There was all the atmosphere of a joint press conference between heads of state when, on February 1st, French President François Hollande and Google Executive Chairman Eric Schmidt announced a deal had been reached between the US search engine giant and the French press over Google’s use of article contents.
Standing side by side behind identical speakers’ desks, amid the ornate decorations of an Elysée Palace salon, Hollande and Schmidt revealed Google’s agreement to pay 60 million euros into a fund to help French news publishers develop their presence on the internet, while the US company will also help to increase their online revenues using Google’s advertising platforms.
The courtesy shown to Schmidt during the event was yet further confirmation of the immense power that Google wields over the system of news distribution in France and, in turn, the weakness of the print news publishers, who can no longer survive with their dated economic model.
The agreement reached last Friday, the fine details of which will not be made public, was widely hailed in the international press as a landmark compromise in Europe, where news publishers in other countries are also challenging Google’s unpaid use of their material. It came after three months of negotiations and some 15 meetings between the different parties, under the mediation of Marc Shwartz, from the international accounting and consultancy group Mazars, who was appointed to the task by the French government.
The process began after a large number of French news publishers, acting together under an umbrella association called IPG (presse d’information, politique et générale), had demanded that Google pay for the right to catalogue their articles and publish them via Google News. Initially, Google dismissed the move, threatening to black out references to the French media, before finally entering negotiations, the result of which was uncertain right up to the end.
“The agreement was officially announced on Friday at 7 p.m., but right up to 3p.m. or 4p.m. we didn’t know if it would be finalized,” an Elysée source told Mediapart. “Eric Schmidt let it be known he was in Paris, and we had good hopes of being able to organize a meeting with the [French] president, to close the case in the same way that it was opened, during their last meeting on October 29th.”
Hollande spoke of his “pride for France” in reaching such an agreement, which he described as “the first in the world” of its kind. Mediator Marc Schwartz agreed: “It is a first, that’s true,” he told Mediapart. “Until today, there was no example of an agreement of this amplitude signed by Google without there being first several years of legal [action].”
Previously in France, the largest news agency, AFP, succeeded in obtaining payment from Google of 1 million euros per year for use of its contents, but only after a lengthy battle in the courts. Similarly, Belgian news publishers reached a financial agreement with the firm late in 2012 only after gaining two legal rulings in their favour, firstly in 2006 and later in 2011.
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Hollande had warned Google last October that if no amicable agreement was reached he would call on his government to prepare a bill of law that would force Google to pay for use of French media content. He repeated the threat again during his traditional New Year’s greetings address to French press representatives gathered at the Elysée on January 16th.
The draft for the threatened bill was based on the IPG’s demands, notably the establishment of a right they described as “close” to that of authors’ copyright, by which Google and other search engines would pay for using content. However, Elysée advisors, and government ministers – in particular junior minister responsible for the digital business market, Fleur Pellerin – were sceptical about the practicality of the scheme; it would have entailed payment also went to the individual authors of news content, and there would have been no clear distinction between news organizations and bloggers.
But the threat of legislation appears to have been key to the agreement reached last Friday. “The situation was unblocked during the very last days,” explained mediator Marc Schwartz. “There were two things that, I believe, were decisive. On the one hand, the total commitment of the [French] President with the reminder that a law would have been voted through if the discussions didn’t succeed. On the other, the fact that at the highest level of Google [management], men like Eric Schmidt and the company’s co-founder Larry Page, they understood that there was a major interest for them in finding an agreement.”
IPG president Nathalie Collin, who is also co-chair of the board of directors of French weekly news magazine Le Nouvel Observateur, expressed relief that legislation was, finally, not necessary. “We proposed that there should be a law because it had never been possible to reach an agreement with one of the major digital players,” she said. “Google has now demonstrated the contrary, and a good agreement is preferable for everyone.”
Enlargement : Illustration 2
The agreement was “the beginning of a realization that technological players need content” added Collin. “It’s a first small step towards that, and there remains much to do, but, in this sense, it’s historic.
“I think it’s a very good agreement,” said Schwartz. “Without betraying the secrecy of the negotiations, I think the press publishers are happy because the amount paid by Google is what they were waiting to get. Indeed, the IPG members ratified the agreement unanimously.”
