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Document 1.1
The Economic Impact of Online News Intermediaries1 
(For internal discussion among Commission services only) 
June 2016 
1.
Introduction
Some EU MS have taken action on news aggregators.  Germany introduced a law2 in 2013 that 
allowed publisher to charge news aggregators for using their text, unless it is reduced to very small 
snippets.  The law creates an opt-in situation where original news content publishers need to 
explicitly agree that an aggregator can put snippets of news items on the aggregator website.  
Despite expressing concern about news aggregator sites and lobbying for the law, most German 
news publishers opted in3.  A similar dispute between Google News and the Francophone Belgian 
newspapers was settled in 2012 with an agreement4 for enhanced collaboration between Google 
and the newspapers to attract more traffic to newspaper sites and to increase advertising revenue, 
without copyright license payments.  A settlement was also reached in France between Google News 
and newspaper publishers5.  In Spain, the government introduced legislation in 2014 that goes a step 
further and provides for mandatory payment of license fees through a collection society by online 
news aggregators.  Publishers are no longer free to opt-in to aggregation of their content. As a 
result, Google withdrew its News service from Spain.  The law was opposed by another group of 
newspaper publishers who commissioned a report that shows that this new law damages the 
newspaper industry6.  The experience in these countries provides a first indication that, rather than 
damaging the publishers, news aggregators are beneficial because they drive additional web traffic 
to the publishers’ sites that otherwise would not have reached them.   
This note aims to shed some economic light on the question of news aggregators. It is based on 
existing economic evidence and research; it does not offer new evidence.  A narrow economics of 
copyright approach would focus on the impact of news aggregators on the revenue of publishers 
only and thus on the incentive to invest in news production.  The key empirical question is whether 
the original content providers get more or less traffic as a result of news aggregation sites?  Beyond 
this narrow approach, a wider economics of copyright approach would go beyond the question of 
publishers' revenue and examine the impact on consumer welfare and on the actual production of 
1 Written by 
, DG JRC 
.  The author is a researcher at the Joint Research Centre of the 
European Commission 
.  The views and opinions expressed in this note are the author's and do not 
necessarily reflect those of the JRC or the European Commission. 
2 See http://www.nytimes.com/2013/03/02/technology/german-copyright-law-targets-google-links.html? r=0 
3 See http://techcrunch.com/2013/08/01/google-publishers-love-hate/ 
4 See http://www.googlepolicyeurope.blogspot.jp/2012/12/partnering-with-belgian-news-publishers.html 
5 See https://googleblog.blogspot.co.uk/2013/02/google-creates-60m-digital-publishing.html 
6 See http://www.aeepp.com/noticia/2272/actividades/informe-economico-del-impacto-del-nuevo-articulo-
32.2-de-la-lpi-nera-para-la-aeepp.html  


news content7.  From a public policy perspective, copyright protection should strike a balance 
between the interests of the content producers and users and maximize overall social welfare in 
society, not only the welfare of a single interest group.   
2. 
The narrow economic approach to aggregator websites 
 
The impact of aggregators on the revenue of rights holders is the result of two opposing forces:  a 
positive quantity and a negative substitution effect.  The substitution effect measures to what extent 
unlicensed distribution displaces and reduces (the revenue derived from) licensed distribution.  The 
quantity effect measures to what extent unlicensed distribution increases revenue by re-directing 
traffic or sales to licensed channels.  If the unlicensed product is a close substitute of the licensed 
version, the substitution effect will be strong.  The degree of substitution depends on the quality and 
the quantity of news available on the aggregator's site.   
 
