Google moves to strike media deals following Morrison, Frydenberg talks

The federal government has signalled it may consider amendments to its digital media code if Google can convince large media companies to sign up to its own news product, sparking a rush of last ditch negotiations between the search giant and publishers.

Google, which has threatened to turn off its search engine in Australia, approached several major publishers with revised offers for its ‘News Showcase’ product last week following high stakes talks between Prime Minister Scott Morrison, Treasurer Josh Frydenberg and its global chief executive Sundar Pichai. But the offers, which arrived as late as Friday, contained explicit provisions allowing Google to terminate any deals it strikes if the government’s proposed digital media regulation is not revised.

Google and Australian media companies are engaged in a major standoff over the news media bargaining code, which is designed to force Google and Facebook and pay media companies to display links to their news stories. The News Showcase product has been central in Google’s strategy to seek revisions to the code, and would allow it to pay media companies for news content without being forced to pay for links.

The search advertising giant launched its News Showcase product locally last week with participation from Crikey, The Saturday Paper, The Conversation and Australian Community Media, which publishes a raft of regional titles including the Newcastle Herald, in an attempt to show the government how the product worked.

Multiple sources familiar with Google’s discussions that can’t speak publicly for confidentiality reasons, said the search giant approached multiple major outlets with offers for content following Mr Pichai’s meeting with Mr Morrison. Google has been speaking to a range of publishers such as News Corp, the ABC, Guardian Australia, Daily Mail Australia, and Nine Entertainment Co, which owns this masthead.

But provisions in the offers tabled to publishers as late as Friday, seen by the Herald and The Age, say the deals can be terminated if Google stops its search in Australia or if the new code makes the tech giant pay publishers for use of search. Other conditions allow Google to terminate its deal if any dispute over payment is managed through “final offer” arbitration, which is currently a key component of the code. The “final offer” mechanism, most prominently used to resolve Major League Baseball contract disputes, allows two parties to put forward a final offer to an arbitrator who decides which of the two figures is more appropriate.

There was a clause in Google’s contracts that were signed by small publishers mid-last year, but the latest provisions are far more explicit.

Under the proposed code, Google and Facebook will be forced into agreements to pay Australian news providers for the ability to display news content in newsfeeds and search results, or face fines of up to 10 per cent of annual revenues.

Google and Facebook both claim the code is “unworkable” and have threatened to cut off key parts of their services in Australia. Media outlets such as Nine (owner of this masthead), News Corp and Guardian Australia are urging the government to legislate the code.

Several news outlets have said Google is getting closer to offering the amount they want to be paid for news content, but many are sceptical about the intent of the deals.

They are concerned that Google is using Showcase and offering large sums as a way to avoid a precedent for paying for search and that they will be used as part of a public relations exercise. Other outlets say the money on the table is significantly below what they require to agree to it.

One source indicated the federal government had tried contacting news outlets encouraging them to strike deals with Google. Concerns about the proposals were raised to the federal government over the weekend.

“Since we launched Showcase last week, we’ve continued to have conversations with publishers large and small, these negotiations are commercial in confidence,” a Google spokesman said.

Mr Frydenberg’s office referred back to comments made by Mr Morrison last week, who said he was far more optimistic about Google’s future in Australia.

Google reversed plans to halt the launch of the news product last month, a decision which was directly related to a Senate Hearing where Senator Andrew Bragg criticised the product as a “pillar of smoke”.

The tech giant launched the product a day after a meeting with Mr Morrison, who said he felt more positive about their future in Australia. The launch came days after rival tech giant Microsoft declared it “fully” supported the code and pledged to invest in its search engine Bing to fill the void in the event Google exited the market.