But while the result is presented as a victory reached from compromise, Google has in fact confirmed and reinforced its position as an indispensible part of the news industry, while the French print-based press has simply found a new short-term source of cash without remedying any of its fundamental problems.
By paying the one-off sum of 60 million euros, Google has avoided threatened legislation that would have seen it forced into constant and open-ended payment for use of content and the probability that such a law would serve as the basis for others around the world.
The sum is a relatively small amount compared to what is estimated to be more than 1 billion euros in annual turnover of Google’s activities in France. If its profits out of this were declared in France, it would make the company liable to pay about 150 million euros in yearly taxes, but for 2011 it paid just 5.5 million euros because it claims Ireland, where corporate profits are taxed at just 12.5%, as the base for its advertising activities (see more here).
The claim is contested by the French fiscal authorities who are currently seeking 1.7 billion euros in unpaid taxes from Google. All those contacted by Mediapart who were close to the the agreement reached last Friday have denied that the tax conflict was raised during the negotiations.
Eric Schwartz dismisses the suggestion that, when compared with the profits from its activities in France, Google’s payment was relatively little. “You have to compare what is comparable,” he said. “Since 2009, press titles have invested 100 million euros in the digital domain, and notably their internet sites.”
The fund into which the money is paid will sponsor projects for the development of websites that are selected, noted Hollande at the joint press conference, “according to their merit”. These will be judged by the fund’s board of directors, which will be composed of representatives of Google and French press publishers, along with independent figures.
The funding is applicable to projects not only from members of the IPG but from across the government’s definition of those organizations which make up “political and general news” trade (see more here). These include 400 French press titles and 150 associated news websites, representing a potentially awesome number of candidates.
The sum of 60 million euros is, in parallel, also the total amount the French state paid to the press in subsidies for the development of online publications between 2009 and 2011. Called the Spel Fund, these annual subsidy payments have been halved since 2012, to 10 million euros per year. While Hollande has insisted that the state will continue with the subsidy payments independent of Google’s funding, one source close to the government told Mediapart that it was “difficult to know whether the state aid will remain at its current level all the way to the end of [the government’s] five-year term.”
A deal shrouded in secrecy
The Google-financed fund is expected to run out of cash after between three to five years, and while Hollande jokingly invited Google’s Schmidt to hold another press conference together when that happens, it would appear unlikely that the company will stump up yet more cash.
Meanwhile, a Google spokesman quoted by AFP said the agreement includes a second element that “consists of concluding commercial agreements with the publishers to help them get the best out of the internet and to grow their online revenue, using advertising solutions”. The IPG’s Collin said this involves “a business agreement with the publishers who so wish, who will enter into a deal directly with Google”.
This can only strengthen Google’s dominant position online while increasing its influence among the press. Collin dismisses the fear that the press will therefore become dependent upon Google as misguided because content producers are already dependent upon internet technology companies. “It is in fact exactly because we are inter-dependent that we must together find solutions for collaboration,” she said. “The technological players are more powerful, but they need content, and they know this.”
Just exactly what these “solutions” reached “together” might be remains unclear. The agreement announced on Friday is a vague protocol, and while a definitive text is due in eight weeks’ time both parties have announced it will remain secret.
That caused an angry reaction from the independent online press union, the SPIIL, of which Mediapart is a founding member. It has called for the definitive agreement to be made public and for the activities of the fund to be accounted for in all transparency. “The composition of the commission to attribute funding must be made known rapidly,” it said in a statement published on its website. “The criteria for attributions must be divulged; the projects financed, the amounts and the beneficiaries must be made public,” it added.
Maurice Botbol, president of the SPIIL, said the notion of keeping the agreement secret is at odds with Hollande’s involvement in brokering the deal. “[…] it seems strange to us that this agreement be presented as a negotiation between two private parties, which could remain confidential, whereas the [political] executive was its driver,” he said.
Marc Schwartz rebuffed the comment. “The state wanted the agreement but it was not negotiated by the state,” he said. “The state was never involved in the negotiations, and I kept its terms total confidentiality up until the last moment.” However, his comment sits awkwardly with the official photo published on the French presidential website (see above) showing Schmidt and Hollande sitting before a table, each pen in hand, studying the agreement, as if Google was signing a deal with the French state.
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English version: Graham Tearse