It appears that the European Union is proposing a set of copyright rules that could be mildly troublesome for Google-parent Alphabet Inc (NASDAQ:GOOGL) and Facebook Inc (NASDAQ:FB). Although the revenue impact from these rules seems limited, the proposed copyright regulations could diminish the value of Google and Facebook’s services.
On the other hand, the same rules could be beneficial for online video service providers like Netflix, Inc. (NASDAQ:NFLX) and Amazon.com, Inc. (NASDAQ:AMZN) as the new rules could enable them to offer better services in EU countries.
One of the “three main priorities” outlined in the EU’s proposal, and the one that’s nettlesome to Facebook and Google, is the plan to “a fairer and sustainable marketplace for creators and press.” These rules include ensuring that audio and video content owners are compensated once their works are used on “video-sharing platforms such as [Google’s] YouTube or DailyMotion.” Another part of the proposal includes a new related right for press publishers, which require companies to provide compensation for newspaper and magazines.
Video sites – such as YouTube and DailyMotion – provide audio/video copyright holders with tools to let them decide how their materials can be used in the uploaded videos. And with every allowed material, the sites have a cut on ad revenues.
Unsurprisingly, Google, Facebook, and other companies are contesting the proposal, arguing that providing excerpts and links for copyrighted material on their platforms is perfectly legal and the U.S. courts have agreed that the practice is on fair-use grounds.
But in Europe, the courts and lawmakers are siding with publishers. In fact, Spain announced a “Google tax” in 2014, requiring the search engine giant to pay publishers for using their material. In response, Google shut down its Spanish version of Google News.
To appease continental publishers, Google gave publishers $163 million to fund their digital efforts over a course of 3 years via its Digital News Initiative. The search engine giant also set up a $82 million fund to pay French publishers.
Google slammed EU’s copyright proposal, arguing that it would “effectively turn the internet into a place where everything uploaded to the web must be cleared by lawyers before it can find an audience.” It also declares the rules could hurt publisher traffic, and that “paying to display snippets is not a viable option for anyone.”
As to how the new measures could prove beneficial for Amazon, the e-commerce giant is heavily invested in its European Prime Video offerings. The EU is calling member countries to “set up negotiation bodies to help reach licensing deals, including those for cross-border services,” for video-on-demand (VOD) platforms like Netflix. This could lead to licensing deals with studios that cater to many EU markets, lower total licensing costs and provide easier content streaming for customers visiting other countries.
The proposal came just as Netflix announced a deal with European pay-TV provider Liberty Global (NASDAQ:LBTYA). The deal enables Netflix app to be installed on Liberty set-top boxes. The European pay TV provider boasts of 29 million subscribers in 30 countries.