The German solution for newspaper revenues: two cheers, two boos

The German government is planning to introduce a new right for newspaper publishers to charge ISPs, search engines and aggregators for use of their stuff.

Two cheers, I suppose, because newspapers need all the help they can get when it comes to making money online. They have been pushing for this for a long time and it will provide a much needed new revenue stream.

But two boos, too, because it doesn’t fundamentally solve anything and in my view it risks making some things worse.

The logic, as I understand it, of this solution starts with the observation that consumers ARE paying for content online, they’re just not paying content companies.

Everyone buys a service from an ISP, for example, who makes money from providing users with access to content. Aggregators and search engines are exploiting content and making money from it by selling ads, but not giving any to publishers.

So the solution, in a similar vein to the blank tape levy of old (popular in some parts of Europe), is to collect money centrally from the businesses which are making it and then distribute it to the deserving content owners.

The reason it makes me uneasy is because it uses collective licensing as a primary revenue stream. You don’t sell your product to anyone, you just sit back and let a collective body go and and sort-of tax them, then bank the cheques when they come in.

That’s fine for secondary revenue streams (people photocopying your newspaper for example) where there is no practical alternative, and it works well in many different guises.

The problem in general with using collective licensing as a primary revenue stream is that doesn’t create many incentives to really innovate or invest. If your money comes rolling in from the levy more-or-less regardless of what you do, what is the incentive to differentiate your product and fight for the most customers and most attractive offer?

If you want to negotiate your own deals with aggregators. operate on different terms with different search engines, play one ISP off against the other, offer more rights in return for more money (and less to someone else) or do a whole range of the things successful businesses do, it is made harder or impossible with centralised, possibly mandatory, certainly regulated, licensing in place.

Now in this case I have a lot of sympathy with the German publishers, and they have clearly made their case well to the government.

The sad truth is that there is no primary revenue stream to fight for – advertising isn’t enough, paid models for newspaper content are notoriously hard to make a success of and few if any search engines or anyone else have any reason to negotiate and share revenue.

So given a choice between two inadequate and seemingly stagnant revenue streams what other options do they have? Securing some sort of revenue from those who financially benefit the most from their content seems a lot better than nothing.

But better yet would be to tackle the real root cause of this problem: the protection unfairly given by law to so many of the internet players. The failure of a true market to emerge for content products and companies online is a consequence, largely, of bad law and until it is tackled things won’t substantially change.

The Digital Millenium Copyright Act, the European E-commerce directive and other laws like them need to be substantially overhauled and re-balanced. Unfortunately that is beyond the scope of national governments, in Europe at least, so the best that can be done is to try to minimise the impact of the bad laws with new, slightly less bad ones.

It’s better than nothing. But a lot worse than a true and vibrant market for content products in the digital realm – and could inhibit that market from emerging if the collective approach becomes too entrenched.

What the Germans have here is a bird in their hand, in place of several thousand in the bush. But they’re all sparrows: not very nourishing either way.

The fact that newspaper publishers will soon be looking longingly at the resulting revenue in Germany is a sign of how bad things have got, not that this is really much of a solution.

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