Naspers-owned media group Media24 – the parent of the country’s largest publication, News24 – has told the Competition Commission that Google is abusing its “dominance” and threatening the viability of the Fourth Estate in South Africa.
Media24 CEO Ishmet Davidson told the Competition Commission on Tuesday that Google is sucking advertising revenue out of South Africa, making it increasingly difficult for local publications to survive. He said even News24, despite its size, is loss-making – and he pointed the finger at Google and rival Meta Platforms, the owner of Facebook, for the dire situation facing local publishers.
Davidson said News24 was “forced” in 2020 to implement a paywall around much of its content, but even though more than 100 000 paying subscribers have signed up, the revenue from subscriptions “has not nearly been sufficient to offset the decline in advertising revenue”.
“To survive, we have been forced to manage our costs as tightly as possible, with zero cost growth over the past seven years… Despite the cost interventions, 100 000 subscribers and 20 million monthly users, News24 is unprofitable,” he told the commission’s media and digital platforms market inquiry, which kicked off in Pretoria on Monday.
“This is a clear indication that the business model is unsustainable and, coupled with our dying print business, is an extinction crisis for media in South Africa. The Fourth Estate is on its knees. Yes, one or two media companies may survive, but a democracy thrives on a plurality of voices.”
And Google is at least partly to blame for this crisis, Davidson alleged in his oral submission, citing PwC and IAB research that suggested the media’s share of the digital advertising market declined from 8% in 2015 to just 3% in 2022. While Google and Meta have come to “dominate” South Africa’s digital advertising market, publishers have been left with “crumbs”.
PAIA application
Ahead of the Competition Commission’s hearings, Davidson said his company launched a Promotion of Access to Information Act application to “compel” Google to disclose its revenue in South Africa as well as its operating costs, intergroup charges, and pre- and post-tax profits.
“They flatly refused, claiming confidentiality of competitor-sensitive information, which I believe is an argument of convenience to hide the truth of the extent of their dominance and their cash-extraction business model, which makes competing with them on an equal footing even more impossible and exacerbates what we believe is a clear-cut case of abuse of dominance,” he said.
He alleged that Google employs few people in South Africa – “our guess is about 30 people” – and therefore has “minimal operating costs and very limited employment opportunities” for South Africans.
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“Sources tell us that they put through a platform charge from their head office in Ireland to the South African operation, which leaves very little taxable profit in South Africa, with their South African income taxed in Ireland at 12.5%,” he added, without provided proof of this claim.
“Not for a moment am I suggested that this is illegal, but in my view it is immoral. It deprives the South African fiscus of much-needed tax and fortifies Google’s dominance in South Africa. I could be completely off-track… Prove us wrong, and I’ll apologise.”
He said that Google profits unduly from South African media houses’ content, without providing compensation for that content. He admitted, however, that Google is also responsible for driving a significant amount of referral traffic to local news website – 44% in the case of News24.
But, he said: “We didn’t ask for the Google News initiative, which in any case is designed to increase their stranglehold over the media industry. We don’t want their charity. What we do want is to be fairly compensated for our content.”
Asked for comment on Media’s presentation, Google sent TechCentral a terse statement: “Google works constructively and collaboratively with South African publishers and the broader news ecosystem to build durable partnerships that will foster a sustainable, resilient and diverse news industry. We are participating in the [commission’s process] and look forward to attending the public hearings over the coming weeks.” — © 2024 NewsCentral Media