The Consequences of Ancillary Copyright for Press Publishers

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European Commissioner Günther Oettinger is still contemplating whether he should propose the German Ancillary Copyright for Press Publishers on the EU level. I would like to help him make the right decision by exploring the consequences of such legislation.

Throughout this article, I will refer to news aggregation services and search engines as “aggregators” and to press publishers simply as “publishers”. I will use the German law as reference but also consider some alternative options, both better and worse. This kind of analysis requires the assumption that aggregators will eventually start signing licence contracts according to the law. However, I do not expect them to give in very easily for the reasons stated below as well as for the sake of their bottom line. The worst consequences of ancillary copyright can be summarized into the following short list:

But before exploring these problems in depth, let’s clear one very important misconception. Aggregators provide an important free service to the public which has significant indirect beneficial effect on publishers’ revenue. Calling it free advertisement would be accurate description. Publishers’ willingness to give Google a royalty-free license almost immediately in order to get the full advertisement service again is the best evidence of how beneficial this service is to publishers on its own. However, it is not evidence of any need to regulate some dominant position held by Google. Publishers could have collectively given the same royalty-free license to any other single aggregator instead with pretty much the same result for their bottom line. The aggregator in question would be immediately catapulted to the top, taking Google’s place as #1 news aggregator in Germany for the simple reason that it would be the only aggregator with a fully functional service.

Deterioration of search result quality

The most obvious reason why ancillary copyright might have detrimental impact on search result quality are licensing issues. When aggregators do not have licence to index certain news articles, those articles cannot appear in search results, plain and simple. The German law includes provisions about collective rights management but VG Media, the collecting society in charge of news aggregation, is not authorized to issue statutory blanket licences (see their collective licence terms, in German). This will force aggregators to deal with lots of unnecessary copyright bureaucracy and severely restrict their ability to index articles.

Another reason, depending on the metric used to distribute royalties to publishers, could be malicious search engine optimization (SEO). In other words, publishers cheating to bend the metric in their favor and therefore get more money. Malicious SEO is already a major problem and all search engines spend a lot of effort fighting it in order to give you what you search for instead of click bait and spam. On the bright side, solution of this problem is usually as simple as delisting known offenders. However, finding those offenders in the first place is the hard part.

Deterioration of news quality due to publishers’ cheating

Depending on the metric used to distribute royalties again, publishers may also use other ways of cheating that do not manipulate search ranking. VG Media for example licenses news content of its members in exchange for fixed percentage of the aggregator’s worldwide revenue related to use of licensed content. Claiming worldwide revenue is a sensible precaution against the aggregator formally moving revenue to another country. But it also creates very tempting opportunity for abuse. Let’s suppose that Google accepts those terms. I wouldn’t be surprised in the least if worldwide interest in German news, particularly articles licensed from VG Media, suddenly skyrocketed the very next day. But only on Google News, for some mysterious reason.

It’s extremely hard to avoid using some sort of user traffic statistics as the royalty distribution metric. Even though aggregators would pay a fixed percentage of revenue, a collecting society might use traffic reported by aggregators as an internal metric to distribute the collected money among its members. User traffic also becomes an unavoidable metric when aggregators themselves have to split money between multiple publishers/collecting societies in the same area. Aggregators will most likely take great care to have some clear limit on total royalties to be paid. So publishers will compete among themselves to get the biggest cut from a fixed amount of money. This competition who can inflate their traffic through the aggregator the most will be very expensive, of course. So if royalties from aggregators become bigger income for publishers than revenue from advertisement on their own news websites, publishers won’t hesitate to cut budgets for news reporting and spend the money on cheating harder.

If you think something like that couldn’t possibly happen, you should read about MP3.com’s Pay for Play which had the same problem 15 years ago. The publishers’ decision whether to write high quality news reports or cheat harder in royalty distribution metrics really comes down to which of the two is more profitable.

News search fragmentation

As I have said earlier, the collecting society in charge of news aggregation in Germany is not authorized to issue statutory blanket licences. This enables big aggregators to sign exclusive contracts with individual publishers, locking their news content away from other aggregators for the duration of the contract. Today, you can search all news conveniently through any aggregator. But imagine that the big aggregators split up the news landscape so that content from certain publishers is only searchable through their service.

