At OneZero, Owen Williams writes about the Australian government’s proposed media law that will make online giants pay local companies.
…the News Media and Digital Platforms Mandatory Bargaining Code, would require social media platforms to negotiate with local media in order to use their content. For instance, whenever Google publishes headlines and summaries on Google News, Google would have to pay a small sum to the newspapers or magazines listed.
European governments have attempted similar media law changes with little success.
Devastating for traditional media
There’s a huge disconnect with the plan. Yes, the likes of Google and Facebook have devastated traditional media. They, and other world scale media giants, have sucked almost all the advertising revenue that once paid for a vibrant and diverse market of newspapers, radio stations and television channels.
And yet today’s media companies depend on the same tech companies to drive online readers to their sites allowing them to pick up the few remaining revenue crumbs. Without that traffic they’d wither and die.
The analogy that comes to mind is that the media companies have a prescription drug dependency. The medicine reduces their pain and allows them to function, but in the long term it is killing them.
Australia’s proposed legislation isn’t only doomed to failure. It will almost certainly end up doing more harm than good. The likes of Google and Facebook need to be dragged into line, but this is not the way to do it.
What would I do? First, I’d flatten the playing field by making sure all revenue sucked out of the local market is subject to tax. If local media companies pay tax, but their more successful rivals do not, they don’t stand a chance of competing. While that train has already left the station, taxing the giants on an equal footing with local publishers might create local opportunities that would not otherwise exist.
Second, I legislate so that the likes of Google and Facebook have the same responsibilities for their content that more traditional publishers have. It’s not good enough for them to wash their hands of damaging and harmful material published on their sites. It’s not as if they don’t have the rivers of gold to help them pay for teams of editors.
In the meantime, I’m also concerned the Australian moves could have implications for New Zealand. Like it or not, the tech giants tend to treat us and Australia as a single, unimportant market.
“Google plans to produce less than 1 million Pixel 5 smartphones this year, sources told Nikkei Asia, signalling a far more conservative outlook for the internet giant’s flagship device than last year.
“Production could be as low as around 800,000 units for the 5G-capable flagship smartphone…”
The Pixel 5 runs Android 11. It supports 5G networks. There’s a six-inch screen, two back cameras; a 12.2 megapixel main camera and a 16 megapixel ultra wide camera. There is a cheaper Pixel 4A model.
A phone that waits in hold for you
One of its features allows you to have Google Assistant wait on hold until a human picks up the phone at the other end.
If Google has plans to sell the Pixel 5 in New Zealand, it is keeping quiet about them. Parallel importers have brought in previous models. The international price is US$700, which translates to around NZ$1300 or $1400 here.
This will be a rough year for phone makers. Yet if the Nikkei report is correct, Google’s own brand models will be a rounding error for the market.
Even the most bearish observers expect to see more than a billion units sold during the full year. On those numbers Google won’t account for 0.1 percent of the total.
Samsung, which like Google uses Android, should sell more than 200 million phones. Huawei, which can no longer use Google services expects to sell a similar number.
As the Nikkei story points out, Google’s phone making suffered in the Covid-19 pandemic. But then every phone maker hit the same problem.
The Pixel phones are oddballs. In the US a single carrier, Verizon, lists them. Americans are more inclined than people elsewhere to buy their phones from carriers.
Not a phone business
For Google, phones represents a tiny slice of the business. They don’t need to make money. Pixel phones are more about Google showcasing technology. It’s no accident the wait on hold feature appeared first on a Pixel phone.
They serve to put pressure on other phone makers to continue innovating.
Google may want to keep a toe-hold in the market for strategic purposes. For now, Pixel is not mission critical at Google. It’s a hedge against a possible future.
Phones are mission critical for the big brands: Samsung, Apple and Huawei. For those companies, phones are central. They provide cash flow, and, all being well, profit.
Google’s goal is to push as much traffic as possible through the company’s data collection, if you like, surveillance, services. Pixel helps keep that on the boil.
The company has deep enough pockets to push the button and ramp up production. It may do that one day if it is necessary. Pixel means if that happens, Google won’t be starting from a long way behind the pack.
A word of warning: there will be popular paid for or subscription Android apps that won’t run on this phone. That said, if you use that kind of software, it’s unlikely you’d be looking for a bargain basement phone.
The phone hardware is promising enough. Huawei says that 5000nAh battery is good for 32 hours of video playback. It will handle 20 hours of web surfing using mobile data. In normal use you should go two or more days between charges.
Charging other phones
Huawei has included hardware that allows you to charge other phones from the Y6P. You’ll need to buy a separate reverse charging adapter to do this.
The adaptor is not available on Huawei’s New Zealand website at the time of writing. Finding one online shouldn’t be a struggle, but it highlights a lack of attention to detail. It’s something you wouldn’t expect Apple to miss.
Almost the entire front of the phone is a 6-inch 720×1600 display. Huawei’s specification sheet says 6.3-inches, but the image doesn’t go to the edge of the display.
Huawei calls its display Dewdrop. That’s a fancy way of saying the camera notch is tiny compared with other phones. It is, but in practice it is no less irritating.
