TY - JOUR AU - Torti,, Valerio AB - Abstract On 12 September 2018, the European Parliament approved the new version of the proposal for a Directive on Copyright in the Digital Single Market elaborated by the European Commission in 2016. In order to address problems in protecting content and improve the bargaining position of press publishers against information society service providers, the European Commission decided to intervene on rights, introducing an additional layer of copyright, namely a new neighbouring right that will cover reproduction and the making available to the public of press publications to the extent that digital uses are concerned. The proposed reform has produced a spate of comments and criticism, since it has for the most part been interpreted as unjustified, ineffective and damaging. In particular, the new right appears to be without economic or legal justification, since there is no evidence of a market failure which the legislation would need to solve. The article aims to scrutinize the world of online news and its business models, as well as the complex framework of the much-debated EU copyright reform and the overall effects of the introduction of the new right. INTRODUCTION The opportunity to confer a specific and separate right on the publishers of press publications used online by information society service providers has resulted in substantial debate and uncertainty. Several questions arise. Is there an unquestionable failure of the market that justifies the recognition of a new right? What is the legal and economic reasoning behind such new legal instrument? And what are the potential overall effects deriving from its introduction? The Internet has profoundly impacted newspaper publishers: business models are crumbling, new forms of journalism are emerging and consumer habits are changing.1 The rise of digital technologies has changed the way news is produced and disseminated, lowering costs and enabling new intermediaries to enter the information value chain, including news aggregators, online news publishers, search engines, Internet portals with news services, social networks and communication services.2 Among these, the attention has been caught mainly by news aggregation platforms that attract readers by leveraging changes in consumption habits and offering a combination of short snippets of news articles from several publishers, with links to original articles.3 The shift from offline printed newspapers to online digital media has led to a decline in revenues for legacy newspapers, and traditional publishers are struggling to find a sustainable business model.4 Hence, while we are experiencing a growing availability of news,5 questions have been raised over how the costs of high-quality journalism will be borne, since the structure and the economics of new intermediaries are deemed to promote the spread of low-quality content.6 In essence, legacy publishers report an inability to recover the investments made by producing news content owing to free-riding by new intermediaries, fuelled by the economic features of the news, ie its public good nature. Therefore, the question for policymakers is whether the activity of new intermediaries is purely parasitic or whether it is useful in fostering development and innovation.7 Diverging opinions and economic theories have been proposed in order to justify, on one hand, the recognition of a new (neighbouring) right for the publishers and, on the other, its rejection. The examples of legislative intervention in this direction coming from the German and Spanish jurisdictions have been thoroughly explored, yet the outcome of such interventions cannot be interpreted as having shed full light on this thorny matter. More recently, the debate concerning the introduction of the new right for the press publishers has progressed to EU institutions level, in the context of the long-awaited Directive on Copyright in the Digital Single Market. Nevertheless, the difficulties emerging from the negotiations among the EU Commission, Parliament and Council on the scope of the related rules and principles have confirmed that the legal and economic reasoning behind the introduction of the cited right is far from being crystal clear. One may argue that publishers and authors of press publications already benefit from effective legal protection (ie copyright), and the identification of a new legal instrument might only duplicate what is already in existence. What is more, the risk of negative effects on the whole press publication system should also be taken into account, from the increase in transaction costs to the substantial decrease in the public domain sphere and consequently in the freedom to access information. Not to mention the fact that the positive relationship between the recognition of such a new legal instrument and the quality of journalism has still to be demonstrated. Subsequent sections will, hence, be devoted to better understanding and scrutinizing the world of online news, its business models and related risks, as well as the complex framework of the much-debated EU copyright reform and the overall effects of the introduction of the new right. NEWS FROM THE WORLD The introduction of an additional layer of copyright—such as a new neighbouring right—may be perceived as a means to encourage cooperation between the holders of exclusive rights over news content, on one hand, and innovative service providers who elaborate and reproduce the contents protected by such rights, on the other. In order to justify the new legal instrument, press publishers have inter alia accused news aggregation services of free-riding on news content produced by publishers, hence, contributing to a situation of overall decline in publishers’ revenue streams in the press sector and to a significant loss of revenues linked to compensation for uses under copyright exceptions across the whole publishing industry. In short, these new intermediaries would profit from the exploitation of content while preventing publishers from receiving market compensation for their productive activities. Therefore, the proposed press publication right should, in theory, provide news publishers with the required layer of protection. Such perspective is supported by the European Commission, which has acknowledged that the works and other protected subject-matter published by different publishing industries have a pivotal role in a democratic society, especially in light of the need to preserve citizens’ access to knowledge and good quality information.8 Provided that the sustainability of publishing industries may be at stake if publishers’ investments are not backed by appropriate revenues, without a specific intervention at EU level, press publishers may only continue licensing the use of their publications on the basis of the rights transferred to them by the content creators. Indeed, despite