Leistungsschutzrecht (Germany’s Google Tax)

Germany’s parliament today passed the highly controversial “Leistungsschutzrecht" which is an ancillary copyright that requires payment for excerpting from and linking to content in some instances. When I walked around in a slight daze at Chicago O’Hare this morning after an all too short red eye flight, my Twitter feed was full of German friends and others outraged about the bill (just look for #lsr). Jeff Jarvis — who spoke out strongly against the law at this year’s DLD conference — in particular was tweeting up a storm.

I agree that the LSR is the wrong approach because it is a blunt instrument that will have significant collateral damage. Excerpting and linking are the lifeblood of the web. But it would be naive to think that there isn’t a problem here that needs addressing. It is very different if I excerpt and link here on Continuations than when Google does it. Why? Because I account for some vanishingly small faction of Internet traffic whereas Google often has 80 percent or more of all search queries.

When Larry Page took over as CEO of Google I wrote that I hoped he would address the problem of Google’s role in the Internet marketplace by figuring out how to share some of Google’s economics. Because that’s what this is all about. It’s about trying to fix rent extraction by a near monopolist in search. And that rent extraction is a very real issue (how do you think Google is financing self driving cars and Glass?).

Imagine for a moment a situation in which there are many competitive search providers and consumers switch easily between them. Now consider a company such as Yelp that has accumulated a lot of information about restaurants. If one of the search engines starts to publish more and more of Yelp’s data in the search results instead of finding the listing and driving traffic to it, Yelp could simply choose to not let that search engine crawl and index Yelp. That becomes a credible threat as consumers might switch to a different search engine if they can no longer find high quality restaurant data. That credible threat would over time lead to a situation where companies such as Yelp receive a licensing fee from the search engines for inclusion of the content, whenever including the content directly creates more value rather than driving traffic.

But with the market structure in search as it is, Google has been holding on to all of the value creation from including ever more content in its search results. All the while adding insult to injury by starting to build or buy competitive content services. That is not sustainable and Google needs to change its practices or we all risk seeing more legislation like the LSR that in trying to fix a market structure problem in search is likely to do more overall harm than good.

Posted: 1st March 2013Comments
Tags:  lsr copyright search Google market structure

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