Google's entente not-so cordiale

After three months of tense negotiations, Google has finally reached an agreement with the French government that will allow that country's newspapers and magazines to access the US search engine's online advertising platforms at a reduced cost.

The French print industry had wanted a law that would have required Google to pay royalties every time its Google News cited French newspaper headlines, arguing that this gave viewers free access to publications' articles. The company had refused to pay, arguing that in some cases, up to 50 percent of readers of online editions come via Google News, which should increase advertising revenue on those newspapers' websites.

Google had threatened to pull its references and links to French media. Company CEO Eric Schmidt met French president Francois Hollande on February 1 to finalize a resolution to the dispute. In return for the royalties demand being dropped, Google will set up a 60-million-euro Digital Innovation fund to help some 160 publications adapt to the digital age over the next three years.

The news has sparked intense debate in the media and the digital industries. Supporters of a free, open internet say the agreement is another dangerous step toward paid content; the French newspaper industry says it accepted the deal to avoid further lengthy and costly litigation. Journalists' unions accuse the media and big business of cozying up to use reporters' intellectual property rights without due payment. Many commentators believe the deal shows that Europe is now the biggest threat to Google's global hegemony, and that the company is more fearful of an alliance between governments and publishers than of its own competitors in the digital industry.

It's not Google's fault if newspapers haven't adapted to the internet"

Jeff Jarvis, author of What Would Google Do? and a consultant to online publications, defends a free, open internet. He is angry about the deal between France and Google: "This is a scam. What has happened here is that the French newspaper industry, with the connivance of its government, has kidnapped and blackmailed Google. The European media has been doing nothing about the internet for the last 15 years, it hasn't invested, it doesn't understand how the internet works, and now, suddenly, it is going to take advantage of Google's hard work to make a killing. Just because Google is successful doesn't mean the media has had anything to do with it. It's not Google's fault if the traditional newspapers haven't known how to adapt to the internet."

This latest turn in the war between ever-weakening newspapers and the ever-mightier search engine would seem to bear out David Simon, creator of hit television series The Wire. He predicted in the early years of the decade that Wall Street would back the digital industry when it realized that online publications were a bigger threat to its interests than the traditional press. A former reporter at The Baltimore Sun, Simon predicted that financiers would use the internet to close down traditional newspapers.

The existence of 24-hour news flows has produced a paradox: the traditional newspapers are being read by more people than ever - online - but the newspapers have so far proven incapable of cashing in on this increased readership and are in fact losing money by maintaining an online presence. Dozens of newspapers and magazines have either closed down or cut back over the last decade, sacking journalists like Simon, and replacing them with what he calls "information packers." And as print sales fall, so does advertising revenue. Which is where Google comes in.

Google was set up in 1998 by Stanford University students Larry Page and Sergey Brin as a way of imposing some order on the internet. Fifteen years later it is the most powerful company on the web. It launched on the stock exchange in 2004 at $85 dollars a share, since when its value has risen eightfold. Last year it reported profits of $8.075 billion, 10 percent up on 2011.

From a European perspective, a Google contract is virtually impossible to enforce

The company's ascent has coincided with a lengthy depression in Europe and the United States, where the media is desperate for new revenue streams. European governments accuse companies like Google of avoiding paying their taxes and of hogging a growing share of the advertising revenue that once kept newspapers and magazines in business. There have been growing calls from news organizations around the world, and particularly in Europe, for Google to pay a copyright fee for linking stories on Google News.

The agreement with France comes as Google tries to contain the battle that has been brewing across Europe over recent years. The company reached a somewhat similar, albeit much smaller, agreement to settle six years of litigation with Belgian newspapers in December. But Google is still fighting its cause in Germany, where lawmakers are considering a bill aimed at making search engines pay publishers.

The dispute between the newspapers and Google heated up last fall, after French publishers began pushing for a law that would create a new copyright in France for web links, aimed at making search engines pay to refer to newspapers' content.

After meeting with Google executive chairman Eric Schmidt in Paris at the end of October, Hollande said he would instead appoint a mediator - and would only consider a law if publishers and the US company couldn't reach an agreement by the end of the year.

Charging Google is like the sources journalists use asking to be paid"

Talks were not easy. Representatives of newspapers and Google remained distant on key issues, such as compensation, as the deadline set by Hollande neared its expiration, according to one person familiar with the process. At the time, the government decided to extend talks by a month, to ease the pressure.

As part of Friday's pact, Google said it would work with publishers to help them use Google's online advertising services - a move that could let papers opt to allow Google to sell ads on French newspaper websites, in return for giving Google a cut of the business.

Google's 60-million-euro fund isn't a blank check for newspapers and magazines, Google and newspaper representatives said. Instead, publications will propose projects that will help speed their transition to digital media, or create new ways for them to make money online.