playing a comparable role—in terms of investments—to that of audio and video producers, publishers are not identified as right-holders under EU copyright rules.9 Rather, they exploit and enforce their content on the basis of the rights transferred to them by authors. Given the growing number of players and means of content distribution, this is likely to increase legal uncertainty, lower publishers’ revenues, hinder the enforcement of rights, weaken the bargaining power of press publishers in comparison to large online service providers and new intermediaries (who receive the majority of advertising revenues generated online) and eventually affect the number and quality of print media. Ultimately, there might be a concrete risk of negative effects on media pluralism, quality of information, democratic debate and cultural diversity in EU society.10 This being premised, some jurisdictions (Germany and Spain) have considered the option of expanding intellectual property rights in order to prevent the cited risk of free-riding and allow publishers to obtain compensation from news aggregators and search engines.11 Such approach has nevertheless raised the attention of several scholars, who have questioned the lawfulness of creating neighbouring rights by national legislation.12 Other commentators have also questioned the competence of the Union to introduce a neighbouring right for publishers.13 The German and Spanish experiences In 2013, Germany amended the Copyright Act and introduced an ancillary copyright for press publishers whereby the commercial use of press products over the Internet—in particular by search engine providers and news aggregators—is subject to an exclusive right.14 The neighbouring right for press publishers covers the making available for commercial purposes of publications and fragments thereof (but not the smallest text excerpts), which is transferable and expires 1 year after the publication. In other words, according to the amendment, press publishers have the exclusive right to make their content publicly available for commercial purposes. This further means that the making available of such content, in whole or in part, by third parties is authorized, except for commercial operators of search engines or commercial news aggregators.15 Interestingly, the problems affecting the press publishing industry have also been addressed by competition law, whereby the legislator has amended the German Act Against Restraints of Competition in light of the digital economy boost.16 Notably, the amendment introduced an exemption from the cartel prohibition for certain forms of collaboration between publishers of newspapers and magazines, provided that the coverage is only national and does not include editorial work. In a way similar to the legislative initiative adopted in Germany, Spain implemented an Intellectual Property Law reform, which provided for, inter alia, an ancillary right over news content, with the relevant difference that—unlike the German version—the Spanish ancillary right cannot be waived.17 A specific statutory limitation for Internet service providers and content aggregators is introduced, subject to an inalienable equitable compensation. In particular, the amendment authorizes the use of non-significant fragments of content previously published in periodical publications or in regularly updated websites, which are directed at forming public opinion or have informational or entertainment purposes. It further establishes the right to obtain an equitable, unwaivable and collectively managed remuneration for publishers and other right holders. Ultimately, the new article provides that the making available of pieces of information by search engines shall not be subject to either authorization or compensation when the use is non-commercial, necessary to provide results on a specific user’s search and is combined with the display of the link to the original source. Despite the similar purpose of the provisions, the Spanish amendments differ from the German reform owing to their compulsory nature. Put differently, while the German model permits voluntary negotiation, the Spanish provisions introduce a compulsory fee even for the use of non-significant fragments of text. Hence, news publishers cannot opt out of receiving this fee and negotiate over their right to be remunerated, even if they want their content to be available on a more permissible basis. Notably, the reform has already had a radical impact, namely the removal of Spanish publishers from Google News and the closure of Google News in Spain. The empirical evidence on the impact of news aggregators Besides the questions raised about the lawfulness of creating neighbouring rights by national legislations, the German and the Spanish cases are also of the utmost relevance from a different perspective since they represent natural experiments to assess the effects of the introduction of a European press publication right. Therefore, not surprisingly, several empirical studies have been elaborated relying on data coming from the Spanish and German markets with the aim of evaluating how news aggregators affect news consumption. After all, the justification for protection at a supranational level cannot rely simply on evidence of the newspaper industry crisis but requires the demonstration of a causal relationship between the introduction of a press publishers’ neighbouring right and the increase in the revenues for the press. Provided that there is a positive relationship between website visits and revenue generated by publishers, the impact of aggregators on online news consumption (hence, on the revenue of original news publishers) is the result of the net effect of two opposing forces: a substitution and a market expansion effect. While, according to the former, aggregators negatively impact on legacy publishers by displacing online traffic (users are satisfied with the limited information available on the aggregator’s site and do not click through to the original source), the market expansion effect argument maintains that aggregation services increase the total number of site visits since they allow consumers to discover news outlets’ content that they otherwise would not know, and reduce search times, allowing readers to consume more news. Determining whether the referral traffic (the traffic driven by third-party sources, which include news aggregators, search engines, social networks and blogs) compensates for the direct visits lost by the substitution effect is an empirical question. Looking at German and Spanish data following the change in the copyright law, empirical results show no evidence of a substitution effect but rather demonstrate the existence of a market-expansion effect.18 Hence, German and Spanish attempts have proven that a neighbouring right has a negative impact on publishers’ economic interests, particularly to the detriment