Microsoft Corporation (MSFT) has gone on record supporting pending legislation in Australia that would force tech companies to pay for content that they copy from Australian news sites. This puts Microsoft in direct opposition to the Google division of Alphabet Inc. (GOOG, GOOGL) and Facebook, Inc. (FB), which have threatened to cease operations in that country should the law be enacted. Additionally, Microsoft advocates passage of similar legislation in other countries, including the United States.
- Microsoft has endorsed a proposed Australian law that would compel search and social media sites to pay for content copied from news sites.
- Google and Facebook vigorously oppose this and have threatened to exit Australia if it passes.
- Microsoft, by contrast, says that it already pays for news content, and it urges the United States and other countries to adopt similar laws.
Microsoft's position is presented in a lengthy commentary by company president Brad Smith, posted in "Microsoft On the Issues: The Official Microsoft Blog." Key passages are presented below:
The internet has eroded the news business.
"[I]ndependent journalism is vital to the social cohesion that is essential for democracy."
"As the 21st century began, the internet eroded the news business as dotcoms like Craigslist disrupted advertising revenue, news aggregators lured away readers, and search engines and social media giants devoured both. Many other factors have been at work and there is a pressing need for innovation across the news sector. But one thing is clear – the internet and social media have not been kind to the free press."
"Since 2000, newsroom revenue in the United States has fallen by 70% and employment has been cut in half. More than 2,000 newspapers have closed entirely. In many places, local news has been decimated. News deserts – communities with no local paper at all – have spread across the country, with terrible effects."
News content creates significant value for search and social media sites.
"About half of U.S. 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 annually for Google, according to one recent study – even though people often do not click through to the original story. This means that news organizations go uncompensated even while all this traffic fuels platforms that have become profitable tech gatekeepers on which businesses must advertise to reach consumers."
Australia seeks to correct a competitive imbalance.
"In Australia, Prime Minister Scott Morrison has pushed forward with legislation two years in the making to redress the competitive imbalance between the tech sector and an independent press. The ideas are straightforward. Dominant tech properties like Facebook and Google will need to invest in transparency, including by explaining how they display news content."
"Even more important, the legislation will redress the economic imbalance between technology and journalism by mandating negotiations between these tech gatekeepers and independent news organizations. The goal is to provide the news organizations with compensation for the benefit derived by tech gatekeepers from the inclusion of news content on their platforms."
Microsoft shares revenue with news publishers.
"In October , we launched a new initiative to invest in and support local news and, through Microsoft News, we have been sharing a large portion of revenue with news publishers."
"[Microsoft CEO] Satya Nadella and I reached out to Prime Minister Morrison. It was an opportunity to combine good business with a good cause and, as we explained, even if Google wanted to leave Australia, we would stay."
"[W]e are comfortable running a high-quality search service [Bing] at lower economic margins than Google and with more economic returns for the press."
Google backs down, partially.
"Our endorsement of Australia's approach has had immediate impact. Within 24 hours, Google was on the phone with the Prime Minister, saying they didn't really want to leave the country after all. And the link on Google's search page with its threat to leave? It disappeared overnight. Apparently, competition does make a difference. But yet 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 they are prepared to tamp down their services or pull out of a country entirely if legislatures force them to share more of their revenue with the press on terms they don't like. This creates a new vulnerability for the world's democracies, and it underscores the need for new competition rules in regards 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 tech companies to support a free press. It should copy it instead."
Significance for Investors
By staking out this position, Microsoft clearly is setting itself apart from Google and Facebook. While Microsoft is positioning itself as a public-spirited good corporate citizen, the latter two tech giants have cast themselves as rapacious copyright infringers and intellectual property thieves who expect to profit from others' labors.
Microsoft is taking a farsighted approach that is bound to be a positive from both a public relations and a government relations standpoint. Moreover, this controversy has raised the profile of Microsoft's search engine Bing, which may gain more usage as a result. Meanwhile, Google and Facebook are adding to an already large reservoir of ill will toward themselves.