Such fragmentation would obviously have negative impact on search result quality. But it would also put many small publishers out of business. Small publishers are not important enough to get a fair licence deal from big aggregators, perhaps even any deal at all. While ancillary copyright is in effect, collective rights management is their only hope to get indexed and stay in business. However, big aggregators will refuse to sign any collective licence deals because that would undermine their effort to push big publishers into exclusive contracts.

Exclusive contracts between content producers and middlemen are the standard business practice in most existing copyright-based industries. Look at music industry, movie industry or video game industry for examples. In this case, aggregators will become the copyright-empowered middlemen who get to decide which content will reach the public. The question is not “if” but “when”.

Entry barriers for startup aggregators

Most of the above will also create unnecessary barriers for startup aggregators. New aggregators need to fill their service with content before they can get any revenue. While ancillary copyright is in effect, broad collective rights management with reasonable licence terms is even more indispensable to them than to small publishers. Search fragmentation through exclusive contracts will therefore create the biggest barrier.

Another barrier may arise if collective rights management does not cover the full extent of monopoly granted by ancillary copyright. Many innovative aggregation ideas which require transformative use of indexed content may be abandoned in early stages only because collective rights management does not license the necessary transformative uses and signing enough contracts directly with individual publishers before the startup runs out of funding would be impossible.

Raising new barriers for startup companies is completely antithetical to European Commission’s stated priority of creating a single EU digital market.

Interaction with other laws

Here I want to focus on possible future proposal of “search engine neutrality” which is a particularly dangerous territory for legislators who don’t understand technical details of running a search engine. For example, the proposal may inadvertently outlaw countermeasures against malicious SEO, which would open the floodgates to extremely aggressive malicious SEO techniques and render search services mostly useless.

It may be very tempting to try solving some of the above problems by legislating that aggregators have to index everything they can (I will call it “compulsory indexing”). Even with sufficient exceptions against abuse (like malicious SEO), this will require statutory blanket licensing with no opt-out for publishers. Otherwise aggregators won’t be able to pay what the publishers will ask for. While ancillary copyright is in effect, aggregators have only one bargaining chip: delisting content. Compulsory indexing takes this bargaining chip away and forces aggregators to either accept every single whim of each publisher, or shut down the whole service.

Aggregators are most likely well aware that compulsory indexing would make them completely powerless in licence negotiations. So if compulsory indexing ever comes into effect without statutory blanket licensing, aggregators will just save themselves the trouble and shut down their service right away. However, the combination of compulsory indexing with statutory blanket licensing turns ancillary copyright into plain old tax.

Conclusion

Dear Commissioner Oettinger, I hope this article will help you clear your doubts about proposing ancillary copyright on the EU level. If this is the first time these issues have been brought to your attention, your advisors are doing a bad job. If you still want to bankroll press publishers so badly, a simple special tax on aggregators would achieve that goal with none of the potentially disastrous side effects described above. There is no reason for dressing it up as copyright with all the superfluous arcane complexity that stems from giving somebody a statutory monopoly. Unless you want to pretend for PR purposes that it’s not a tax.

But if you still think that ancillary copyright is a good idea, go right ahead and shoot the whole EU in the foot. Your exercise in futility will only demonstrate how destructive the whole concept of copyright, of permission culture, is to the digital world. So far, existing copyright laws have always been applied to crush new innovative services before they could mature and demonstrate their potential benefits to everybody, including creators. Now, for the first time in decades, we can watch brand new copyright rules tearing apart established services which have already fully demonstrated their global value. Part of the EU digital market will be set back to the early beginning of the century by ancillary copyright, with little hope of future progress.

Many thanks to Mikuláš Peksa for researching details about German ancillary copyright which are not available in English.

Discussion

  1. anonymous.2

    And ex-owners and nowadays workers of Finnish newsaggregator Ammparit dot com wondered why they should swap the headline of each news they linked.
    You have Your answer now…

  2. Corwin

    Who cares about the laws? If you have an idea better than google, host your servers in uzbekistan and open a company in russia, where cybercrime is not punished and IP is an obscure joke.

    Problem. Fucking. Solved.

    Globalization : it’s not just for those who own a trillion usd.

  3. Autolykos

    Great letter. The only problem with it is that it’s addressed to Günther Oettinger, of all people. He is not only a digital illiterate, he’s also proud of being unable to speak English. Putting that yokel in charge of Internet regulation is probably one of the cruelest jokes Merkel has ever played on the EU.

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