of start-ups and small businesses.19 These findings are confirmed by a recent (unpublished) report edited by the Joint Research Centre for the European Commission.20 The available empirical evidence shows that newspapers actually benefit from news aggregation platforms in terms of increased traffic to newspaper websites and more advertising revenue. Aggregators services are complementary to, rather than competing with, newspapers’ original websites: on balance, they generate additional traffic to news publishers’ websites and thereby may increase rather than reduce their online revenue. Overall, it is apparent that the experience of those Member States that granted some rights to press publishers would call for additional evidence in order to justify a supranational legislative initiative.21 If national ancillary rights of press publishers have proved failures in addressing the weak bargaining position of press publishers in negotiations with online services, it is not clear why a European right would result in a different outcome.22 Rather, according to some commentators, the prevalence of a market expansion effect is evidence that the fair use exemptions relied on by aggregator sites in the USA are less potentially damaging to the publishers than is often thought.23 The US perspective The solution provided by the US experience to the free-riding on news has been traditionally found outside the scope of copyright protection. By designing the hot news doctrine as a variant of the common law tort of misappropriation, a century ago, the Supreme Court stressed the peculiar time value of the news,24 hence recognizing a quasi-property right on the facts gathered and distributed in order to protect news organizations’ efforts and investments against competitors’ free-riding.25 However, the judges pointed out that ‘the view [adopted] does not result in giving the complainant the right to monopolise either the gathering or the distribution of the news, or, without complying with the Copyright Act, to prevent the reproduction of its news articles, but only postpones participation by the complainant’s competitor in the processes of distribution and reproduction of news that it has not gathered, and only to the extent necessary to prevent that competitor from reaping the fruits of the complainant’s efforts and expenditure’.26 Although the principle established therein was based on a federal law, which is no longer binding, some recent decisions recognized its applicability at State level, an interpretation that is not precluded by the Copyright Act amendments approved in 1976. Notably, in National Basketball Association v Motorola,27 the court specifically outlines a five-step test necessary to invoke the hot news doctrine: (i) the plaintiff generates or collects information at some cost or expense; (ii) the value of the information is highly time-sensitive; (iii) the defendant’s use of the information constitutes free-riding on the plaintiff’s costly efforts to generate or collect it; (iv) the defendant’s use of the information is in direct competition with a product or service offered by the plaintiff; and (v) the ability of other parties to free-ride on the efforts of the plaintiff would so reduce the incentive to produce the product or service that its existence or quality would be substantially threatened. However, the applicability of the hot news doctrine has been significantly challenged in a more recent decision of the same Circuit in Barclays Capital v Theflyonthewall.com.28 Indeed, despite endorsing the test developed in NBA, the judges argue that the accusation of misappropriation is not compatible with the Copyright Act, as the conduct scrutinized in the case could not be classified as free-riding; hence, it is not possible to invoke the exception provided in the NBA case. Therefore, since the NBA test is brought back to the question on whether the conduct at issue could be interpreted as free-riding, the scope of application of the hot news doctrine is significantly reduced. A different roadmap that could be followed in order to protect the investments borne in the gathering and distribution of news leads to the reshaping, in more restrictive terms, of the scope of application of the fair use doctrine. Such doctrine limits the scope of copyright protection by allowing third parties to reproduce, display and distribute work protected by copyright, without authorization, if done for certain purposes, such as criticism, comment, news reporting, teaching, scholarship or research and if the use strikes the appropriate balance under the four factors enumerated in Section 107 of the Copyright Act: (i) the purpose and character of the use, including whether such use is of a commercial nature or is for non-profit educational purposes; (ii) the nature of the copyrighted work;
(iii) the amount and substantiality of the portion used in relation to the copyrighted work as a whole and (iv) the effect of the use upon the potential market for or value of the copyrighted work. More recently, another proposal suggests—similarly to what happened in Germany—the introduction of an antitrust exemption. As a possible response to the current crisis faced by the press, a trade association representing digital and print publishers (News Media Alliance) made a call to Congress, seeking legislation that would allow news publishers to negotiate collectively with online platforms.29 THE EU COPYRIGHT REFORM UNDER THE DIGITAL SINGLE MARKET STRATEGY Despite the available empirical evidence and even acknowledging that neither of the two ancillary rights solutions at national level (in Germany and Spain) have proven effective, as they have not resulted in increased revenues for publishers from the major online service providers,30 the European Commission decided to address publishers’ concerns by intervening on rights. Indeed, provided that the Internet has become the main marketplace for accessing and distributing copyright-protected content, and online services represent a major source of revenue for works and other protected content, the Commission suggested that the current EU copyright rules are unable to guarantee the equitable sharing of the value generated by some of the new forms of online content distribution along the value chain.31 More specifically, since right holders cannot set licensing terms and negotiate on a fair basis with potential users, and the playing field is, hence, not level for different market players engaging in equivalent forms of distribution, the Commission aimed at giving press publishers legal certainty and putting them in a better negotiating position in their contractual relations with online services using and enabling access to their content.32 This outcome would be achieved by providing a new related right that recognizes the key role press publishers play in terms of investments in and overall contribution to the