In March, the European Union passed a new copyright law requiring digital platforms such as Google (GOOGL) to pay publishers for displaying extracts of their articles. France will be the first to implement the copyright law next month.
However, Google doesn’t intend to pay French publishers to display summaries of their articles in news search results. Instead, it intends to display only article headlines, which the EU copyright law permits without the requirement of a license. The company may displace extracts where publishers have allowed it to do so free of charge.
Google argues that pay for article summaries would adversely affect its search results and may undermine trust in its search service. While France will be the first to implement EU’s copyright law, all EU countries have until 2021 to do so.
Google resists Europe’s demand it pay for content that doesn’t make it money
As we discussed recently, Google says it doesn’t make money from its news search service. We believe that fact makes it more comfortable about shutting down or reducing the service if it’s faced with demands it can’t accept. Google shut down its news search service in Spain in 2014 after the country passed a law requiring it to pay publishers for showing snippet articles.
Traffic and content cost the company billions of dollars per year
We believe Google’s refusal to pay European publishers to display extracts of their articles shows the company pushing back against a measure that could drive up its costs.
Google spends billions of dollars every year on traffic and content acquisitions. In 2018, for instance, its traffic acquisition costs jumped to $26.7 billion from $21.7 billion in 2017. Its other revenue costs, which include content acquisition expenses, increased to $32.8 billion in 2018. Its content acquisition–related costs were $23.9 billion in 2017. We believe these costs will rise further if Google has to pay European publishers to display snippets of their articles.
Google is undertaking multiple projects that demand a lot of financial investment. For example, Google recently announced a plan to invest $3.3 billion to expand its data centers across Europe. Moreover, Google is spending billions of dollars to develop undersea cable systems to support its cloud computing business. Therefore, we believe that an unexpected increase in operating expenses, such as traffic and content costs, could interfere with Google’s development plans.