Google’s threat to shut down its search engine in Australia if the legislature there proceeds with a plan to require the search giant to pay publishers for linking to their news articles puts the spotlight on a little-understood question. What is the potential cost for Google, and Facebook, if they had to pay for news content on terms dictated by others? Judging by Google’s threat, it’s big enough to seriously damage that company’s profit margins.
A crucial feature of the Australian proposal is that the amount to be paid would be determined by arbitration if the companies can’t reach an agreement, taking it out of Google and Facebook’s hands. So while Google has reached deals to pay global news publishers in its Showcase program, including one announced in France this week, Google’s commitment on that program is only for $1 billion over three years. That’s a negligible amount for Google, which generates more in revenue in a day that it would have to pay in a year under Showcase.