creation of quality journalistic content and will grant them the protection they need for the effective exploitation of their publications in the digital environment.33 Indeed, according to the Commission, the fact that publishers are not protected as right holders at EU level but rely on the rights of the authors transferred to them ‘has furthermore contributed to the situation of legal uncertainty’ concerning their ability to receive compensation.34 Therefore, in order to address problems in protecting content and improve the bargaining position of press publishers, within the Digital Market Strategy and, notably, the general call for initiatives to adapt the EU framework to the digital environment, the Commission has proposed that press publishers should be granted a neighbouring right under Article 11 of the Directive on copyright in the Digital Single Market.35 The new neighbouring right would last for 20 years from first publication and would cover reproduction and making available to the public press publications to the extent that digital uses are concerned.36 The reproduction and making available rights conferred would be subject to the same limitations as are applicable to copyright under the InfoSoc Directive (2001/29/EC). Moreover, Recital 33 clarifies that this legal protection does not extend to acts of hyperlinking, ‘which do not constitute communication to the public’. Finally, the aforementioned rights cannot be invoked against authors and other right holders in respect of the works and other subject matter incorporated in a press publication; therefore, the new rights could not be used to prevent authors and other right holders from exploiting their works elsewhere. The Commission has explicitly declared that, since, in the transition from print to digital, publishers of press publications are facing problems in licensing the online use of their publications and recouping their investments,37 the proposed legal protection is needed in order to recognize and encourage the organizational and financial contribution of publishers in producing press publications, thus ensuring the sustainability of the publishing industry.38 Moreover, the Commission seems also to link the proposed right to the need of ensuring the existence of a free and pluralist press that is a guarantee of quality journalism and citizens’ access to information.39 Is the reform justified and effective? The Commission proposal has rapidly produced a spate of comments and criticism. In the academic environment, the reform has been mostly interpreted as unjustified, ineffective and damaging on the basis of various considerations.40 In particular, it has been argued that the new right is without economic or legal justification, since there is no evidence of a market failure that the legislation would need to solve.41 From an economic perspective, empirical results show no evidence of a substitution effect, since the activities of online news aggregators seem complementary to, rather than competing with, those performed by newspapers’ original websites. The decline in newspaper revenues is the outcome of significant changes in the market and has nothing to do with the alleged free-riding of news aggregators.42 Newspapers actually benefit from news aggregation platforms in terms of increased traffic and more advertising revenue. This explains why most newspapers actively collaborate with aggregators.43 Indeed, the German and Spanish attempts have proven that a neighbouring right is not effective for publishers’ economic interests but rather may clash with their interests.44 This is because in the digital environment legacy, news publishers cannot rely anymore on the printing press and traditional distribution channels, but they need to develop business models that allow them to become interactive and multifunctional platforms that aggregate content and build communities in order to satisfy different users’ information needs.45 In this respect, the proposal for an additional intellectual property right appears not only outdated but also detrimental to the transition towards platform-based business models.46 From a legal perspective, the proposed neighbouring right would not strengthen the bargaining position of the press publishers, provided that they already have significant rights in their publications. Indeed, EU law recognizes copyright in creative material such as articles, photographs, illustrations and even snippets: according to the Infopaq decision, the extraction of 11 words may infringe copyright law, since small parts of literary works are eligible for protection if they are original in the sense that they are their author’s own intellectual creation.47 Furthermore, press publishers benefit from the sui generis right in databases and copyright in newspapers as databases. Moreover, some Member States recognize copyright in newspapers as collective works and related rights in non-original photographs and typographical arrangements of published editions. In sum, press publishers may already exploit a huge array of tools in order to protect almost every part of a publication. Therefore, rather than creating new rights, the EU legislator has been invited to focus on the publishers’ need to easily licence and enforce their existing rights.48 Besides the lack of any legal and economic justification, the new right may be harmful to the public interest on different grounds. First, as the scope of the new right seems undefined or overbroad, the reform may lead to a diminished public domain and threaten the free dissemination of information and freedom of expression. Indeed, the proposed right is not subject to a requirement of originality and apparently would cover both commercial and non-commercial uses.49 Hence, the protection would be extended to any subject matter and any use. This would also increase transaction costs owing to complexities in rights negotiations and clearance to the detriment of small players that would not be able to cope with the changed framework.50 Not to mention the legal uncertainty about the provision, according to which the new right does not extend to hyperlinks that do not constitute communication to the public. Indeed, in light of the case law of the Court of Justice, the circumstances and the requirements to consider hyperlinking as communication to the public are still not clear.51 Secondly, the duration of the proposed right (20 years) is unreasonably long, given that the value of news depends chiefly upon its freshness; thus, their commercial cycle ends in a few days. Thirdly, the proposal appears unaligned with the ultimate goal of the Digital Single Market strategy. Since the new right would be territorial, there would be one for each Member State and national legislators would be free to adopt different approaches in implementing the new provision. This would increase uncertainties and fragmentation, negatively