Most news aggregators offer snippets or small extracts of the original news article only.  This may 
stimulate the interest of at least some readers to read more and click through to the original 
website.  That increases traffic again to the original newspaper website (the quantity effect).  
Because all this content is already freely available on the newspaper site the impact translates into 
ad revenue on the newspaper publisher's site.   Aggregators may also provide a re-worked and 
edited version of one or several original articles, for instance in user-aggregated and blog aggregator 
sites (Isbell, 2010).  That shifts more consumer value to the aggregator site and affect users' interest 
to look for the original article (Delarocas et al, 2015). A key factor in the substitution effect is the 
difference in quality between the aggregator service and the original service offered by the publisher 
or rights holder.  If the aggregator offers a lower quality service than interested users may be 
inclined to go for the full quality service.  The wider the quality gap between the two services the 
more likely that the quantity effect prevails.  Unlicensed intermediaries often deliberately provide 
lower quality or incomplete services because they cater to the needs of the long tail of news readers 
with a low willingness to pay for content. Stopping that unlicensed distribution channel will not bring 
these customers back to fully licensed distribution websites.  A similar mechanism is at work in 
YouTube music and audio-visual media: YouTube music and video quality is usually lower than the 
original version and therefore constitutes an imperfect substitute for the original in the eyes of many 
consumers.  If it would be a perfect substitute there would be no incentive to go to the original 
content producer site.  Consumers who consider it to be a sufficiently high quality substitute will not 
be attracted to the original.  They would often not be willing to pay the full price for the original.  
Differences in willingness to pay among consumers drives market differentiation.   In that sense, 
aggregators and original content producers play on price and/or quality discrimination between 
users.  This may be welfare optimising for all parties concerned.  The net effect is an empirical 
question that cannot be settled by economic theory or legal reasoning; only data can answer that 
question.  We turn to this in the next section.  
 
                                                            
7 The distinction between the narrow and wider economic approach can be linked to the Continental European 
"authors rights" ("droit d'auteur") approach to copyright that emphasizes the interests of the original author 
and the Anglo-Saxon approach to copyright that seeks a balance between the interests of the authors and 
society at large.  The economic tradition on copyright is situated in the latter approach.  

 

Besides the economics of copyright, the role of news aggregators can also be seen in the context of 
the emergence and rapid growth in online platforms or multi-sided markets on the internet (Caillaud 
& Julien, 2003; Rochet & Tirole, 2006; Parker & Van Alstyne, 2005).  Platforms bring new and 
innovative business models to the internet, enabled by the dramatic decline in information costs 
that digital technology offers. They bring together different types of users in a single online place. 
For instance a news aggregator platform brings together news content publishers looking for clients 
for their content, news consumers looking for interesting articles and advertisers looking for 
consumers who may be interested in buying their products.  Bringing all these groups together in a 
single site facilitates matching between different users and their interests.  Traditional newspapers 
websites only contain the content from one publisher; aggregators offer content from many 
publishers.  They lower search and information costs for news consumers.  They provide more 
efficient matching opportunities to all types of users, compared to scattered presence of users on 
the internet.  Aggregators curate all that content and classify it in ways that reduces search time.  
This enables users to consume more content in a given time period, spending less time on search 
and switching.  This attracts more consumers to the aggregator site.  At first sight, this may be 
interpreted as a loss for traditional newspaper sites because it shifts traffic away from these sites 
and towards the aggregator (the substitution effect).  In the US for example8 Yahoo and Google 
News feature prominently at the top of the online news sites ranking.  However, news aggregators 
do not offer exactly the same content as the original newspaper publisher website.   
 
Moreover, contrary to single newspaper websites, news aggregator platforms generate beneficial 
network effects across user groups. The more newspapers are covered by an aggregator, the more 
consumers will be attracted to it.  Conversely, the more consumers use an aggregator, the more 
publishers will be interested in having their material covered by the aggregator platform.  For the 
platform operator, the more users are operational on his platform the more data he can harvest to 
improve the efficiency of his matching algorithms and the curation of media products on his site.  
On the other hand, aggregator platforms may also induce welfare re-distribution effects between 
users, both within and across different user groups.  They may have a stronger beneficial effect for 
some type of content providers, for instance local newspapers and high-quality newspapers than for 
middle-of-the-road publishers of mass content (Chiou & Tucker, 2015; Jeon & Nasr, 2015).  They may 
increase the audience of less popular news outlets that otherwise would not have received 
attention.  They may also depress revenue for middle-of-the road news publications.  That re-
distribution may lead to perceptions of inequalities in the distribution of welfare effects.  It may 
trigger socio-economic disruption and calls for action by policy makers – for instance calls by artists 
for "fair remuneration" and by newspapers publishers for re-distribution of the benefits reaped by 
new aggregation platforms.  Public policy interventions in the market-based distribution of income 
should be justified in principle by market failures or social concerns.   
3. 
The available empirical evidence 
The available empirical evidence suggests that the quantity effect dominates the substitution effect 
and thereby confirms the rationale behind the response of the German, French and Belgian 
publishers – as well as the opposition of some Spanish newspapers to the Spanish law.  Aggregators 
are complementary rather than competing services to newspapers' original websites and convey 
                                                            
