UK creative industries want the internet giant brought to heel, writes Katherine Rushton
'You can make money without doing evil.” So goes Google’s corporate philosophy, apparently informing its mission to “organise” the world’s information and make it accessible to everyone.
It certainly makes money. The Californian web search business notched up revenues of just under $50.2bn (£32.4bn) last year, and $10.7bn profit.
It has also hit the nail on the head when it comes to organising the internet. The reason the company dominates search, with more than two thirds of the market, is that it is so very good at serving up the information that people want. Microsoft’s Bing and AOL (NYSE: AOL - news) barely compete. Meanwhile, it is also doing its level best to pull in all the information that is not already on the web.
“Google is at least a two-headed beast. There is good Google and bad Google,” says the head of one trade organisation that regularly clashes with the company. A lot of such incursions in the UK are with creative sectors, such as the music, book publishing and film industries, which depend on copyright laws for their income.
These industries would have you believe that Google is making inroads into them by making it far too easy to access illegal downloads, with no thought for the business models that make it possible to produce records by Adele or novels by Hilary Mantel in the first place.
“Copyright is the lifeblood of the creative industries it’s what allows music companies to fund the development of new artists and so contribute to Britain’s rich culture. Weakening copyright at the behest of technology companies will only benefit Britain’s competitors,” says Geoff Taylor, the chief executive of BPI, the music industry trade body.
But for those who are on the opposing bench, who support Google, the creative businesses are simply stuck in the past. The world has changed. If it has become too easy for people to find and steal pirated content, then business models must adapt too. Google acolytes claim that the company has become a cipher for the thing the creative industries actually fear most: the internet.
It is perhaps no coincidence that the music industry, one sector badly affected by the advent of the internet, is perhaps most exercised about the Google threat. Over the past month, Parlophone, the record label behind Coldplay, has launched a boycott of Google’s “scan and match” cloud music service.
Such an argument will be familiar to Ed Vaizey, the culture minister who has spent the past 18 months or so attempting to broker some sort of resolution between the two camps.
His series of “round table” discussions occasionally became the scene for stand-up rows between the creative industries lobbying Google to demote or automatically block piracy websites on the one hand, and Google refusing to make any changes on the other. For a long time, it maintained that its complex algorithms were untouchable.
Eventually, however, Google relented. It agreed to tweak its algorithms, the complex codes that power its search engine, so that websites that predominantly offer illegal downloads appear further down the results listings than their legal alternatives.
It was a watershed moment for the creative industries, helped along by threats from the major music labels that they would follow Parlophone’s lead and boycott Google Play’s cloud service en masse. “It was about a commercial deal which Google needed to do,” says a source.
The search giant also said it would remove any link to a pirated website it was notified about something that creative industries have used to considerable effect. Some 2,775 copyright owners requested the removal of more than 14m links in the past month alone. A year ago, Google was being asked to remove around 330,000 links a month.
“Google has never worked harder to tackle piracy online,” a spokesman for the company said. Rights holders who can be bothered jumping through the bureaucratic hoops can effectively line-edit search results.
But the creative industries are not yet satisfied. They want those websites that are the subject of tens of thousands of “take down” requests to be blocked altogether sites like fenopy.eu and filestube.com whose primary purpose appears to be offering downloads of pirated content. They also claim that the changes Google has made to its algorithm are not particularly effective. A search for “Adele Skyfall” might deliver a list of legal results, but Googling “Adele Skyfall download” does not.
Google’s wranglings with the music, books and film industries around Mr Vaizey’s conference table continue, but many parties involved in these discussions consider them a sideshow.
The discussions that really count are taking place at the Intellectual Property Office (IPO) of the Department for Business, Innovation and Skills, as well as at the heart of government, Number 10 Downing Street.
The IPO has responsibility for the reform of Britain’s copyright laws, the foundation on which the creative industries are based. Its critics claim it has blindly accepted the web search giant’s line in this area.
Google has funded a number of academic papers and sits on the boards of various think tanks and research bodies that argue against copyright laws. The company then cites these findings as evidence when it is lobbying government for change. It is not doing anything wrong here, merely protecting its shareholders’ interests. The real problem, say creative industry chiefs, is that the Government does not challenge those findings.
“Big US company in lobbying shocker! Big deal,” says Richard Mollet, chief executive of The Publishers Association. “The issue here is that the IPO isn’t testing the stuff [that Google claims], Google is feeding in thoughts to a group of academics saying how copyright should be for them.”
Another publishing source complains of a “lack of rigour” in IPO assessments. Many in the creative industries claim that a blithe acceptance of Google-backed research has also found its way into the Hargreaves Review of Intellectual Property, which is expected to form the basis of any future rewrite of copyright law.
The IPO, which commissioned Hargreaves’ review, said it was “not based on the views of one organisation. He spoke to businesses large and small consumer groups, lobby organisations and trade bodies … all of these are contributing towards making the intellectual property framework fit for purpose in the 21st century.”
But figures bandied about in various reports have caused alarm.
“The financial analysis falls apart like a house of cards when you peer into it,” says one music source.
The Creative Coalition Campaign (CCC), a lobby group representing the books, music, film and television industries, which claims their businesses are worth £36bn to the UK economy and account for 1.5m jobs, has written to the new minister for intellectual property, Viscount Younger, to express alarm at the wildly differing estimates for the contribution to the economy certain copyright rules would make.
The Hargreaves report valued them at £26bn. The latest government report has them at £500m. Both studies are “fundamentally flawed”, the CCC claims.
In private, the creative industries argue that Google’s supposed favoured status began in Number 10.
David Cameron’s former director of strategy, Steve Hilton, is married to Rachel Whetstone, head of communications at Google. It handed Ms Whetstone a “hotline” to Number 10, opponents argue. Although the couple now live in California, that hotline is “still hot”, says one source. “But it doesn’t matter anyway, because the damage is done.”
The close relationship between Number 10 and the top brass at Google’s Mountain View headquarters has become the framework for all subsequent discussion, critics say. It was emblematic when, nearly a year ago, Downing Street was apparently so in tune with Google’s thinking that the company’s chairman, Eric Schmidt, and the Chancellor, George Osborne, published a joint leader in The Financial Times.
That may be uncomfortable for the Government looked at through the prism of the past 12 months. Google has hit the headlines thanks to its tax arrangements it paid just £6m in UK corporation tax last year, despite generating $4.1bn of sales in the country.
While MPs have been rapping Google for “immoral” behaviour, Mr Schmidt has inflamed the situation by declaring himself “proud” of Google’s complex tax structures, and the overseas subsidiaries which last year helped the company halve its tax bill.
“It’s called capitalism,” Mr Schmidt claimed , challenging the Government to tighten its tax laws if it wanted his company to pay more.
The Government has accepted the challenge to take a tougher stance, with the Prime Minister pledging to drive a co-ordinated international crackdown on tax to ensure that Google and other companies, such as Amazon and Starbucks, “pay their proper share”.
However there does not appear to be any such shift when it comes to copyright law. According to government sources, keeping the search giant onside is seen as key to Britain’s status as a leading light in the technology industry worldwide.
“The PM needs TechCity [the technology development around Old Street roundabout in east London] to succeed and Google is a big anchor tenant of that,” says one senior government figure. “The contribution companies like that can make, to the economy and in terms of employment, is pretty compelling.”
Whether the creative industries can get beyond that and lobby into the heart of government as Google appears to have done will shape their future success or otherwise.