The EU proposes better terms for revenue sharing between social media platforms and content creators

The European Parliament and the European Commission have already approved the new copyright law, which will require the two largest cross-border platforms hosting user-uploaded content, Facebook and YouTube, to cut licensing deals with creators so they are paid when people share their content from 2021 onwards.

The law would apply to all content creators, including music and film producers, but also newspapers and magazines.

The move is meant to hold tech platforms accountable for the content their users share, and to try to return some of the billions of US dollars in revenue that Facebook and YouTube make each year to the people who actually create the content that appears on those sites.

In YouTube’s case, if content owners find that someone else has uploaded their video, they can ask YouTube to remove it or make money off the video by having YouTube run ads alongside it.

For starters, each European Union member country will implement the rule on its own, which could mean tech companies will have to abide by a different set of guidelines in each country.

This diversity of regulations will require a finely tuned filtering system, which could possibly use matching technology to identify unsuitable content

However, Google has not been keen on developing such a software and has historically been prone to back out of markets attempting to restrict them.

This time as well, Bloomberg said Google have been musing that it derives no money from its news service and that a withdrawal would not be a financial hit, even from a market the size of the EU.

However, the corporation earns significant ad revenue from Google searches after reading news articles which makes this statement dubious.

Same business in Vietnam

In fact, both Facebook and Google have been using content of entertainment and news articles, so thanks to this, gaining hundreds of millions of US dollars in annual advertising revenue in Vietnam.

According to the latest data published by market research company ANTS, spending on online advertising in 2018 reached $550 million, including Facebook’s $235 million, Google’s $152 million, and the remaining $150 million divided among local advertising firms.

Thus, Facebook and Google accounted for more than 70 per cent of the local online advertising market. ANTS also forecast that the combined market share of Facebook and Google will stay at 60-70 per cent in 2019 and 2020.

Thanks to its extensive user network across the country, Facebook and Google have become the only effective promotion tools for local content creators.

However, their earnings did not live up to expectations because most of the advertising revenue for their content goes to the two tech giants’ wallets.

The two tech giants are averse to sharing advertising revenue with local content creators, even though they have been largely responsible for the success of the platforms.

Discussing the issue with VIR, Nguyen Thanh Ha, chairman of law firm SB Law, said that as the digital economy is gathering speed, local lawmakers are under increasing pressure to issue policies on supervising content on social networks.

“Violations of the Law on Intellectual Property have been rampant on the Internet and social media. The local regulations are not strict enough to deter violations,” Ha said.

As a result, the only way to alter the balance of power in the advertising industry would be for content creators to pull their content from these platforms.

However, content creators are just too dependent on Facebook and Google to do so.

Not only being chased for copyright fees by the EU, social networks like Facebook and Google have been beset by the ­authorities of numerous countries for tax arrears and evasion. Dozens of countries are stepping up efforts to levy new taxes on technology giants, hoping to capture revenue from digital services as economic activity increasingly goes online. According to the Vietnamese Ministry of Finance’s latest report, in the 2016-2017 period, Facebook and Google only paid VND120 billion ($5.28 million) in taxes in Vietnam via their advertising agencies and local businesses directly purchasing their services, which is disproportionately little compared to their tremendous annual revenues. In Italy, Facebook agreed to make a payment of more than €100 million ($112 million) to end a fiscal fraud dispute at the end of 2018. This country has already drawn similar agreements from Amazon, Apple, and Google, joining EU neighbours seeking a bigger tax take from multinationals previously able to use loopholes allowing the booking of profits in countries with more favourable tax regimes. Last May, Google agreed to pay €306 million ($342.9 million) to end a dispute related ­primarily to 2009-2013 profits booked in Ireland. Meanwhile, the government of the UK also announced a drastic change to the way Silicon Valley tech giants would be taxed. The UK will issue a 2 per cent tax rate on the revenue tech giants make from UK users, estimating that it could raise up to £400 million ($508.5 million) a year starting from 2020. In every country, these cross-border platforms are a real challenge for the sustainability and fairness of the national tax system. The rules have not kept pace with changing business models, and it is clearly not sustainable or fair that digital platform businesses can generate substantial value in the UK without paying tax. Inspired by EU regulations to collect tax based on the revenue of tech companies rather than their profit, South Korea, India, and at least seven other Asia-Pacific countries are exploring new taxes. Mexico, Chile, and other Latin American countries are also contemplating new taxes aimed at boosting receipts from foreign tech firms. In the same case, Netflix, a cross-border TV show and movie streaming service popular the world over, has also been accused of tax arrears and evasion in Vietnam.

Power over tech giants

Despite the fact that Vietnam has yet to bring any case of intellectual property rights violation against Facebook or Google, the EU would set a weighty precedent, and the country may well re-create the EU regulations in its national framework to ensure the rights of local content producers.

“It will be a big change for the local regulatory system and will favour Vietnamese content creators,” said Ha.

However, it will take time to materialise such regulations in Vietnam.

According to Ha, the current big issue is that Facebook and Google have yet to open representative offices in Vietnam, despite the huge revenue they generate in the country.

Therefore, the efficiency and possibility of applying the sanctions like the EU’s in Vietnam are questionable.

“Vietnamese lawmakers need time to research the EU’s regulations and organise consultations before drawing up such a law,” added Ha.

In addition, one big obstacle is the platforms’ ability to obey the new regulations.

In fact, the EU is not the first one to attempt to collect copyright fees from Facebook and Google. Specifically, in Germany, Axel Springer SE – the owner of German newspapers Die Welt and Bild – requested Google to pay fees for quoting the content of its newspapers.

However, Google decided to simply stop quoting the newspapers.

Similarly, Spain had passed the Law on Intellectual Property outlining copyright fees payable to newspapers after sharing their articles. As a result, Google completely halted its news business in the country.

Economist Vu Sy Cuong, who has long experience in financial analysis and research in France, told VIR that Google and Facebook will readily leave the small- and middle-sized markets if they get tangled up in regulations.

He was of the opinion that the two tech giants may just leave Vietnam if it chooses to flex its muscles simply because of the size of the market.

True enough, compared to the EU, the Vietnamese market may seem a small enough loss. However, the EU might just be opening the floodgates to be followed by a multitude of smaller countries, with Vietnam being one. Compared to the loss of the 500 million people EU market, each step back may seem small – but they add up and there will be a point when Google will feel the pressure to back down.

This pressure by the EU will not only affect revenue sharing with content creators but will bring tech giants more under the purview of legislators, extending supervision over social media. VIR

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