8 See the Top-15 US news sites http://www.ebizmba.com/articles/news-websites  

 

more benefit to publishers than harm.  In the following paragraphs we briefly present the most 
relevant empirical economic studies available to date. 
Chiou & Tucker (2011/2015) start from the observation that the digitization of content has led to the 
emergence of platforms that draw information from multiple sources and the possible policy 
consequences of this change in media dynamics.  Policymakers are concerned that these new 
platforms threaten incentives for the production of original content. As a result, policymakers are 
contemplating regulations that would force aggregation platforms to pay or require an explicit "opt-
in" for content providers. To understand the possible consequences and underlying rationale of such 
laws, the authors explore whether aggregation of content by a single platform encourages users to 
"skim" content or to investigate in depth. The study uses data related to a contract dispute in 2010 
that led a major aggregator (Google News) to remove news articles from a major content provider 
(Associated Press). These articles were typically shortened versions of stories that appeared in a 
select number of AP-associated newspapers.  They compare users' website visits before and after 
this contract dispute relative to traffic from Yahoo! News, which continued to provide Associated 
Press content during this period. In theory, on one hand, consumers may use platforms to scan the 
extracts of content without clicking through to pursue more in-depth material ("scanning effect"). 
On the other hand, consumers may use platforms to explore new material more deeply ("traffic 
effect.") The data allows measuring both of these effects.  The authors find that after Associated 
Press content was removed from Google News, fewer users subsequently visited news sites after 
navigating to Google News relative to users who had used Yahoo! News. Over a seven-week period 
80 million monthly visits were lost to newspaper websites that carried AP content.  They find 
evidence that the traffic effect is large, as aggregators may guide users to new content. There is no 
evidence of a scanning effect, as overall traffic to Google News and Yahoo! News remained relatively 
comparable during that time period.  Websites with stronger ties to AP suffered a drop in traffic 
after the dispute.   
Chiou & Tucker (2015) conclude that the "fair use" exemptions relied on by aggregator sites in the 
US are potentially less damaging to the original copyright holder than often thought.  Moreover, the 
decision to opt-into (or out of) an aggregation platform should depend on whether the content 
provider is considered high-quality or highly unusual. Both these characteristics appear to encourage 
users to use the aggregator to explore content more deeply instead of scanning content.  
Horizontally or vertically differentiated content from high-quality newspapers or from very local or 
specialized themes newspapers are likely to benefit from news aggregator sites while more bland 
middle-ground news producers may stand to lose.  These findings are in line with earlier research by 
Bar-Isac et al (2012) on the impact of reductions in search costs on the distribution of online 
consumption.  Top performing products as well as long-tail rare products are likely to gain when 
search costs diminish while the middle ground may lose out.  New aggregators reduce search costs 
for consumers and seem to have a similar impact of the distribution of news consumption.   
Athey & Mobius (2012) study the introduction of a “local news” feature in Google News France in 
late 2009. Users could enter their zip code and on all subsequent visits they see news from local 
outlets prominently featured.  The authors compare the news consumption of users who enable this 
feature to the usage of a set of “control” users, over a 2-week and an 8-week period.  Adoption of 
this Google news feature leads to greater consumption of local news by more than 26% though 
Google news explains a substantial portion of the increased traffic to local sites. We see a 5% 

 

increase in direct navigation to local outlets (bypassing Google news altogether) and a 13% increase 
in clicks on local outlets from the Google news home page.  Over an 8 week period the local news 
treatment effect is attenuated somewhat but remains high (over 14%). Over time the incremental 
local news consumption derives primarily from increased utilization of Google News.  There is a 12% 
increase in the number of local outlets used.  The Google local news feature cuts into the “curation” 
role of newspapers; users are sent to the article directly, bypassing the profitable home page of the 
news outlet. They may subsequently read other articles in the outlet through following links they see 
on the same page as the original article, and thus their browsing may never take them to the outlet’s 
home page.  Even though our results broadly support the hypothesis that news aggregators are 
complements for local news outlets, it is important to emphasize that the impact on local news 
outlets is mixed overall. Some outlets gain more than others, users spread their consumption over a 
larger number of outlets, and the curation role of news outlets is diminished.  
 