affecting the EU copyright acquis and the functioning of the Digital Single Market.52 At the same time, from a different perspective, it could be questioned whether a uniform EU approach makes sense, provided that the size of some determinants of legacy news publishers’ crisis, such as the decline in print circulation and the related advertising revenue, differs across Member States.53 Moreover, despite the Commission’s concerns about good quality information that may be affected by new digital intermediaries, whose structure and economics are deemed to promote the spread of low-quality content, it is not clear how the recognition of a new exclusive right might support quality journalism and provide protection against fake news. No empirical evidence supports this conclusion. Rather, from a theoretical perspective, aggregators and search engines can positively affect content quality owing to the competition they generate among content websites.54 Finally, it has been noted that the creation of a new right that overlaps existing authors’ rights may lead to a reduced income for authors, in light of distributional effects.55 According to the ‘pie theory’, those who pay the royalties have only a certain amount of money (ie one pie); hence, if new players (ie new right holders) sit at the table, they will have to share the pie. Thus, new royalties stemming from the proposed neighbouring right would be distributed at the expense of those receiving royalties from authors’ rights.56 LOOKING FOR A MEDIATION: THE REVISED ARTICLE 11 The lively debate animated by the controversial provision has involved also the European institutions affecting the process of approval. After several mediation attempts, on 25 May 2018, the Council’s permanent representatives committee (Coreper) agreed a common position on the revised text of the proposal.57 In order to address some of the concerns and the critics illustrated in the previous paragraph, the Coreper suggested significant amendments to the original version of the text. Namely, the amended text of the Recital 34a and Article 11(2) acknowledged that, since insubstantial parts of press publications are not usually the expression of the intellectual creation of their authors, in accordance with the case law of the Court of Justice, it is appropriate to provide that the use of insubstantial parts should not fall within the scope of the rights provided for in the Directive. Therefore, the press publishers’ rights shall not apply in respect of uses of insubstantial parts of a press publication and, in order to determine the insubstantial nature of parts of press publications, Member States shall be free to take into account whether these parts are the expression of the intellectual creation of their authors, or whether these parts are individual words or very short excerpts or both criteria. Furthermore, the new version of the Recital 34 clearly stated that the legal protection does not extend to acts of hyperlinking, regardless of the fact that they may constitute communication to the public. Moreover, as with the German provision, the new rights expire 1 year after the publication of the press publication (instead of 20 years, as proposed by the Commission) and do not have retroactive effect. Despite the mediation attempt delivered by the Coreper, the text approved by the Committee on Legal Affairs and submitted to the European Parliament for the final vote contained just slight changes with respect to the original version.58 Namely, amendments to Recital 33 and Article 11 clarified that the new rights granted to press publishers does not extend to hyperlinks, regardless of the fact that they may constitute communication to the public. Moreover, the new version of Article 11 stated these rights shall not apply with retroactive effect. On 5 July 2018, the Parliament rejected the proposal, sending back the text for review and changes and reopening debate. However, on 12 September 2018, the Parliament approved the new version of the proposal for a Directive. The Parliament will now enter into final negotiations with the Council, representing Member State governments and the Commission (so-called trilogues). The agreement reached after trilogues will be subject to Parliament’s final vote. The adopted version of the new neighbouring right addresses some of the concerns reported in previous pages. In particular, according to Article 11(1a), the new right shall not prevent ‘legitimate private and non-commercial use’ of press publications by ‘individual users’. Furthermore, Recital 33 and Article 11(2a) state that the protection does not extend to acts of hyperlinking, without making any reference to the fact that they may constitute communication to the public. Moreover, Article 11(4) provides reassurance on temporal coverage, declaring that the right shall not have retroactive effect. Finally, in order to address the risks that the creation of a new right may lead to a reduced income for authors of the works incorporated in press publications, Article 11(4a) ensures that authors shall receive an appropriate share of ‘the additional revenues’ press publishers receive by information society service providers. Recital 35 makes clear that: [t]he amount of the compensation attributed to the authors should take into account the specific industry licensing standards regarding works incorporated in a press publication which are accepted as appropriate in the respective Member State; and the compensation attributed to authors should not affect the licensing terms agreed between the author and the press publisher for the use of the author’s article by the press publisher. However, most of the criticisms raised by academics still stand. First, the scope of protection continues to be overbroad since the new right is not subject to a requirement of originality; thus, it still also covers insubstantial parts of press publications. In this regard, the approved version of Recital 33 just adds that the protection shall not extend to ‘factual information’ reported in journalistic articles. Unfortunately, the statement merely reflects the well-known idea-expression dichotomy, whereas a clear recognition of the need to meet the originality requirement would have effectively safeguarded the public domain. Secondly, the provision about (not extending the protection to) hyperlinks contains a confusing reference to mere hyperlinks, which are accompanied by ‘individual words’: lacking a minimum threshold the meaning of the reference is unclear (how many words are enough?); thus, the provision will be open to diverging national interpretations. Furthermore, the rationale of the reference is unclear, since it appears easy to bypass. Thirdly, by excluding from the scope of protection, the non-commercial uses of press publications, the adopted version specifies that the exclusion is limited to ‘individual users’, hence apparently allowing