A year ago Canada was in a tense standoff with the search giant over its digital news bill. Duncan Greive asks whether New Zealand should follow its lead in resolving it.

Illustrations by Daylight’s Ezra Whittaker.

It dropped in the classic bad news slot: Friday afternoon, ready to ruin the weekend of a news media still reeling from losing one of the big five newsrooms earlier in the year. In a post attributed to its head of New Zealand, Caroline Rainsford, Google made clear a profound and seemingly implacable opposition to the Fair Digital News Bargaining Bill. 

The legislation currently sits before parliament, supported by five of the six parties (only Act is opposed) currently in the Beehive, and aims to correct for the vast power imbalance between New Zealand news organisations and the social and search giants which distribute their work and increasingly function as de facto owners of the internet. It asks that the tech companies either come to agreements with news organisations, or move to binding arbitration to figure out an appropriate compensatory figure.

A high level of support from politicians and the news media had meant its passage appeared a formality. Yet Google’s post, which ran on its little-read blog, blew up within news media circles – not just for the opposition, which was well-known, but for what Google said it would do if the law were passed. The relevant paragraph reads:

“We’ve been transparent with the government that if the bill were to proceed on its current trajectory and became law, we would be forced to make significant changes to our products and news investments. Specifically, we’d be forced to stop linking to news content on Google Search, Google News, or Discover surfaces in New Zealand and discontinue our current commercial agreements and ecosystem support with New Zealand news publishers.”

The threat is twofold. Firstly, stopping linking to news content would remove the single biggest source of referral traffic to New Zealand news sites. It’s not precisely clear what that means. The majority of traffic comes from a simple brand search, for “Stuff” or “The Spinoff” – would that be removed? Or just any links when a Google user wants to follow a particular story? Still, it’s a pretty scary scenario, especially given Google’s breadth – ad tech, Android, search and YouTube. With Dunedin still mopping up from a flood, it doesn’t take much imagination to know how dire it would be when the next natural disaster strikes for news to be gone from so many key parts of the internet.

The second part of the sentence is as troubling. Paradoxically, Google is both leading the charge against the bill, while also being the only company already doing what the bill wants tech companies to do. It’s the sole technology company that has signed agreements with the employers of the vast majority of New Zealand journalists. They are typically split between a payment for an appearance on Google’s “news showcase” product, and a grant for innovation and technology upgrades. The amounts are confidential, but news media figures I spoke to believed they collectively amount to between $10m and $12m flowing into the news media.

In the scale of Google’s New Zealand revenues, it’s barely a drop. The company shipped nearly $1bn offshore to its subsidiaries in controversial licence fees which minimise its New Zealand tax expense. On that basis the settlements amount to a little more than 1% of its New Zealand turnover. Yet because the news media is so embattled – partly because Google takes such a large proportion of digital ad revenues, which in prior eras funded journalism – the agreements are crucial to the ongoing viability of news. 

The news media responds

Google’s blog post is an enormous escalation in the battle of wills between news media, government and big tech. The NPA, which represents former print newspaper publishers, most notably Stuff, NZME (publishers of the NZ Herald) and Allied Press (publishers of the Otago Daily Times) put out a statement in response. In its own way, it was as aggressive as that of Google.

“The NPA … believes that the government of New Zealand should be able to make laws to strengthen democracy in this country without being subjected to this kind of corporate bullying.

“Today, all New Zealand publishers have also received communication from Google that make it clear they will punish those with existing agreements if the government progresses with this legislation. We trust the government will stand firm and act in the interests of New Zealanders.”

That last line can be read to imply Google is bluffing. Not without cause. When Australia pioneered this form of law in 2021, Google threatened to pull out in response – not just to drop news, but remove search altogether. Meta really did pull out of news distribution – for a while. However in the aftermath, both capitulated and signed deals worth a rumoured AU$200m a year – a huge sum which meant Australia’s media went through something of a boom time in the early ‘20s.

That seems to form the basis of the NPA’s position. Adjusted for population and the relative strength of our economies, this law would prompt deals in the $30m-$40m range from the search and social giants. This is much more significant than the current situation, with only Google contributing, and only at much lower level than comparable deals in Australia. On that basis, there is a logic and moral weight to the NPA’s position. And given that both Google and Meta are amongst the most profitable firms to have ever existed, and the least taxed, even at the Australian level the contributions look affordable.

Yet there are equally good reasons to believe the NPA’s position is unrealistic. Since 2021, the technology landscape has shifted. All large tech companies feel a pressure from the rise of TikTok and generative AI, which has prompted a costly infrastructure and investment arms race and made once secure positions plausibly open to competition. Similarly, Australia’s law has prompted a number of similar laws around the world, and Google has signed deals in dozens of territories. None have matched Australia’s scale. Meta really has dropped news in some countries, without suffering any obviously meaningful penalty. Viewed through that lens, New Zealand’s negotiating position looks weaker. 