Delarocas et al (2015) conduct a series of field experiments about readers' allocation of attention 
between news aggregator and the original articles they links to.  They examine how the length of the 
text snippet, the presence of images and the number of related articles on the same story, affect a 
reader’s propensity to visit the content producer’s site and read the full article.  Their findings 
suggest that longer aggregator snippets reduce the probability that readers will read the full articles. 
However when several related snippets compete for user attention, a longer snippet and the 
inclusion of an image increase the probability that an article will be chosen over its competitors. 
 
Huanga et al. (2013) in their assessment of the relationship between aggregators and news websites 
in Taiwan find that aggregators do not compete with news websites, with one exception.   
Newspapers worldwide often serve as content providers for news portals, but portals outperform 
most newspaper sites in audience share. Whether this is a zero sum game or a win-win scenario 
deserves scholarly attention, because the phenomenon constitutes a unique case of intra-media 
competition. Based on empirical data collected through a large-scale survey, this study 
systematically examines the delicate relationship among and between news portals and newspaper 
sites in Taiwan. The results document non-competitive relationships among most news sites, with 
the exception of Yahoo! News. Such counter-intuitive findings carry theoretical and strategic 
implications for the study and practice of online journalism. 
Lee & Chyi (2015) use a national survey of 1,143 U.S. Internet users to study the demand for 
aggregators and other media outlets in the USA.  They find a non-competitive complementary 
relationship between three major news aggregators and 13 major TV, print and social media news 
outlets.  Google News, Yahoo! News, and Huffington Post do not compete with other media outlets.  
They recognize that this finding is at odds with industry sentiment.  
The Spanish Association of Publishers of Periodical Publications asked NERA Economic Consulting 
(UK) to assess the impact of a new article in the Spanish Copyright Act (Art 32.2) that established a 
compulsory fee to be paid by online news aggregators to publishers for linking their content within 
their aggregation services. Publishers cannot opt out of receiving this fee and payments are to be 
made through a copyright collecting society.  This fee was promoted by a small group of publishers 
affiliated with the Association of Publishers of Spanish Newspapers despite opposition from many 
industry players. The theoretical motivation for this new article was that aggregators benefit from 
the publishers’ efforts without remunerating them.  The underlying assumption is that news 

 

aggregators compete with newspaper publishers, reduce the number of visits to newspaper 
websites and consequently their advertising revenues.  The publishers’ inability to refuse payment 
was justified to prevent a repetition of what occurred in Germany where publishers finally decided 
to opt in for fear that news aggregators would exclude publishers from their services in order to 
avoid the fee.  The Spanish law become effective on 15 December 2014. NERA (2015) examined 
newspaper website traffic during the first few months of 2015 using ComScore traffic data.  They 
found a decrease in traffic of more than 6% on average, going up to 14% for small newspaper 
publications.  The decrease in traffic was confirmed independently by web-analytics service 
Chartbeat within hours of their removal from the Google service9.  Chartbeat tracks about 50 
Spanish newspaper sites ranging from small media outlets to the largest newspaper publishers.  
These sites saw their external traffic fall by 10-15 percent.  Overall traffic did not fall as the amount 
of internal traffic coming from other Spanish newspapers rose. This suggests that readers are moving 
between different Spanish news sites more than they did previously, rather than coming directly 
from links at Google News.  This could be another indication that user search costs increased as the 
Google aggregator site stopped providing links.  Users have to generate their own news aggregation 
instead of Google News doing it for them. 
 
