Microsoft (MSFT) believes tech giants should pay for news

Microsoft Corporation (MSFT) supports pending legislation in Australia that would force technology companies to pay for content they copy from Australian news sites. This puts Microsoft in direct opposition to Alphabet Inc.’s Google division. (GOOG, GOOGL) and Facebook, Inc. (FB), who have threatened to cease operations in that country if the law is passed. In addition, Microsoft is advocating for similar legislation in other countries, including the United States.

Microsoft’s position

Microsoft’s position is presented in an extensive commentary by company chairman Brad Smith posted in “Microsoft On the Issues: The Official Microsoft Blog.” The main passages are listed below:

The internet has eroded the news industry.

[I]Independent journalism is essential for the social cohesion that is essential for democracy. ”

“At the turn of the 21st century, the Internet eroded the news industry as dotcoms like Craigslist disrupted ad revenue, news aggregators lured readers, and search engines and social media giants both devoured. There have been many other factors at work and there has been an urgent need for innovation in the news sector. But one thing is clear: the internet and social media have not been nice to the free press. ”

“Since 2000, editorial revenues in the United States have fallen 70% and employment has halved. More than 2,000 newspapers have been shut down completely. Local news has been decimated in many places. spread across the country, with dire consequences. ”

News content creates significant value for search and social media sites.

“About half of American adults (53%) say they get news from social media ‘often’ or ‘sometimes’.”

[N]ews content generates significant indirect value for search and social media sites – as much as $ 4.7 billion per year for Google according to a recent study – even though people often don’t click through to the original story. This means that news organizations are not being compensated, while all this traffic feeds platforms that have become profitable technical gatekeepers that companies must advertise to reach consumers. ”

Australia is trying to correct an unbalanced competitive position.

“In Australia, Prime Minister Scott Morrison has already passed legislation for two years to redress the competitive difference between the tech industry and an independent press. The ideas are simple. Dominant tech properties like Facebook and Google will have to invest in transparency, including by exporting. explain how they display news content. ”

More importantly, legislation will repair the economic imbalance between technology and journalism by mandating negotiations between these technical gatekeepers and independent news organizations. The aim is to compensate the news organizations for the benefit that technical gatekeepers derive from recording news. content on their platforms. ”

Microsoft shares revenues with news publishers.

“In October [2020]we launched a new initiative to invest in and support local news, and through Microsoft News, we shared a large portion of the revenue with news publishers. ”

[Microsoft CEO] Satya Nadella and I contacted Prime Minister Morrison. It was an opportunity to combine good business with good cause and, as we explained, even if Google wanted to leave Australia, we would stay. ”

[W]We are comfortable performing a quality search service [Bing] at lower economic margins than Google and with more economic returns for the press. ”

Google is partially withdrawing.

“Our agreement with Australia’s approach has had an immediate effect. Within 24 hours, Google called the Prime Minister and said they didn’t really want to leave the country anyway. And the link on Google’s search page with the threat of leaving? disappeared one day. Apparently competition makes a difference. But still not enough. Google continues to fight Australia’s proposal. ”

The need for new competition rules, including in the United States.

“Google and Facebook have shown their willingness to discontinue their services or withdraw completely from a country if the law forces them to share more of their revenue with the press on terms they don’t like. new vulnerability to the world. democracies, and it underscores the need for new competition rules with regard to opening up digital markets, something more governments are now considering. ”

“The United States should not object to a creative Australian proposal that strengthens democracy by requiring technology companies to support a free press. Instead, they should copy it.”

Significance to investors

By staking out this position, Microsoft clearly distinguishes itself from Google and Facebook. While Microsoft is positioning itself as a bourgeois citizen, the latter two tech giants have portrayed themselves as predatory copyright infringers and intellectual property thieves who expect to profit from the work of others.

Microsoft takes a forward-looking approach that will no doubt be positive, both from a public relations point of view and from a government relations point of view. In addition, this controversy has boosted the profile of Microsoft’s search engine Bing, which may be more widely used as a result. Meanwhile, Google and Facebook are adding to an already great reservoir of ill will towards themselves.