE letter. “There is.” The news publisher shall be compensated appropriately for the profits he derives from Google from the use of the news content. And news publishers are well placed to compete effectively. ”
He says this can only happen if Google discloses information to the industry.
In the letter, Media24 said: “Previous negotiations between Media24 and Google have been futile and future negotiations will be futile, especially given the asymmetry in access to information between Media24 and Google. I came to this opinion reluctantly.” It added that disclosure was “essential for Media24 to establish its commercial position in the negotiations”.
Caxton chairman Paul Jenkins was more blunt in a communication to Moneyweb: “There is a hard truth that has taken mainstream news organizations a long time to realize: Google (and Meta) is essentially parasitic, sucking the vitality out of organizations. It’s the cuckoo inside.”
He said it was the media's job to hold governments to account and that until now the media had been funded by advertising. “But advertising platforms are now dominated by big tech companies, to whom clickbait is more valuable than shocking news stories.
“The playing field has tilted so much in Google's favor that news has been relegated to the lowest league on the revenue share chart.”
Mr Jenkins said Google has never disclosed such information anywhere in the world and is “hiding behind complex corporate structures in Ireland and the British Virgin Islands to protect itself from taxes, as well as… Google is exempt from publicly disclosing the following detailed information: Revenues and profits in the individual countries in which we operate. We aim to improve that in South Africa.
“Caxton resolutely pursues disclosure, transparency and leveling the playing field on global digital platforms. Freedom of the press is critical to democracy and our constitutional freedoms. So we can't ignore the words of poet Dylan Thomas, who told us, 'Don't be gentle on that good night.'”
Google's response to Caxton
Google informed Caxton of its decision not to release any of the requested information in a letter marked “confidential.”
In the letter, which Mr. Jenkins published on Moneyweb, Google denied that its operations were “in violation of applicable law” and that Mr. Caxton had no legal recourse for the information. I'm denying it.
“You understand that the information you request is confidential and may include proprietary, commercial, financial, and trade secrets. In some cases, the request may not be related to the media industry at all. It is irrelevant to Caxton's purpose.”
Google's letter adds, “The requested information is not necessary to protect the right to freedom of the press, and we deny that Google's products restrict freedom of the media.” . Our products promote freedom of expression, including freedom of the press. Every day, we link hundreds of millions of people around the world, including South Africans, to the websites of publishers that publish the news people want to read. ”
Google did not respond to questions.
MDPMI public hearing
These developments have shifted the battleground from individual negotiations with publishers to MDPMI, with public hearings beginning this week.
The MDPMI is being driven by the Competition Commission under the leadership of economist James Hodge and will determine the extent to which South Africa's media sector is distorted by major digital platforms and the impact this has on competition. be.
This process is much broader than Google's influence on the space, and also includes other digital giants such as Meta, YouTube, and Microsoft's Bing.
The premise is that while virtually all publishers in the country face significant financial challenges, digital and ad tech platforms are distorting the market and making content available to publishers without returning financial returns to publishers. They are making huge profits by aggregating and monetizing them.
South Africa is not alone in its struggle.
These developments are not unique to South Africa.
Media industries, regulators, and governments in many countries rely on Google, Facebook, and other platforms, resulting in laws that force them to pay for the news content they aggregate.
Such countries include Australia, Brazil, the United States, Canada, and Indonesia. Similar processes are underway in many other countries.
Last week, 32 European media groups sued Google for R44 billion, alleging losses due to Google's digital advertising practices.
news value
The amount of money that digital platforms can earn from aggregating news content can be significant, so publishers' and CFEs' requests for information from Google are critical. This is also one of the reasons why Google is so vocal about not disclosing how much it makes from news content.
Courtney C. Radosh, Ph.D., director of the Center for Journalism and Freedom and a fellow at the UCLA Institute for Technology, Law, and Policy, recently discovered that the value of news is much higher than policymakers and publishers think. , said that news value may explain the value of news. It accounts for the majority of Google's $280 billion in annual revenue.
His estimate is based on a recent Swiss study that found as much as 40% of the $440 million Google makes in Switzerland comes from monetizing local publishers' news content. This equates to $176 million a year or R3.3 billion to him.
Another study by Columbia University's Institute for Policy Dialogue found that Google should pay US publishers between $10 billion and $12 billion a year for the use of their news content. This amount is based on a 50/50 split of revenue from Google's news content. Meta's bill should be about $2 billion, according to the study.
Google objected to the methodology of both studies.
MDPMI public hearing
The Competition Commission will begin hearings this week as part of a comprehensive information-gathering process related to MDPMI. You can view the presentation schedule here.
Moneyweb will be presenting on Tuesday at 12 p.m.
The hearing will be livestreamed on the Commission's YouTube channel here and Facebook here.
*Disclosure: Caxton's majority shareholder is also a major shareholder in African Media Entertainment (AME), the owner of Moneyweb. Paul Jenkins is a non-executive director at Moneyweb.