Google has pledged to pay news publishers around $1bn over the next three years, as it aims to establish new terms of trade with media groups and avoid potentially more costly action by regulators.

The money will support the Google News Showcase, a new mobile feature the US tech group will roll out on Wednesday in Germany and Brazil and “expand to other countries where the right working framework exists”.

Such payments to license news are a fundamental change in approach for Google, which has spent almost a decade staving off complaints from publishers such as Rupert Murdoch’s News Corp and German group Axel Springer.

But the rollout of the programme, which includes groups such as Der Spiegel and Die Zeit in Germany and Folha de S.Paulo in Brazil, has stoked controversy, with critics casting it as a way to divide the industry, blunt copyright law and underpay for content.

Sundar Pichai, Google’s chief executive, said the $1bn pledge was to support “quality journalism” and a news industry “critical to a functioning democratic society”.

“The business model for newspapers — based on ads and subscription revenue — has been evolving for more than a century as audiences have turned to other sources,” he said in a blog post. “The internet has been the latest shift, and it certainly won’t be the last . . . we want to play our part by helping journalism in the 21st century.” 

Google and Facebook are facing regulatory pressure around the world to make systematic payments for news, most notably through the EU’s copyright directive and a radical code of practice proposed in Australia.

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Australian publishers have suggested US tech groups should pay the industry as much as $500m a year under the national code, expectations that Google has described as “completely extraordinary”.

The group has struck a deal with one small publisher in Australia but Brad Bender, vice-president for Google news products, said work there on the Showcase product “was on pause”. “That proposed law is unworkable for our products,” he said.

Some publishers in France and Germany are refusing to participate in Google’s news programme unless it upholds Europe’s new copyright laws, which give media groups the “right” to seek licensing fees.

Angela Mills Wade, executive director of the European Publishers Council, said many of her members were “quite cynical”. “By launching a product, Google can dictate terms and conditions, undermine legislation designed to create conditions for a fair negotiation, while claiming they are helping to fund news production,” she said.

The Google News Showcase will feature story panels prepared by publishers which will first appear in Google News on Android mobile phones, before being expanded to Apple’s iOS operating system and eventually to Google search. Publishers will be paid for producing branded panels and Google also plans to pay publishers to bring certain news stories outside paywalls.

Google has reached agreements with publishers in Germany, Brazil, Argentina, Canada and Australia and hopes to expand in India, Belgium and the Netherlands. Mr Bender declined to comment on the group’s US plans.

Facebook pays some publishers in the US and is bringing its news product to other countries. But the company has not disclosed how much it plans to spend.

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Stefan Ottlitz, Der Spiegel’s head of product development, said Google’s project showed it was “serious about supporting quality journalism in Germany”. “We are happy to be part of it right from the start,” he said.

Robert Thomson, chief executive of New Corp, said “there are complex negotiations ahead but the principle and the precedent are now established.”

“We applaud Google’s recognition of a premium for premium journalism and the understanding that the editorial eco-system has been dysfunctional, verging on dystopian,” he added.

Axel Springer, which has long complained that Google has abused its dominant market position, said it is “open” to work with tech platforms as long as “they do not make it difficult or impossible” to enforce publishers’ rights under copyright law.

Via Financial Times