The relationship between South Africa’s major publishers and Google has turned hostile and may trigger an aggressive face-off between the parties as the Competition Commission’s Media and Digital Platforms Market Inquiry (MDPMI) gains momentum.
The hostility follows after protracted negotiations last year between Google and individual publishers to reach commercial agreements for Google’s use of their news content hit a brick wall. According to several sources, Google’s final settlement offers were insulting, and the industry believes Google negotiated in bad faith.
Read: Why Facebook and Google cannot be trusted
Following the collapse of the negotiations, Caxton and Media24 and the Campaign for Free Expression (CFE), an organisation set up to protect press freedom in South Africa and led by journalism veteran prof Anton Harber, went on the offensive.
They sent letters to Google stating its dominance in the digital space has distorted the South African media landscape to such an extent that it threatens the financial viability of the sector and freedom of the press.
They also request that Google disclose information about their local operations and precisely how much money they make from aggregating their news content, as they deem it critical to ensure any future negotiations are fair and on a level playing field.
However, Moneyweb can confirm that Google has refused to disclose any information, which turns the MDPMI into a beachhead for future engagements.
Read the Caxton, Media24 and CFE letters.
Request for information
The three letters are broadly similar.
Harber states in the CFE letter that for “South African news entities to continue fulfilling their constitutional role and for South Africans to enjoy an open and free media, it is critically important that these market distortions do not persist; that news publishers are appropriately compensated for the benefits accrued by Google from the use of news content; and that news publishers are properly positioned to compete effectively.”
He says this can only happen if Google discloses the information to the industry.
Media24 states in its letter that it “has reluctantly come to the view that negotiations to date between Media24 and Google have been futile, and will continue to be, given, amongst other issues, the asymmetry of access to information between Media24 and Google.” It adds that the disclosure of the information “is essential for Media24 to formulate its commercial position in these negotiations.”
Paul Jenkins, Caxton’s chair, put it more bluntly in communication to Moneyweb: “There is a stark reality that has taken the mainstream news organisations a long time to realise – Google (and Meta) are inherently parasitic and are sucking the lifeblood out of the free press, a veritable cuckoo in the nest.”
He said it is the media’s job to hold governments accountable, and, in the past, the media was funded by advertising. “But the advertising platforms are now dominated by big tech, for whom click-bait is more valuable than a hard-hitting news story.
“The playing field has tilted so dramatically to favour Google that news is relegated to the lowest league in the revenue share tables.”
Jenkins added that Google has never disclosed such information anywhere in the world and hides behind a “complex corporate structure in Ireland and the British Virgin Islands to shield itself from tax, and similarly, it holds itself out as exempt from public disclosure of detailed information about its revenues and profits in the individual countries in which it operates. We aim to remedy that in South Africa.
“Caxton is resolute in its quest for disclosure, transparency, and the levelling of the global digital platform playing fields. The free press is too important to democracy and our constitutional freedoms to ignore the words of poet Dylan Thomas – who tells us: ‘Do not go gentle into that good night’.”
Google’s response to Caxton
Google communicated its decision not to disclose any of the requested information to Caxton in a letter marked “confidential”.
In this letter, which Jenkins made available to Moneyweb, Google denies that its operations “contravenes any applicable law” and denies Caxton has any legal claim to seek the information.
“You will appreciate that the information you have requested is confidential and includes proprietary, commercial and financial information and trade secrets. In some instances, the requests do not relate to the media industry at all and also are irrelevant to the Caxton objective.”
The Google letter adds that the “requested information is not required to protect the right to press freedom, and we deny that Google’s products limit the media’s freedom. Our products promote freedom of expression, including freedom of the press. Every day, we link hundreds of millions of people worldwide, including South Africans, to publishers’ websites containing the news that people want to read.”
Google did not respond to questions.
MDPMI public hearings
These developments now shift the battlefield from individual negotiations with the publishers to the MDPMI, where public hearings kick off this week.
This MDPMI, driven by the Competition Commission under the leadership of economist James Hodge, is set to reveal the extent of the big digital platforms’ distortion of the South African media sector and its impact on competition.
The process is much broader than Google’s impact on the sector and 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, the digital and ad tech platforms have distorted the market to such an extent that they profit handsomely from aggregating and monetising publishers’ content without financial benefits flowing back to the publishers.
South Africa is not alone in its fight
These developments are not unique to South Africa.
The media industries, regulators, and governments in many countries have taken on Google, Facebook, and other platforms, resulting in legislation forcing the platforms to pay for the news content they aggregate.
Such countries include Australia, Brazil, the United States, Canada and Indonesia. Similar processes are also ongoing in many other countries.
Last week, 32 media groups in Europe sued Google for R44 billion they allege they lost due to Google’s digital advertising practices.
The value of news
The requests for information from Google by the publishers and the CFE are highly relevant, as the amounts of money the digital platforms earn from aggregating news content can be significant. It is also one of the reasons why Google has been vociferous in its efforts not to disclose how much it earns from news content.
Dr Courtney C Radsch, director of the Center for Journalism and Liberty and a fellow at the UCLA Institute for Technology, Law & Policy, recently stated that the value of news is far higher than policymakers and publishers think and estimates that it may account for the majority of Google’s $280 billion annual turnover.
His assumption is based on a recent Swiss study, which found that as much as 40% of the $440 million Google earns in Switzerland came from monetising local publishers’ news content. This equates to a mammoth $176 million or R3.3 billion a year.
Another Columbia University Institute for Policy Dialogue study found that Google should pay US publishers between $10 and $12 billion a year for using their news content. This amount was based on a 50/50 split of Google’s revenue from news content. The study found that Meta’s bill should be around $2 billion.
Google disputed the methodology of both studies.
MDPMI public hearings
The Competition Commission starts with public hearings this week as part of its comprehensive information-gathering process related to the MDPMI. The schedule of presentations is available here.
Moneyweb is making a presentation on Tuesday at 12pm.
The public hearings will be live-streamed on the Commission’s YouTube channel here and on Facebook here.
*Disclosure: Caxton’s majority shareholders are also significant shareholders in African Media Entertainment (AME), the owner of Moneyweb. Paul Jenkins is a non-executive director of Moneyweb.
