Report: Spain’s Google Tax A Disaster For Newspapers, Internet Innovation

Call it one of the most egregious examples of unintended consequences. The effort of the Spanish newspaper association and Spanish government to get Google to subsidize Spanish news publishers with a mandatory link tax (under the the guise of copyright fees) is a massive disaster — for publishers, for the Spanish internet and for innovation in the country.

Here’s the history: the Spanish Newspaper Publishers Association successfully convinced Spanish lawmakers in late 2014 to pass a strict “anti-piracy” law, which mandated compensation for the appearance of newspaper publishers’ content on news aggregation sites as of January 1, 2015. It was effectively directed at Google but applied broadly to all news/content aggregators.

In response, Google shuttered Google News in Spain, though it has continued to present Spanish news sites on its main search engine results page (SERP) and in other ways. The Spanish publishers then tried unsuccessfully to get the government to force Google to keep Google News alive in Spain (to collect the tax).

Google wasn’t the only news aggregator to shut down. A range of European and Spanish internet companies changed their models, shut down or quit the market rather than face uncertainty and potential liability for the fees. For example, according to TechDirt, “Planeta Ludico, NiagaRank, InfoAliment and Multifriki shut down entirely.”

The site quotes at length from a Spanish-publisher-commissioned report (en Español) that assesses the economic fallout of the copyright law. According to the Spanish report’s analysis (translated in TechDirt), the impact has been extremely negative across the board:

The negative impact on the online press sector is also very clear, since a very important channel to attract readers disappears, resulting in lower revenues from advertising. In addition, the new fee is also a barrier to the expansion of small publications with little-known brands, and an entry barrier for new competitors, since they will be unable to count on these platforms to increase their readers’ base.

The report goes on to say that companies such as Zite and Flipboard won’t enter the country, thus depriving Spanish users of these and similar services. Traffic is also down to newspaper sites, especially smaller newspaper sites:

A simple traffic analysis of Spanish digital newspapers in the first three months of 2015 based on data from ComScore also suggests results in line with the aforementioned. The impact of the closing down of Google News and some other aggregators has generated a decline of visitors to the 84 major Spanish online newspapers…

Given the decline in exposure, smaller Spanish publishers may be less able to compete against larger ones with more established brands. However, in the wake of these findings, the question becomes: What is the Spanish government going to do? Is it going to reverse course and rescind the law? Or will it refuse to admit this massive mistake and allow the disastrous fallout to continue?