The studies cited above cover news aggregation sites only.  However, copying news items is not 
limited to websites that claim to be news aggregators.  It is widely practiced by all news media, 
including traditional newspapers publishers, radio and TV news channels.  This is well-documented 
in a study of French news media by Cage et al (2015) who investigate the speed and modalities of 
online news dissemination.  On average, it takes two hours for information published by an online 
media outlet to be published on another news site, but less than 45 minutes in half of the cases and 
less than 5 minutes in 25% of the cases. At least half of online dissemination is copy-and-paste and 
does not follow rules for citing and crediting.  Information is costly to produce but cheap to 
reproduce.  Copyright law does not protect facts, only the particular expression of facts by an author 
in a news article. Some re-writing, reduction to short excerpts or an appropriate reference to the 
original publisher might go a long way to satisfy the law.   
 
4. 
Why are neighbouring rights not effective in Spain and Germany? 
 
In this section we link that empirical evidence to the observed behaviour of newspaper publishers in 
their strategic interaction with the aggregators.  We combine arguments from the well-known Coase 
Theorem in law & economics with the economics of platforms or multi-sided markets to explain why 
the news publishers could not make effective use of their newly acquired neighbouring rights and 
why it is in their interest to work around the legal solution.  We focus in particular on the outcome of 
the real-life experiments with neighbouring rights in Spain and Germany.    The section starts with a 
discussion of the opinions of the Spanish and German competition authorities on the neighbouring 
rights.  Both use economic arguments and come to similar conclusions. 
 
The Spanish competition authority (CNMC, 2014) issued an opinion that questions the economic 
foundations for the introduction of a neighbouring right for news publishers vis à vis news 
                                                            
9 See https://gigaom.com/2014/12/16/traffic-to-spanish-news-publishers-plummets-after-google-move/  

 

aggregators in the Spanish intellectual property law.  First, the CNMC observes that there are 
technical solutions (the introduction of a robot.txt file in a web page) that newspapers can apply to 
avoid that their articles are aggregated by online news platforms, or to select specific aggregators 
that are included or excluded (as German newspapers do).  The fact that newspapers do not use this 
means could be considered as an indication that they perceive this aggregation as beneficial and not 
a competitor but rather a complement to their own news distribution efforts.  The introduction of 
other and "irrevocable" legal means to achieve the same purpose would then be not only 
superfluous but could be harmful.   Second, the CNMC notes that it is inefficient to fix an a-priori 
price for the remuneration of newspapers and not let the market work out a price.  News 
aggregators generate traffic and revenue for news publishers' websites; that is part of the 
remuneration. It is difficult to determine the revenue that news aggregators gain from specific news 
articles. Hence it would be difficult to work out the basis for the calculation of compensation.  The 
CNMC concludes that there is no indication of a market failure in news aggregation because news 
publishers do not seem to actively oppose news aggregators. Consequently, there is no reason for 
regulatory intervention in that market.  Moreover, the intervention through the modification of the 
Spanish intellectual property law creates new market access barriers, both for existing news 
aggregators and for new service providers.  The CNMC recommend carrying out a more profound 
economic analysis and to drop at least the irrevocable character of the provisions and the 
intermediation of copyright management societies.   
 
The CNMC report explains why the Spanish neighbouring right fails to generate any additional 
revenue for Spanish newspaper.  The newspapers' behaviour shows that they are interested in 
maintaining their presence in news aggregators, even without remuneration, by not blocking the 
aggregators' access their websites and articles.  The law introduces a right to remuneration - on top 
of the additional traffic that newspapers get through the news aggregation websites – but the 
aggregators have no incentive to pay more for something that they can get for less.   However, by 
making the remuneration irrevocable, the law disrupts the status-quo that emerged in the market 
and declares it illegal.   
 
A similar situation occurred in Germany when a revocable neighbouring right was introduced. The 
German is case is more complex than the Spanish case because if involves the Google Search engine 
too. Part of the debate is about the length of the news snippets that Google can extract from the 
article and put in Search.  After the law came into force, VG Media, the collecting society for the 
German news publishers, introduced a tariff of 11% on all (ad) revenue derived from news search 
and news aggregation activities in June 2014. The tariff was subsequently reduced to around 6% in 
October 2014. There was also a debate about the legality of the robot.txt protocol and what to do 
about the newspapers that do not include such a protocol in their webpages.  Google eventually 
asked all publishers to sign a written contract with a zero price license under the "opt-in" clause, and 
all of them did in order to allow Google News and Google Search to continue linking to their news 
articles.   
 
