2018 is likely to be remembered as the year when global tax systems finally woke up to the digital age.

In addition to Philip Hammond’s announcement of a sales tax on big tech, the EU has just pushed through its Copyright Directive with the intention of protecting the publishing industry and bolstering its profits for artists and journalists.

Already being termed a ‘GDPR for Copyright’, the directive is going to have transformative impacts on the web as we know it.

Article 11, EU CopyRight Directive, the  Link Tax

What is the EU Copyright Directive?

The European Union Directive on Copyright in the Digital Single Market is intended to update copyright laws for the digital age and ensure content originators receive the benefits they are due.

Until now, the responsibility for copyright enforcement has rested with the copyright holders (i.e. record companies and publishing houses).

The new rules shift the responsibility for this to the major tech platforms themselves meaning Google, Facebook and YouTube will have to monitor potential copyright infringement much more actively or face liability.

What is Article 11?

Article 11 requires permission and licensing fees to be paid when snippets of content are used on the web (hence its nickname ‘the link tax’).

Just as radio stations pay fees for playing music, the theory behind this is that it will offer the same legal protection to digital journalism. This new right for publishers would apply for 20 years after publication, and the fees involved would be at the publishers discretion.

In actual fact it’s not a tax at all, but a piece of copyright legislation. Nevertheless, it’s going to have serious economic impacts both on big tech, and the publishing industry itself.

It will cover:

  • news aggregators
  • media monitoring services
  • fact checking services
  • even automatic link previews that display an image and headline would be included

Is Article 11 Likely to Work?

So far several attempts have been made to implement similar legislation.

It was tried in Germany during 2013 with the result that people just stopped linking rather than paying, or reduced the extracts they shared to below the legal threshold. Ultimately, large publishers changed their minds once they recognised what a huge loss of traffic would mean for their profits

When it was tried in Spain, Google simply stopped its news service altogether, resulting in a projected 10-15% loss of traffic and subsequent revenues. (1)

A study (2) by the Spanish Association of Publishers of Periodical Publications (AEEPP) found that the law had almost entirely negative consequences, including stifling innovation.  

Ultimately, AEDE (Asociación de Editores de Diarios) who were one of the primary lobbyists for the laws inception concluded the law would: ‘without a doubt will have a negative impact on citizens and Spanish companies’ and appealed for government intervention to reverse it. (3)

By then it was too late.

Will Article 11 Damage the Companies it’s Intended to Save?

While most key advocates for the Article 11 legislation have been from the publishing world, some pundits question whether the reform is going to provide necessary revenues to save an industry whose decline may be inevitable.

Many traditional publishers have simply never achieved the level of digital transformation required to survive in the internet age.

Some newspapers have rolled out a version of the metered paywall, while others continue to give away their information for free in the hope of relying on advertising revenue.

Perhaps the most notable example of a newspaper trying to reinvent itself in the age of Google has come with Amazon boss Jeff Bezos’s acquisition of the Washington Post. Not long ago, Bezos confessed that the Post would be in ‘investment mode for some time.

If the experiences of Spain and Germany are anything to go by, far from bringing in extra revenue sources the more likely impact of Article 11 will be that publishers used to receiving large volumes of traffic from aggregator platforms like Google News will see less traffic.

Google has already indicated that, if forced, they will simply shut down Google news across the EU.