Google is threatening to blow up its New Zealand news agreements and remove any ability for users to find local news on its search engine, in ramped-up threats to oppose new legislation.

The global tech giant said today it would remove all links to New Zealand news content if the Government passes the Fair Digital News Bargaining Bill, the new law that would force it to pay publishers for their content.

In a statement, Google – whose New Zealand operation made almost $1 billion last financial year – said it was “deeply concerned” about the Bill, which is due to be passed later this year.

The bill, backed by New Zealand’s media industry, was introduced by the Labour Government last year and supported, with amendments, by National and NZ First (but not Act) at the coalition Cabinet table this year.

The new law would force tech giants such as Google and Meta (Facebook) to negotiate with media companies and pay for the New Zealand journalism and news content that help drive their fortunes.

But Google said today the Bill was “not the right approach”.

“This Bill proposes a ‘link tax’ that would require Google to pay simply for linking to news articles,” said Google New Zealand country director Caroline Rainsford in a statement.

Google NZ country manager Caroline Rainsford. Photo / Dean Purcell

“We’ve been transparent with the Government that if the Bill were to proceed on its current trajectory and became law, we would be forced to make significant changes to our products and news investments.

“Specifically, we’d be forced to stop linking to news content on Google Search, Google News, or Discover surfaces in New Zealand and discontinue our current commercial agreements and ecosystem support with New Zealand news publishers.

“These are not outcomes we want for New Zealanders, news publishers, or our business.”

Media industry representatives have been approached for comment.

Earlier, Media Insider revealed that Google has been accused of employing hardball tactics with the Government and media companies over the planned new law which would force it to pay for the journalism and news content that help drive its business model.

Several sources had earlier alleged Google’s tactics include threatening to not renew existing contracts with media companies, while the new law goes through Parliament.

One source said the tactics were tantamount to bullying. “They’re playing their usual games, being as obnoxious as they can be.”

The source indicated the tech giant had even raised the spectre of reviewing its New Zealand operations – the source said any threat of a pullout would be “ludicrous” and extremely unlikely given Google operated a $1b business here and Microsoft would move in rapidly with its own search engine, Bing.

Prime Minister Christopher Luxon and Media and Communications Minister Paul Goldsmith. Photo / Mark Mitchell

Google’s latest positioning represents a stern test of Media and Communications Minister Paul Goldsmith’s mettle and his legislation.

Goldsmith said today: “There are a range of views throughout the sector which I am considering. We are still in the consultation phase and will make announcements in due course.

“My officials and I have met with Google on a number of occasions to discuss their concerns, and will continue to do so.”

Act leader David Seymour - whose party does not support the Bill - said today the Government was “playing chicken” with Google and “New Zealanders stand to lose”.

“If Google make good on their threat, New Zealand audiences and media companies will be worse off. Smaller media outlets in particular would suffer as they would be denied the opportunity to connect with new audiences via search results.

“It is not any government’s job to protect businesses from customers making different choices. The internet has made it easier than ever to report news, and certain outlets need to stop blaming the internet and start looking at their product.”

Rainsford said today the proposed “link tax” model was fundamentally flawed and would generate unintended consequences.

Such “taxes” were in conflict with the principles of the open web, and had not proven effective in supporting journalism.

She also said the Bill would “overwhelmingly benefit a small number of large operators at the expense of small and local language publishers”.

The Bill also meant there would be an “uncapped financial exposure” for Google. “This makes it impossible to plan and invest effectively in New Zealand.”

She added: “Looking ahead, we encourage the Government to reconsider the current Bill and engage in constructive dialogue to find alternative solutions that will ensure a sustainable future for New Zealand journalism. We are confident that, together, we can develop a better path forward.”

Google’s NZ operation

As the Herald’s Chris Keall reported in May, Google NZ paid nearly $1b to its international parent in what was described as inter-company service fees for the year to December 31, 2023 – a true indication of the size of the business in New Zealand.

Google NZ’s 2023 revenue – net of those inter-company payments – was $84.3 million, with an after-tax profit of $17.8m.

Estimated income tax expense was $5.6m v $4.4m in 2022.

A spokeswoman said in a statement at the time: “We continue to invest locally through infrastructure, community engagement and product launches, and work in co-operation with Inland Revenue to comply with New Zealand’s legislative requirements.”

Image / 123rf

What happens in other countries?

Google has been ruled exempt from the Online News Act in Canada, after agreeing to pay an annual sum of money – $C100 million ($119m) – to be shared amongst news media companies.

The Google money will be allocated on a formula based on the journalist headcount at each company.

The money will be administered and distributed by the Canadian Journalism Collective, an organisation set up of independent publishers and broadcasters.

The collective was committed to distributing the funding in a “fair, transparent, and inclusive manner” said CJC independent board director Sadia Zaman.

“We look forward to working with the full diversity of the Canadian news ecosystem, including traditional print and broadcast organisations, and independent local news publishers, including those who serve indigenous, black and racialised communities and francophone communities.”

It is understood Google would want a similar arrangement here, but for the minister to administer the pool of money.

Any pool of money is likely to be well short of what the media industry believes it should be paid, and even what it receives now.

Media industry representatives have previously stated Google should not be exempt.

In Australia, Google has been negotiating individual deals with publishers under that country’s News Media Bargaining Code but it has also been reportedly adding a clause that allows it to cancel contracts after each year.

Google is reportedly paying more than $A130m ($140m) a year to media companies in Australia.

The Australian Financial Review reported in July that Google had renewed agreements with several specialist and regional news publishers.

Google has an existing five-year deal in place with two of the biggest media companies, Seven West Media and Nine Entertainment.

Rupert Murdoch’s News Corp has a global deal in place with Google, in which the tech giant reportedly pays at least $US100m ($162m) a year. The AFR said it understood this had been renewed in May, for one year “on similar terms to its previous deal”.

“Sources close to Google’s new round of deals with publishers, not permitted to speak publicly, described them as being year-long arrangements that roll over,” reported the AFR. “This made sense from Google’s perspective, publishers said, given the uncertainty over the future of the Code.”