The news publishers then filed a complained at the German competition authority about the alleged 
abuse by Google of its dominant position in the German market.  The competition authority (Bundes 
Kartel Ambt, 2015) ruled that there was no need to take action in this case.  Because the complaint 
went beyond Google News that is not ad-driven and also covered news articles snippets ranked in 

 

Google Search the BKarA examined the question from a multi-sided online platforms perspective.  
The different sides or user types in the market (newspaper publishers as suppliers, consumers, 
advertisers) cannot be considered as separate markets; they are linked by indirect network effects.  
One side (advertisers) may subsidize the other side (consumers), thereby increasing the welfare of 
all sides.  Although the news publishers are not remunerated for their contribution to the platform, 
the BKarA still considers this to be a market, though with a zero price. It also considered that the 
"opt-in" procedure as a proportional measure that leaves newspapers free to decide whether they 
want to participate in the market or not. It concluded that Google does not abuse its market position 
and that there is no reason for intervention in this market.  After the competition authority rejected 
their claim, the publishers around VG Media filed a new complaint against Google in a civil court in 
January 2016, claiming that Google owes them remuneration. This case is still pending.  
 
Even if the German civil court would rule that Google owes the publishers remuneration, a first 
economic question is whether zero is an acceptable market price?  The BKarA reached the 
conclusion that zero can still be a market price because there are on-going transactions at that price.  
By bringing the collecting societies as intermediaries into the market process, the legislators in Spain 
and Germany have tried to increase this price to a positive non-zero figure.  Collecting societies will 
obviously not work for zero remuneration, partly because they are private companies that have to 
cover their own operational costs and would like to earn a profit margin too.  As the Spanish 
competition authority pointed out, the collecting societies create additional costs in the functioning 
of the market.  That in itself is an inefficient solution because the market can clear at a lower cost, as 
it currently does with the robot.txt protocols.  More importantly, the question is whether a legal or 
regulatory intervention in the market, implemented via a collecting society, makes the market more 
efficient or helps to overcome an externality that distorts the market.  Clearly, both the Spanish and 
German competition authorities did not think this was the case.   
 
The wider public economic policy question is how all this affects social welfare.  The price dispute 
between the news publishers and the aggregators is after all only a welfare transfer question: who 
gets which part of the cake?  It does not increase the size of the cake or the total amount of 
economic welfare to be distributed in society.  As the German authority noted however, these 
transactions take place in multi-sided online platforms with several types of users: news publishers, 
advertisers, consumers, and the platform operator.  Consumers and advertisers may be negatively 
affected by the dispute between the platform and the publishers, and by a price increase on that 
side of the platform.  If newspapers withdraw their consent, consumers and advertisers will suffer.  
So far newspapers still consent and there is no loss of social welfare in Germany.  In the Spanish case 
however, newspapers are legally not allowed to consent at a zero price and the entire market 
disappeared as a result.  Consumers, advertisers and news publishers suffer a reduction in welfare as 
a consequence of the law.   
 
The consumer welfare dimension got a bit lost in the debate on neighbouring rights. News 
aggregators are rapidly becoming the preferred entry gate for consumers into news media, 
especially mobile phone users.  What attracts consumers to news aggregators?  First, news 
aggregators give an overview of news across different sources while consumers who go to a 
newspaper website get only one source.  In this way, they may get different perspective on a single 
news event.  To get different perspectives in ordinary news sites consumers would have to incur 

 

more transactions costs and hop to several websites.  Second, news aggregation snippets are more 
appropriate for mobile phone users with small screens.  Users who want to read the full article can 
still click through.  However, loading full articles from newspaper websites onto mobile phones takes 
time.  Some providers have started to improve the experience with fast-loading technologies (see 
below).   
 