Phone makers spend a lot of time talking about cameras. This is the main area where the Y6P departs from premium phones. Keep in mind, the Y6P is at least a grand cheaper than today’s top handsets.
There’s a 13 megapixel camera on the back. It comes with a 5MP wide angle camera and a 2MP depth camera for bokeh shots. The front camera is 8MP.
No-one is going to get excited about the phone’s photography. It’s more than adequate, roughly in line with what you might find on a premium phone three or four years ago. This is more than enough for casual photography, but don’t plan to shoot you next movie on the Y6P.
It’s not a fabulous phone. Yet the Y6P is great value. The big problem is that while it looks like and feels like an Android, it isn’t.
Although you can work around the restrictions, you may not want to. There will be readers who enjoy that challenge. You may have better things to do with your time.
If you’re quick you can buy the Huawei Y6P phone for $200. After August 10 the price will be $300. ↩︎
According to the company’s financial statement Google’s 2019 revenue was NZ$36.2 million. That’s more than double the $17.5 million it made in 2018.
Sales and marketing expenses for the year were $20.4 million. This compares with a shade over $3 million in the previous year.
Which leaves the company with a 2019 profit of $10.6 million. In 2018 the profit was $0.6 million.
More Google tax
It means Google pays more New Zealand company tax than in the past.
Google says its 2019 tax bill is $3.6 million. In the financial statement the income tax expense is listed as $2.5 million. Apparently the lower number is the tax paid during the 2019 year, while $3.6 million represents the total tax the company will pay.
It’s a lot more tax than in the past. Google paid around $400,000 for the previous year.
Yet it is nothing like the whole story. While Google may have booked $36 million of New Zealand revenue in 2019, the figure is only a small fraction of the total amount of business it did in the country.
Does not include everything
A simple back of an envelope calculation shows Google will have booked a total of well over $NZ500 million in advertising last year. The company also has a cloud computing operation, although that is small compared to its advertising business.
The Australian Competition and Consumer Commission (ACCC) estimates Google made around A$3.7 billion in Australia in 2018.
In 2018 Google changed the way it does business in New Zealand to what it calls its ‘reseller model’. Before that the local office was financed out of the Singapore operation.
New Zealand’s government has said it hopes to be part of an international approach to the tax problem and will work with the OECD. This has been slow to date and many countries, including Australia, are moving to introduce a digital services tax.
Global sales of smartphones to end users declined 20.2 percent in the first quarter of 2020, according to Gartner, Inc. The global shelter-in-place combined with the economic uncertainty brought on by the Covid-19 pandemic led to demand for smartphones collapsing as consumers stopped spending on nonessential products during the first quarter.
“The coronavirus pandemic caused the global smartphone market to experience its worst decline ever,” said Anshul Gupta, senior research analyst at Gartner.
“Most of the leading Chinese manufacturers and Apple were severely impacted by the temporary closures of their factories in China and reduced consumer spending due to the global shelter-in-place.”
We knew it was coming. Even so, the raw numbers are still dramatic. All the main phone makers operating in New Zealand suffered big falls. Samsung and Huawei fared worse. Apple, not so much. Gartner also reports people are hanging on to their phones for longer.
The company’s problems are less to do with Covid-19, although heaven knows that is bad enough. Huawei cannot use Google apps or the Google Play store with its new phone models. That is a huge turn off for customers outside of China.
Apple got off to a strong start before the pandemic hit. Garter says it may even have been on track to break records.
While the internet has created new opportunities for media and audiences alike, those opportunities have come at a price. Traditional media organisations now compete with giant digital platforms, not only for the attention of readers, but also for the advertising revenue that was once their lifeblood.
Adding insult to injury, the digital platforms compete for audiences’ attention partly by distributing the news content that was first created and published by those now-struggling media organisations.
This not only damages the media and public discourse, it is harmful to taxpayers.
Plekhanova says Google paid A$426.5 million in Australian digital service tax in 2018. That’s 66.5 times the amount of tax paid in New Zealand: “Given the New Zealand economy is about a seventh the size of Australia’s, this is an extremely wide disparity”.
There are also rules forcing Google and Facebook to compensate publishers when they piggyback off their original content.
All of this makes sense. We let the overseas media giants freeload here. Part of their income depends on services that have been provided by taxpayers. Some of that income even comes direct from government agencies which buys advertising on the two social media giants.
It amounts to a net transfer from the New Zealand taxpayer’s pocket to social media investors: some of the richest people in the world.
Tax a global problem
Ideally the OECD would deal with this problem. But that’s been a long time coming and the money continues to flow in one direction only.
Plekhanova comes unstuck when suggesting taxing or charging tech giants will help local media survive. The damage was done ages ago. Survival depends on more than taxing the giants and anyway, up to a point the main local media outlets depend on the tech giants to reach their audience.
So, yes, let’s tax Google and Facebook like countries tax extractive industries. And, at least, stop pour government money into their coffers. But let’s not kid ourselves this is going to fix our media problems.