only natural persons to benefit from it. Fourthly, the duration of the right remains unreasonably long: indeed, according Article 11(4), the right expires 5 years after the press publication. Finally, the provision related to the distribution of additional revenues to authors still contradicts the ‘pie theory’, implying that, thanks to the new right, there would be more than one profit to share. CONCLUDING REMARKS The tortuous birth of the new neighbouring right on digital uses of press publications has confirmed that its underlying legal and economic reasoning is far from clear. A copyright reform postulates the identification of a market failure and the support of robust empirical evidence. Legacy publishers report the inability to recover the investments made by producing news content owing to free-riding by new intermediaries. By supporting this perspective, the European Commission has argued that a new legal protection is needed in order to ensure the sustainability of the publishing industry, since the current EU copyright rules are unable to guarantee the equitable sharing of the value generated by some of the new forms of online content distribution along the value chain. Unfortunately, the empirical evidence does not support this narrative. The decline in newspaper revenues is the outcome of significant changes in the market and has nothing to do with the alleged free-riding of news aggregators. Indeed, empirical results show that news aggregators are complementary rather than competing services to newspapers’ original websites. Because of the market expansion effect, newspapers actually benefit from news aggregation platforms in terms of increased traffic to newspaper websites and more advertising revenue. These findings are confirmed by the outcomes of the German and Spanish attempts. Hence, the European reform is not guided by an evidence-led approach. It merely relies on evidence of the newspaper industry crisis, regardless of the lack of proof of any causal relationship between the introduction of a press publishers’ neighbouring right and the increase in the revenues for the press. From this perspective, it has been correctly pointed out that the reform is not only outdated but even detrimental to the transition towards platform-based business models. The reform raises also several legal issues and public interest concerns. Indeed, the introduction of an additional layer of copyright overlaps existing authors’ rights and expands the already huge array of tools that press publishers may exploit. Furthermore, as the duration of the right is unreasonably long (in comparison to the very short commercial cycle of news) and the scope of the protection is overbroad (since it covers any digital use of insubstantial parts that do not meet the originality requirement), public domain and free dissemination of information could be threatened. Moreover, despite the Commission’s attempt to consider the proposed right as a cornerstone against fake news and low-quality content, there is no evidence to support the alleged link between the additional legal protection at stake and the promotion of good quality journalism. Taxing new digital players will not save press publishing industry and legacy business models. Therefore, the European Parliament’s approval of the proposal for a Directive on Copyright in the Digital Single Market is just bad news for everyone. Footnotes 1 Federal Trade Commission, ‘Potential Policy Recommendations to Support the Reinvention of Journalism’ (2010) accessed 10 August 2018, addressing different policy options in order to support the ongoing ‘reinvention’ of journalism. 2 OECD, ‘The Evolution of News and the Internet’ (2010) accessed 10 August 2018. 3 European Commission, ‘Impact Assessment on the Modernisation of EU Copyright Rules’ SWD(2016) 301 final, s 5.3.1: the proportion of consumers who indicate that the Internet is their main source to access news largely outweighed those for whom the favourite source is printed newspapers (eg 29–3% in France; 23–7% in Germany, 34–8% in Italy; 38–10% in the UK); newspapers and magazines’ websites and apps are the main services used to access news for 42% of users in the EU. 4 A Cornia, A Sehl and RK Nielsen, ‘Private Sector Media and Digital News’ (2016) Reuters Institute Digital News Project accessed 10 August 2018. See B Martens and others, ‘The Digital Transformation of News Media and the Rise of Disinformation and Fake News - An Economic Perspective’ (2018) Digital Economy Working Paper 2018-02, JRC Technical Reports accessed 10 August 2018, discussing the effects of the shift from direct access to a newspaper to algorithm-driven (search ranking) access to unbundled news articles. As highlighted by the Authors (15–17), a central feature of the digital transformation is the shift from a linear business model in offline news publishing to a multi-sided market or platform business model in online news publishing: the traditional newspaper industry was characterized by high fixed costs (the total costs of paper, print and distribution account for up to 50% of all newspaper publishing costs), its business model in news media was based on vertical integration between production and distribution and news media revenue consisted mainly of print sales and subscriptions, advertising and classified ads. See also M Senftleben and others, ‘New Rights or New Business Models? An Inquiry into the Future of Publishing in the Digital Era’ (2017) 48 IIC 538, 543, underlining the fact that new publishers are less tied to the printing press and even more tied to the timely availability of diverse content: the economies of scale in the publishing business now have to be found in the use of digital content platforms where the extraction of profits takes place by using one’s platform for a wide variety of content that creates value for the selected user community. 5 Despite the growing success of publishers’ content online, the increase of publishers’ digital revenues has not made up for the decline of print: see European Commission (n 3) s 5.3.1, reporting that between 2010 and 2014, news publishers’ total print revenues decreased by €13.45 billion and digital revenues rose by €3.98 billion, ie a net revenue loss of €9.47 billion (−13%). 6 E Bell and T Owen, The Platform Press. How