"The object of this fund is not to finance ailing newspapers, but to help them migrate better to the digital world as quickly as possible," said Nathalie Collin, head of the news-media coalition that negotiated on behalf of the papers.

The French press has failed to make money out of an online presence

The fund will be provided by Google over a three-year period; it will be dedicated to new-media projects. About 60 websites will be eligible for submission. The fund will be managed by a board of directors that will include representatives from the press, from Google, and independent experts. Specific rules are designed to prevent conflicts of interest.

Fréderíc Filloux, general manager for digital operations at Les Echos Groupe, says the biggest challenge will be overcoming an extraordinarily high level of distrust on both sides. "Google views the French press as only too eager to "milk" it, and unwilling to genuinely cooperate in order to build and share value from the internet. It sees the engineering-dominated, data-driven culture of the search engine as light-years away from the convoluted "political" approach of legacy media. They don't understand, or look down on, the peculiar culture of tech companies.

"From a European perspective, a contract with Google is virtually impossible to enforce. The main reason is that Google won't give up on the Governing Law of a contract that is to be 'Litigated exclusively in the Federal or State Courts of Santa Clara County, California.' In other words: forget about suing Google if things go sour. Law firms in Paris, Madrid, or Milan will try to find a correspondent in Silicon Valley, only to be confronted with polite rebuttals. For years now, Google has been parceling out multiple pieces of litigation among local law firms simply to make them unable to litigate against it. The only way to prevent this is to put an arbitration clause in every contract. Instead of going before a court of law, the parties agree to mediate the matter through a private tribunal. Attorneys say it offers multiple advantages. It's faster, much cheaper, the terms of the settlement are confidential, and it carries the same enforceability as a court order."

Jeff Jarvis says that the French press has "failed" in its efforts to make money out of an online presence, and should "do business" with Google rather than kidnap it. "If the search engine sends a reader to a publication, the publication should establish a relationship with that reader. If tens of thousands of readers are being sent to its site and the media is not able to make money out of them, Google can help them to treat their customers better. This would be much wiser and healthier than a relationship based on charging them for content. Charging Google is like the sources journalists use to write a story asking to be paid. So when we have finished this conversation, I'll send you a bill. Does that seem normal to you?"

Veteran Silicon Valley-based blogger Lauren Weinstein describes the French government's approach as "extortion" and sends out a signal that Google is prepared to accede to any demand for payment: "There is little evidence to suggest that paying money to a party that makes irrational demands is the best way to deal with them: inevitably, they will come back for more. And more. And more. And what's worse, by accepting these demands, you are telling other people that they can make the same demands, or worse demands; and that mental state can easily extend the attack from big companies to smaller ones, or even individuals."

Nathalie Collin says she is "flattered" by such comments. "The defenders of a free internet believe that neither content nor the people who write it are worth anything. Eventually this leads to no content and no writers, which is no good for anybody. This is why the deal with Google is so important: it has accepted this principle. The president of a liberal, Anglo Saxon symbol has signed a deal with the Élysée and that sends out a powerful message. I believe that we have reached a synthesis of two schools of thought that sets a good precedent."

The deal would seem to open the door to others around the world where efforts to get Google to pay have been unsuccessful. The European Council of Press Publishers has already asked Google to negotiate in other countries, reminding it that it is using links to media without their owners' permission. Jarvis hopes that this will not happen. "The media can decide: a business relationship, or blackmail with official connivance. If I were EL PAÍS, which is a world leader but, like so many others, has financial problems, I would go to Google and say, 'How can we work together to our mutual benefit?' I'm sure that Google would prefer to sign a deal of that type than be blackmailed by a government and sign a useless pact for an entire sector. And it would be so much better for the media."

Meanwhile, in Brazil, newspapers accounting for some 90 percent of circulation have abandoned Google News. In October, the organization that represents 154 of the country's papers said all its members have banned the search engine from using their content, arguing that Google refused to pay for content and was driving traffic away from their websites.

Some of Brazil's most important titles, such as O Globo and O Estado de São Paulo, are among those that have pulled out from the Google service.

"Staying with Google News was not helping us grow our digital audiences. By providing the first few lines of our stories to internet users, the service reduces the chances that they will look at the entire story on our websites," said the president of Brazil's National Association of Newspapers (ANJ), Carlos Fernando Lindenberg Neto.

Google's public policy director, Marcel Leonardi, defended its decision not to pay, saying: "Google News channels a billion clicks to news sites around the world." He compared the ANJ's demands to "a restaurant taxing a cab driver for taking tourists to eat there."

The world's print media will now be watching to see how the respective situations in Brazil and France pan out.