How dangerous is this standoff?

The stakes could not be higher. The loss of search and those contracts would essentially end wide distribution for New Zealand news media in a digital context. Given Meta has already signalled it will simply cease running news should the bill pass (as it has in other countries), it’s plausible that news becomes an esoteric, elite habit – with profound flow on impacts for politics, for business for culture – even for democracy.

This is not a guaranteed outcome. Some in key roles at news organisations are curious about whether Google would carry through on its threat, and believe Google would view the risk consumers start to mass adopt other products – like Open AI’s ChatGPT or Microsoft’s Bing – as too serious to be tested. Others are curious about what might lie on the other side of this great experiment. Stuff claims to have suffered no major loss from its world-leading withdrawal from Facebook in 2020, and Nielsen data tends to back that up. Maybe Google is less important than we think?

Still, it carries huge risk, and comes at a time when the news business in New Zealand has never been more challenged. Ad revenues have cratered, and the current government is in no mood to repeat any version of Labour’s much-maligned PIJF. 

It all adds up to a deep bind. The government could call Google’s bluff, and pass the law anyway. That risks it being seen as having proactively broken our internet for news. Yet if it blinks and kills the bill, it would essentially be conceding that it lacks the power or nerve to make similar laws, and that technology companies at scale have a veto over our parliament. Given that there are similar calls coming from the production sector around Netflix and Prime Video, it would be a chilling precedent.

Is there a third way?

We do have an alternative. A year ago, Canada was in the very same situation. It had written a version of Australia’s law, and Meta had this time followed through on its threat and removed news. Google was strenuously resisting, stressing that  binding arbitration to decide a fee exposed it to uncapped risk. Despite assurances that its standing agreements meant it was the model, not the target, Google held firm in its opposition. 

At the 11th hour, a compromise was reached. The key elements were later summarised by Robert Whitehead of INMA, a global representative organisation for news media companies:

• The Canadian government dealt itself directly into negotiating money on behalf of media.
• Google has agreed to contribute C$100 million cash annually to a “wide range of news businesses,” according to a four-paragraph statement from Heritage Minister Pascale St-Onge.
• Publishers will receive 63% of the funding, private broadcasters 30% and the state broadcaster capped at 7%.
• Google has been given the choice of dealing with a “single collective” to allocate the funding across “eligible news businesses”.
• The funding will be allocated within these categories based on full-time equivalent headcount of journalists engaged – not on their payroll costs. 
• The amount will be indexed each year for inflation.
• Agreeing to this package means Google will technically be exempt from the law.

It was a landmark deal, and heavily scrutinised at the time and since. Some in news media view it as the government blinking and leaving money on the table, while also overstepping their mark in negotiating without input from the industry itself. They also suggest that splitting the money has proven a continuing headache. Others believe it established a baseline for what an agreement could look like, leaving open the possibility of similar deals with other search and social companies in future (these are yet to eventuate). 

There is a chance for New Zealand to follow the “Canadian compromise”, while moderating it to take lessons from the Canadian experience. This would represent a significant comedown from the heady dreams of the 2021 Australian precedent. On a population-adjusted basis Canada could have expected somewhere in the realm of C$250m from Google alone. Yet it also accepts the different world we’re living in, while avoiding the downside risk too: California (an economy larger than that of France, the sixth largest in the world) signed a paltry US$30m deal recently.

A “Canadian compromise” with moderations might look like this:

• Google agrees to maintain the total market contribution at its current level, and keep those deals intact, rather than breaking them.
• The overall pool is kept at a minimum of the current total level, while being indexed to Google’s gross New Zealand revenues (a more appropriate proxy than inflation). (If these fall, the news media must accept that their share will fall too)
• As scale market entrants arrive and leave, a pool is established to greet new arrivals or otherwise be redistributed among remaining news organisations.
• In return Google is named or tightly described in a way that ensures, subject to this scenario being maintained, it’s exempt from the Fair Digital News Bargaining bill.
• This leaves the law to pass, and other eligible companies to either make deals, or risk designation.

It’s likely no one would design the law this way from scratch today – but to begin again would be a boon to tech companies and an enormous risk to our embattled news media.

Given the strikingly tense and high stakes standoff we’re currently experiencing, it’s worth considering a de-escalating third way – a Canadian compromise. It might be ugly, and not what anyone wants. It might also be our best shot at defending what remains of the news media. 

Either way, a lot rides on how the next few weeks are navigated. Either we take the pragmatic path, or we find out who’s bluffing – and who really means it.