Spain's Google link tax

Spain's Google link tax: 'Clearly insane' law may hurt the news companies it seeks to protect

Summary:The upcoming closure of Google News has reawakened the debate over the consequences of a law that experts have described as quite simply "nonsense".

"It's a disaster. The evidence that Spain is a 'corruptocracy' in which any lobby can write laws at will (even ones as openly and clearly as insane as this one), in which certain media make its editorial line conditional upon government funding, and where the government has no idea how internet works," says Enrique Dans, consultant and professor at IE Business School.

"The media is going to lose clicks, visits, and, of course, advertising revenues. But mostly they will lose credibility because the role of the press is to monitor the power, not to support it," adds Carlos Sánchez Almeida, a lawyer specialising in ICT for Bufet Almedia.

A recent reform of Spain's Intellectual Property Law raised hackles even before the process began in February 2014. The law establishes a rate to be paid by universities for using news materials in teaching, a tax on news aggregators, and penalties of up to €600,000 for sites that don't pay up in accordance with the law.

The law has shaken Spain's digital ecosystem.

It will mean that Google News and other local news aggregators such as Menéame, which racks up more than 35 million views per month, will have to pay for linking to content from publications that belong to AEDE, an association of traditional print media attached to large business groups, whether they like it or not.

Paying for using snippets?

But Google has said no. On Thursday Google News announced that the company will close News in Spain on 16 December.

The move comes as Google doesn't want to pay for using links and snippets from news providers, and prefers to shut up shop altogether before the law goes into effect in January next year. Basically this is because, "Google News itself makes no money (it does not show any advertising on the site) and this new approach is simply not sustainable," Gingras said.

It also goes against "the basic philosophy of the company," says Luis Collado, strategic partner development manager at Google Spain. In a conference about the search engine that took place at the University of Salamanca last week, Collado said the company understands that "you don't have to pay for using snippets". He also denied that the announcement is a means to get the government change his mind.

In fact, according to IE Business School's Dans, the decision is irreversible. "The law is approved and you cannot roll it back once it has passed through the Senate and Congress."

"It will probably happen that Europe will declare that the law is not valid, and so it will come to nothing. It has happened in other cases. But the process is very slow, and furthermore, it leaves many victims behind: Google News is only a collateral victim and not the most important one," he adds.

"But in terms of the image of Spain as an anti-technology country that discourages digital entrepreneurship and can trigger the closure or slow death of Spanish companies based on social aggregation, the effects are terrible, although the government does not know it yet because it does not understand what internet is," he concludes.

Benjamí Villoslada, co-founder of Menéame, echoes Dans: "There is no will to talk, no dialogue. Unfavorable reports about the law have been given by different experts, but the government has ignored them."

Reactions

However, with the closure of Google News, the AEDE seems to think that while running away from the wolf, the media may end up being eaten by a bear instead - and online publishers will suffer from a drop in visits as a result of the law, especially during Christmas.

In a statement issued on Thursday, the association sought "the intervention of the Spanish and EU authorities, and the competition authorities, to effectively protect the rights of citizens and businesses." In the same statement, AEDE maintains "its commitment to negotiate with Google in order to reach agreements that are beneficial to both parties."

Spain's minister of education, culture and sports, José Ignacio Wert, also got involved in the debate a day after Google made its announcement. Wert said the search company announced the closure before "the regulatory development" of the so-called 'Google tax'. In that process of fleshing out the law's practical implications, it's possible that media and news aggregators may be able to agree a mutually satisfactory level of compensation for using news snippets, and that publications that want to opt-out of the compensation deal altogether can negotiate the terms they consider appropriate.

However, that may yet go against the stipulations of the law: one of the most debated points around the law is the "inalienable" nature of the tax. That means that publications have to be paid whether they like it or not, unlike a similar system brought in in Germany, where Google News still operates. "It is like having a hairdressing salon and having to pay for the music, even if you don't use it," says Menéame's Villoslada.

Impact

Be that as it may, the new Intellectual Property law - which Fernando Carvajo, professor of commercial law at the University of Salamanca, considers "a step backward seriously affecting the freedom of information" - will come into effect on January. "They really haven't weighed up the possible consequences," says the professor.

According to a report by Coalición Pro Internet , the law will have both microeconomic and macroeconomic effects. The report highlights "the enormous costs suffered by the publishing industry in terms of loss of visitor traffic and advertising revenue" and underlines that "the introduction of a fee establishes barriers to entry for new aggregators". It also says that "inalienable compensation threatens freedom of enterprise and can harm smaller publishers". Moreover, from a macroeconomic point of view, it could see jobs and work move to sectors with a higher added value.

Menéame's Villoslada sums it up: "The new [intellectual property law] compromises the future of a large part of digital media, because possibly the future for most of them lies in aggregation."