Rupert’s Risky Ruse

Michael Hedges August 10, 2009 Follow on Twitter

Without doubt every stock-trader, News Corp shareholder and most of its employees sit up straight in the chair at each of Mr. Murdoch’s pronouncements. Last week very sour financial results were overwhelmed by his final verdict on the news business and the Web. They will pay, he says.

Of course, The Elder’s word carries considerable weight among stock-traders, his shareholders and fellow publishers looking for a little blue sky. His announcement that News Corp and News International newspapers would begin charging people for web access was targeted to people who eagerly want to be convinced. Web-heads were universally dismissive. So were others in the news biz. “As so often with statements by the world's most famous media mogul, the announcement is being treated as the word of God,” said The Guardian’s Roy Greenslade. “Excuse me if I disagree with those slavish reactions, and with Murdoch…”.

“We intend to charge for all our news websites," said The Elder to the admiring throngs. The first to begin charging for online access will be the Sunday edition of the Times of London, perhaps by November. Sunday Times content will be split off from the Times of London to a separate website. Other News Corp titles – including the illustrious tabloid News of the World - will be charging for web access within a year. "I believe that if we are successful, we will be followed by other media,” he projected.

Most discussions about the future of news on the Web have the appearance of a virtual circular firing squad. Everybody shoots at each other. Nobody falls down. Shortly before Mr. Murdoch’s breathtaking announcement, Thompson Reuters President/Media Chris Ahearn took a preemptive shot on the Reuters MediaFile blog (August 4):

“The Internet isn’t killing the news business any more than TV killed radio or radio killed the newspaper. Incumbent business leaders in news haven’t been keeping up. Many leaders continue to help push the business into the ditch by wasting “resources” (management speak for talented people) on recycling commodity news. Reader habits are changing and vertically curated views need to be meshed with horizontal read-around ones.

“Blaming the new leaders or aggregators for disrupting the business of the old leaders, or saber-rattling and threatening to sue are not business strategies – they are personal therapy sessions. Go ask a music executive how well it works.”

That media habits are changing is not Mr. Murdoch’s immediate concern. News Corp posted a $3.4 billion loss across all business units. Liquidity means keeping bankers, stock traders and shareholders if not happy at least confident.

When Mr. Murdoch says his pay-for-everything plan will be “followed by other media” he’s banking his reputation as money-spinner-in-chief not only that “other media” will follow his lead but some will forge ahead. Indeed, The Elder would like to see “other media” to take on the risk. The plan only works, if that is the design, if all news content producers throw up a pay wall.

Granted, The Elder gave no details on the pay button for his UK newspapers. That's part of the ruse: get somebody else to jump first.

In the UK - where the pay plan will be implemented first, Wall Street Journal notwithstanding - Mr. Murdoch has to contend with the BBC, which posts news content on the web for the price of the household radio and TV license fee and the appearance of being free to access. Though publishers across Europe have railed against public broadcasters’ ventures on the Web, their complaints have managed to dislodge for-fee Websites.  And, too, publishers and their supporters have suggested a sort of universal tax similar to the license fee to support “serious journalism.” Perhaps Mr. Murdoch will explain his need to David Cameron.

But the Murdoch pay plan does have a reasoned logic. Specific numbers arguable, it is better to have twenty thousand people paying something than twenty million paying nothing. All that’s needed, by extension, is the correct calculus of price and content. Mr. Murdoch said he’d invest in quality content. The New York Times experiment with Times Select, discontinued two years ago, showed that the few coughing up cash don’t pay the fees of millionaire columnists.

Also chiming in on the “free content” discussion last week was Axel Springer CEO Mathias Döpfner. Calling paid content on the Web a “step-by-step” process, he’s rallying to mobile media. "Mobile devices offer completely new opportunities,” he said to a press conference (August 6). “Users are accustomed to pay."

Private equity firm Veronis Suhler Stevenson (VSS), reporting media consumption trends in the United States (August 4), drew the conclusion that media consumers – Americans, at least – may be turning away from free ad supported media. Said VSS principal John Suhler: “While we have seen consumer media usage remain generally flat over the past year, the way in which consumers are spending their time continues to evolve. No longer are newspaper and magazine-subscription purchases and network prime-time viewing the norm. Instead, they are declining and consumers are spending more time with media which they support and pay for as opposed to ad-supported media…This development is a culmination of two decades of this secular shift towards consumer-controlled media, and shows no signs of slowing.”

The fastest growing media segments through 2013 in the US will be pay TV, professional information services, direct marketing and entertainment media. “Institutional end-user spending” – largely meaning news and information tied to professional and business practice – will be the fastest growing media segment. This is good news for the providers already charging for content from Financial Times and the Economist to Thompson/Reuters and all variety of professional or industry specific publishers. VSS also said the media and communications industries will grow from the fifth largest economic segment in the Unites States to the fourth by 2013.

The European Commission’s Digital Competitiveness report (August 4) throws cold water on the idea the tide has turned toward a for-pay internet world. “Most,” it said, “aren’t willing to change this behavior even if sources for free content disappear.” Less than 5% of Europeans paid for online content – which includes videos and music as well as publications – in the last three months of 2008 when the study was conducted.

“Moreover,” the report concludes, “the low percentage of individuals that consider the possible lack of freely available online content as a reason for paying, calls into question the argument put forward by representatives of the content industry that European consumers will in the long term suffer from a lack of commercial availability of high quality content if the current model of audiovisual content distribution, based on illegal copying, is not curved.”

Mr. Murdoch contends that consumers in search of hot celebrity gossip or the latest wire-tap results will pay to access the News of the World website. More likely is the celebrity obsessed will buy a copy from the newsstand if they walk by at the right moment. But when they surf the Web hot gossip and rocking scandals have only fleeting interest, good for a water-cooler conversation, less good as an investment.

While the evidence is rather conclusive that people will pay for content from the Web when it’s special (sports) or an acceptable business expense, the market for general interest news on the Web is more likely to remain the domain of the free. More important is the risk a pay-wall poses for content providers’ brands. Once that pay-wall goes up casual news cruisers looking through Google News will avoid those sites charging and, eventually, not see them at all.

As Chris Ahearn said, “Go ask a music executive how well that works.”

See also...

Rupert Murdoch and News Corporation

News Corporation has a global, multi-media footprint. Whether on paywalls or pay-TV Rupert Murdoch has the ear of the media industry. Update includes Sky Europe ups and downs, competing with Google to Berlusconi. 144 pages PDF (July 2010)

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Media Business Models Emerging

After a rough transition media business models are emerging. Challenges remain. There are Web models, mobile models, free models, pay models and a few newer models. It makes for exciting times. This ftm Knowledge file examines emerging business models and the speed-of-light changes. 123 pages PDF (May 2010)

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