Silicon Valley Reengineered Journalism (Tow Center for Digital Journalism, Columbia Journalism School 2017). 7 S Scalzini, ‘Is There Free-riding? A Comparative Analysis of the Problem of Protecting Publishing Materials in Europe’ (2015) 10 Journal of Intellectual Property Law & Practice 454, 455. See Senftleben and others (n 4), questioning whether the neighbouring right proposed by the European Commission would offer an appropriate incentive for publishers to develop new business models. 8 See European Commission (n 3) s 5.3.1. 9 Case C-572/13 Hewlett-Packard Belgium SPRL v Reprobel SCRL EU:C:2015:750. 10 European Commission (n 3) s 5.3.1. 11 It is noteworthy that tensions between press publishers and online service providers also emerged in Belgium, France and Italy, although they did not eventually result in the implementation of new laws. In these countries, Google signed different agreements with associations of news press publishers to introduce funds aimed at supporting innovative development projects. Other EU online service providers have similarly signed agreements or are presently working on new arrangements with publishers. 12 E Rosati, ‘Neighbouring Rights for Publishers: Are National and (Possible) EU Initiatives Lawful?’ (2016) 47 IIC 569; B Vesterdorf, ‘The Effect of Failure to Notify the Spanish and German Ancillary Copyright Laws’ (2015) 37 EIPR 263. Indeed, Directive 98/34/EC (laying down a procedure for the provision of information in the field of technical standards and regulations) requires Member States to notify the EU Commission of any technical regulations that they intend to adopt, in order to allow an assessment of the impact on the internal market. Apparently, both the German and Spanish governments failed to notify the Commission. The Berlin Landgericht seems to share these concerns, as it stayed the proceedings in the litigation between the collecting society responsible for collecting royalties in favour of publishers and Google, and made a reference for a preliminary ruling to the Court of Justice in order to evaluate the enforceability of the German neighbouring right for press publishers (Case C-299/17 VG Media v Google Inc [2017] OJ C309). Recently, in the Opinion delivered on 13 December 2018 (EU:C:2018:1004), the Advocate General Hogan has advised the Court to rule that German press publishers’ right is unenforceable, stating that the provisions in question cannot be regarded as simply the equivalent of a condition governing the exercise of a business activity such as a prior authorization requirement. Indeed, their effect in practice is to make the provision of the service subject to either a form of a prohibitory order or a monetary claim at the instance of the publisher of newspapers or magazines. 13 A Ramalho, ‘Beyond the Cover Story – An Enquiry into the EU Competence to Introduce a Right for Publishers’ (2017) 48 IIC 7. 14 See ss 87(f)(g)(h) of the German Copyright Act (1965). 15 The limitation envisaged in s 87(g)(4) has been interpreted by the Ministry of Justice in the explanatory statement meaning that the press publisher is protected against the systematic use of his editorial activity by commercial providers of search engines and commercial services that process content accordingly whose business model centres on such use: other users (eg bloggers, other privately owned companies, associations, law firms or persons working for private purposes or on a complimentary basis) are not covered; thus, their rights and interests remain unaffected by the neighbouring right. 16 See the 9th Amendment Bill to the German Act Against Restraints of Competition (9 June 2017). 17 See art 32(2) of the Ley de Propiedad Intelectual 21/2014. 18 J Calzada and R Gil, ‘What Do News Aggregators Do?’, (2017) accessed 20 August 2018, by tracking both the volume of web traffic and the sources that generate the traffic, find, with regards to Spain, an 11% drop in newspaper traffic (quantity effect), an 8% drop in the number of newspaper pages visited (a reduction in the variety of news) and a drop in search and direct traffic to newspaper sites by 12% and 14%, respectively, following the change in the copyright law; for Germany, they find a 7% reduction in daily visits to news outlets controlled by the Axel Springer group that initially opted out of Google News during a 2-week period and also a 10% reduction in visits via search engines and 7% direct visits. See also NERA, ‘Impact on Competition and on Free Market of the Google Tax or AEDE Fee’ (2017) accessed 20 August 2018, suggesting aggregators are complementary services and convey more benefit than harm to publishers since the substitution effect is very small while the expansion effect is significant; Deloitte, ‘The Impact of Web Traffic on Revenues of Traditional Newspaper Publishers.
A Study for France, Germany, Spain, and the UK’ (2016) accessed 20 August 2018, showing that referral traffic accounted for 66% of page views to publishers on average, with direct traffic (the traffic driven to news sites directly through a publisher webpage) accounting for the remaining 34% of page views. However, according to S Majó-Vázquez, AS Cardenal and S. González-Bailón, ‘Digital News Consumption and Copyright Intervention: Evidence from Spain Before and After the 2015 “Link Tax”’ (2017) 22 Journal of Computer-Mediated Communication 284, the Spanish law had no discernible impact on the reach of news sites, but determined an increase in the fragmentation of news consumption. 19 RM Hilty and V Moscon (eds), Protection of Press Publications Concerning Digital Uses (Position Statement of the
Max Planck Institute for Innovation and Competition 2017) 79, 83–84 accessed 20 August 2018, arguing that a neighbouring right potentially restrains innovative services from offering new forms of providing online access to information, leaving press publishers more vulnerable than before and at the mercy of huge monopolies since only big players can afford to negotiate and to pay for licences. See S Athey, M Mobius and J Pal, ‘The Impact of Aggregators on Internet News Consumption’ (2017) accessed 20 August 2018, finding that the shutdown of Google News in Spain reduced overall news consumption (including consumption of the Google News homepage) by about 20% while visits to news publishers declined by about 10% (the decrease is concentrated around small publishers, while large publishers did not see significant changes in their overall traffic but saw an increase in their own home page views, although offset by a decrease in views of articles). 20 Joint Research Center, ‘Online News Aggregation and Neighbouring Rights for News Publishers’ (2017) 13 accessed 20 August 2018: ‘the studies published so far contain no empirical evidence in support of the substitution hypothesis and thus no evidence that online aggregators have a negative impact on original newspaper publishers’ revenue. On the contrary, the evidence shows that aggregators may actually be complements to newspaper websites and may help consumers discover more news and boost the number of visits’. 21 C Geiger, O Bulayenko and G Frosio, ‘The Introduction of a Neighbouring Right for Press Publisher at EU Level: the Unneeded (and Unwanted) Reform’ (2017) 39 EIPR 202, 207. 22 T Pihlajarinne and J Vesala, ‘Proposed Right of Press Publishers: A Workable Solution?’ (2018) 13 Journal of Intellectual Property Law & Practice 220, 228. 23 L Chiou and C Tucker, ‘Content Aggregation by Platforms: The Case of the News Media’ (2017) 26 Journal of Economics & Management Strategy 782. 