Ultimately, this is a question of market power.  As Parker & Van Alstyne (2005) demonstrated in 
their seminal paper on network effects in multi-sided platforms, the pricing structure in platforms 
depends on the price elasticities of the different sides and user groups in the market.  The side with 
the lowest price elasticity – i.e. their participation is less sensitive to entry pricing - will usually end 
up paying the highest price for market access.  In Google Search, advertisers pay a price for the ads 
they place, information suppliers and consumers pay no price – though they both pay a relatively 
low price by contributing their private information. In Google News there are no ads and only 
publishers and consumers.  Neither of them pays a monetary contribution10. However, publishers 
pay an opportunity cost in the sense that they are not remunerated.  That shows that they are price 
inelastic too: a lower price, even a zero price, does not affect their participation.  That lowers their 
market power and reduces their remuneration, in this case to zero. Market participants with high 
price elasticities – i.e. their participation will be very sensitive to price increases – end up paying the 
lowest price.  Consumers pay nothing.  If aggregators would charge them they would probably 
unsubscribe in large numbers from the service.   The zero price for news publishers could thus be 
considered as an economically efficient market outcome from the perspective of the Parker & Van 
Alstyne (2005) model.   
 
Whether it is a "fair" outcome is something that economic theory cannot answer.  Policy makers can 
try to intervene in a market, even at the cost of economic inefficiency, to change the outcome 
because they consider the open market outcome unfair.  The question then is whether such 
intervention can be made effective. In Spain and Germany the legal interventions by means of 
neighbouring rights for news publisher were so far not effective and did not change the market 
outcome because market forces were stronger than the law.  Merges (2008) would label this as 
cases of "legal centrism": the idea that laws determine market outcomes rather than market forces.   
 
Economists have another label for this.  They attribute this outcome to the the Coase Theorem.  The 
theorem states that if trade in an externality is possible and transaction costs are sufficiently low, 
bargaining will lead to an efficient outcome regardless of the initial allocation of property rights11.  
The news aggregation case fits very well into this theorem.  Transaction costs between Google and 
the publishers are relatively low, especially when a simple device like robot.txt is used.  The 
publisher perceive an externality – the unremunerated use of the news content that they produced 
– and want to internalize that externality, at least partly.  The law accords them a property right to 
this externality in the form of a neighbouring right.  Bargaining starts but unfortunately their 
property rights are valued at a zero market price.  The benefits of the property right have ended up 
in the hands of another party, the news aggregators, irrespective of the initial allocation of rights 
that was in favour of the publishers.  Nevertheless, this is an efficient market outcome.  It is hard to 
                                                            
10 In other news aggregation platforms, for instance in Yahoo News, publishers receive a remuneration 
because Yahoo News can afford to pay from its advertising revenue. 
11 See https://en.wikipedia.org/wiki/Coase theorem  

 

see how this can be changed through regulation, unless at great costs to societal welfare and 
economic efficiency.   
  
Technological evolution may however be about to change this situation.  The Google, Apple and 
Yahoo news aggregation models are gradually replaced by new business models such as Facebook's 
Instant Articles.  In some countries, social media account for 75% of all news distribution activities, 
especially among the younger generations. Facebook is the clear market leader for social media 
news consumption.  About 40-50% of users consume news through their mobile phone (Reuters, 
2016).  Instant Articles gives mobile phone users fast access to complete newspaper articles, not just 
titles and snippets.  More importantly from a news publishers' perspective, Instant Articles allows 
news publishers to retain 100% of the ad revenue on their own ads and 70% of the revenue on 
Facebook-produced ads.  Facebook claims that users read more Instant Articles than ordinary 
articles and are less likely to abandon the article12.  That explains why hundreds of newspapers have 
already signed up for this distribution channel since Facebook opened it up to all newspapers in May 
2016. This is a business proposition that Google News cannot beat.  Google is trying to compete with 
its own mobile news version through Accelerated Mobile Pages, a technology that enables fast-
loading of entire news articles onto mobile phones.  However, Google's YouTube media platform has 
only half the market share for news consumption of Facebook (Reuters, 2016, p 11). Google might 
soon have to offer better terms to news publishers in order to remain competitive in the market.  
 
It may well be that the battle over neighbouring rights for newspaper publishers will soon become a 
side show as better distribution technologies and channels become available for consumers, with a 
more interesting business proposition for news publishers too.  However, there is no guarantee that 
Facebook will continue to offer such generous financial terms to news publishers in the future.  A 
typical strategy of multi-sided platforms is to start with low prices in order to boost the network 
effects and conquer the market.  Once they are in a dominant position the terms and conditions may 
change again and online news markets will be back to business as usual.     
 
 
 
                                                            
12 See https://instantarticles.fb.com/  
10 
 

 
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