The Google News effect: Spain reveals the winners and losers from a 'link tax'

An analysis of the effect of a new copyright law has found publishers have more to lose than gain if news aggregators are forced to pay for snippets.

Back in July last year, the Coalición Pro Internet (CPI), a group of various organisations created to fight some aspects of the Spain's new Intellectual Property Law (LPI), published a study to assess the possible consequences of the legislation.

The law stipulated that those publishers whose headlines or snippets of articles appeared in news aggregators like Google News could charge them for the privilege.

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Spain's Google link tax: 'Clearly insane' law may hurt the news companies it seeks to protect

The upcoming closure of Google News has reawakened the debate over the consequences of a law that experts have described as quite simply "nonsense".

While the law was intended to bolster publishers whose revenues have fallen in the digital age, the CPI report warned that the law did not bode well for the publishing sector, and highlighted the benefits of aggregators to news outlets: they bringsites an additional 13 percent more visitors, according to an analysis from Mobius and Athey. Google didn't wait for the bills to arrive, closing its Spanish edition of Google News in December, before the law came in the following January.

Now, a new study commissioned by the Spanish Association of Publishers of Periodicals (AEEPP) evaluates the damage done to Spain's online sector. The analysis, by NERA Consulting, highlights that the fee was promoted by a small group of publishers who argued that aggregators benefitted from publishers' efforts without remunerating them properly, and also reducing traffic to the publishers websites, as some readers would be satisfied with the limited information from the snippets and not visit the site to read on, cutting the publishers' advertising revenues.

Yet the report points out that 'substitution effect' is very small in comparison to the 'market expansion effect' that aggregators cause. According to the research, aggregation services reduce search times and allow readers to consume more news overall. The NERA analysis finds that in the first few months of 2015 after the introduction of the law, publishers saw traffic fall on average more than six percent, while smaller publications saw it drop by 14 percent drop.

Unsurprisingly, the LPI is also having a serious impact on news aggregators, as the cost of paying the so-called 'link tax' can threaten the services' financial viability.

For the moment, Menéame, the main Spanish news aggregator, is standing still. In February last year, the company demonstrated the effect of showing snippets by what boycotting AEDE media news for a month. The result was a drop of between 500,000 and 1.7 million visits, depending on whose figures you use.

The NERA analysis concludes that "there is no theoretical or empirical justification for the introduction of a fee paid by news aggregators to publishers for linking to their content".

Now, while aggregators are waiting for the tariffs for the 'link tax', which should be published by the Spanish government in the coming weeks, a couple of puzzling events have occurred. On the one hand, Juan Luis Cebrián, president of Grupo PRISA (which includes El País, Cinco Días, As, The Huffington Post, and others), attached to AEDE, said he won't collect the fee instituted by the 32.2 article of the Spanish Copyright Act, even if the law doesn't allow publishers to opt out. AEDE has not commented on that. The political 'rentrée' is expected to be hectic.

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