24 International News Service v Associated Press, 248 US 215, 235 (1918): ‘The peculiar value of news is in the spreading of it while it is fresh; and it is evident that a valuable property interest in the news, as news, cannot be maintained by keeping it secret.’ 25 ibid 238: ‘Not only do the acquisition and transmission of news require elaborate organization and a large expenditure of money, skill, and effort; not only has it an exchange value to the gatherer, dependent chiefly upon its novelty and freshness, the regularity of the service, its reputed reliability and thoroughness, and its adaptability to the public needs; but also, as is evident, the news has an exchange value to one who can misappropriate it.’ 26 International News Service (n 24) 241. 27 105 F 3d 841 (2nd Cir 1997). See also Associated Press v AllHeadline News, 608 F Supp 2d 454 (SDNY 2009). 28 650 F 3d 876 (2nd Cir 2011). 29 See D Chavern, ‘How Antitrust Undermines Press Freedom’ (2017) Wall Street Journal (New York City, 9 July 2017). 30 European Commission (n 3) s 5.3.1. 31 European Commission, Communication ‘Towards a Modern, More European Copyright Framework’, COM(2015) 626 final, s 4; Communication ‘Promoting a Fair, Efficient and Competitive European Copyright-based Economy in the Digital Single Market’, COM(2016) 592 final, s 4. 32 European Commission, Communication ‘Promoting a Fair, Efficient and Competitive European Copyright-based economy in the Digital Single Market’ ibid s 4. 33 ibid. 34 European Commission (n 3) s 5.3.1: ‘The gap in the current EU rules further weakens the bargaining power of publishers in relation to large online service providers and contributes to aggravate the problems faced by press publishers as regards the online exploitation of, and enforcement of rights in, their content. Online service providers often have a strong bargaining position and receive the majority of advertising revenues generated online. This makes it difficult for press publishers to negotiate with them on an equal footing, including regarding the share of revenues related to the use of their content.’ 35 European Commission, ‘Proposal for a Directive on Copyright in the Digital Single Market’ COM(2016) 593 final. 36 Pursuant to art 2(4), ‘press publication’ means a fixation of a collection of literary works of a journalistic nature, which may also comprise other works or subject matter and constitutes an individual item within a periodical or regularly updated publication under a single title, such as a newspaper or a general or special interest magazine, having the purpose of providing information related to news or other topics and published in any media under the initiative, editorial responsibility and control of a service provider. 37 See Recital 31 of the proposal (n 35). 38 See Recital 32 of the proposal (n 35). 39 See Recital 31 of the proposal (n 35). 40 Literally, ‘a bad piece of legislation’ according to several European academics (Academics Against the Press Publishers Right (2018) accessed 20 August 2018). 41 RM Hilty, K Koklu and V Moscon, Public Consultation on the Role of Publishers in the Copyright Value Chain (Position Statement of the Max Planck Institute for Innovation and Competition 2016) 3–4 accessed 25 August 2018. 42 L Bently and others, ‘Strengthening the Position of Press Publishers and Authors and Performers in the Copyright Directive’, Study commissioned by the European Parliament (2017) 18 accessed 25 August 2018. 43 Martens and others (n 4) 21. 44 Hilty and Moscon (n 19) 83. 45 Senftleben and others (n 4) 544; Hilty and Moscon (n 19) 83. 46 As highlighted by Senftleben and others, (n 4) 549–53, owing to the transition to platform-based competition, the relevance of copyright protection of individual works is going to decrease, while the Commission proposal is based on the traditional model of commercializing individual works; thus, it incentivizes a strategy for generating income in the digital environment that is more difficult and less promising than content platform creation. 47 Case C-5/08 Infopaq International A/S v Danske Dagblades Forening EU:C:2009:465. 48 Hilty and Moscon (n 19) 88, suggest amending art 5 of Directive 2004/48/EC on the enforcement of intellectual property rights in order to introduce a presumption of ownership so that a press publisher is entitled to bring proceedings to enforce copyright in any item if the publisher’s name appears on the news publication in the usual manner, without having to demonstrate it has contractual transfers or use rights in respect of each article. 49 Geiger, Bulayenko and Frosio (n 21) 208; Pihlajarinne and Vesala (n 22) 225. 50 Bently and others (n 42) 20. 51 Case C-466/12 Nils Svensson and others v Retriever Sverige AB EU:C:2014:76; and Case C-160/15 GS Media BV v Sanoma Media Netherlands BV and others EU:C:2016:644. 52 V Moscon, ‘Neighbouring Rights: In Search of a Dogmatic Foundation. The Press Publishers’ Case’ (2018) Max Planck Institute for Innovation and Competition Research Paper n 18-17 accessed 2 September 2018. 53 MMM van Eechoud, ‘A Publisher’s Intellectual Property Right’ (2017) 12 accessed 2 September 2018. Indeed, according to the European Commission (n 3) Annex 13, over the period from 2010 to 2014 the decline in print circulation in Belgium was 8%, in the UK 18%, in Spain 38% and in Italy 52%. 54 See DS Jeon and N Nasr, ‘News Aggregators and Competition among Newspapers in the Internet’ (2016) 8 American Economic Journal - Microeconomics 91, arguing that the presence of aggregators leads newspapers to specialize in news coverage and changes quality choices from strategic substitutes to complements. 55 Geiger, Bulayenko and Frosio (n 21) 204–05. 56 Geiger, Bulayenko and Frosio (n 21) 204: ‘the grant of rights to ever more actors will decrease the economic value of each right covering essentially the same economic use’. 57 The text is available at accessed 2 September 2018. It has been suggested that Germany, Finland, the Netherlands, Slovenia, Belgium and Hungary did not support the deal reached. 58 The text is available at accessed 2 September 2018. © The Author(s) (2019). Published by Oxford University Press. All rights reserved. For permissions, please email: journals.permissions@oup.com. This article is published and distributed under the terms of the Oxford University Press, Standard Journals Publication Model (https://academic.oup.com/journals/pages/open_access/funder_policies/chorus/standard_publication_model) TI - Copyright, online news publishing and aggregators: a law and economics analysis of the EU reform JF - International Journal of Law and Information Technology DO - 10.1093/ijlit/eay019 DA - 2019-03-01 UR - https://www.deepdyve.com/lp/oxford-university-press/copyright-online-news-publishing-and-aggregators-a-law-and-economics-K3NigGHhgL SP - 75 VL - 27 IS - 1 DP - DeepDyve ER -