Microsoft (MSFT) believes Tech Giants should pay for news

Microsoft Corporation (MSFT) has backed record of 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 the Google division of Alphabet Inc. (GOOG, GOOGL) and Facebook, Inc. (FB), which threatened to cease operations in the country if the law is enacted. In addition, Microsoft advocates the implementation of similar legislation in other countries, including the United States.

Microsoft’s position

Microsoft’s position is presented in an extensive commentary by company president Brad Smith, posted in ‘Microsoft on the issues: the official Microsoft blog’. The most important sections are presented below:

The internet has rocked the news industry.

“[I]independent journalism is essential to the social cohesion that is essential to democracy. ‘

“When the 21st century began, the Internet undermined the news industry as dotcoms like Craigslist disrupted advertising revenue, news collectors lured readers away, and search engines and social media giants devoured both. Many other factors were already at work and there are “There is an urgent need for innovation in the news sector. But one thing is clear: the internet and social media were not good for the free press.”

“Since 2000, newsroom revenue in the United States has dropped by 70% and employment has halved. More than 2,000 newspapers have closed completely. In many places, local news has been reduced. News deserts – communities with no local newspaper at all – have spread all over the country, with dire consequences. ‘

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

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

“[N]owe content generates significant indirect value for searches and social media sites – according to Google’s recent study – as much as $ 4.7 billion a year, although people often do not click on the original story. This means that news organizations are not compensated, even though all of this traffic provides fuel that has become lucrative technological gatekeepers on which businesses have to advertise to reach consumers. ‘

Australia seeks to correct a competitive imbalance.

“In Australia, Prime Minister Scott Morrison has pushed two years forward with legislation to redress the competitive imbalance between the technology sector and an independent press. The ideas are straightforward. Dominant technology properties such as Facebook and Google will need to invest in transparency. more by explaining how they display news content. ”

“More importantly, the legislation will redress the economic imbalance between technology and journalism by setting up negotiations between these technological gatekeepers and independent news organizations. The aim is to compensate the news organizations for the benefit that technological gatekeepers derive from the inclusion of news content. on their platforms. ”

Microsoft shares revenue with news publishers.

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

“[Microsoft CEO] Satya Nadella and I reach out to Prime Minister Morrison. It was an opportunity to combine good business with a good cause, and as we explained, even if Google wants to leave Australia, we will stay. ‘

“[W]It’s convenient to use a high quality search engine [Bing] at lower economic margins than Google and with more economic returns for the press. ‘

Google Backup, in part.

“Our endorsement of Australia’s approach had an immediate impact. Within 24 hours, Google telephoned the Prime Minister and said that they did not really want to leave the country. And the link on Google’s search page with his threat to leave? It took overnight. “The competition seems to be making a difference. But still not enough. Google continues to fight Australia’s proposal.”

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

“Google and Facebook have shown that they are willing to reduce their services or move them out of the country altogether if lawmakers force them to share more of their revenue with the press on terms they do not like. This creates a new ‘vulnerability to world democracies, and it underscores the need for new competition rules in 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. Rather, they should copy it.”

Importance for investors

By erasing this position, Microsoft clearly distinguishes itself from Google and Facebook. While Microsoft positions itself as a good corporate citizen, the latter two tech giants saw themselves as vicious copyright infringers and intellectual property thieves expecting to take advantage of others’ labor.

Microsoft is following a far-sighted approach that will be positive from the point of view of public relations and government relations. The controversy has also raised the profile of Microsoft’s search engine Bing, which could lead to more use. Meanwhile, Google and Facebook are adding to an already large reserve of reluctance towards themselves.