Sunday, August 09, 2009

More on Murdoch

Rupert Murdoch’s announcement last week that he would charge for News Corp's Internet content by the middle of 2010 continues to be a massive talking point across the media and the blogosphere. Agree or disagree with them, what News Corp’s risky strategy of "unilateral disarmament" has done is force everyone to consider their response to the most intractable problem of the Internet era: how to make news pay.

Alan Kohler says the problem is not about the cost of access but the price of advertising. He says the price of online advertising has settled at about a tenth of the price of print advertising and is therefore unable to subsidise large editorial budgets. Technology has changed the balance of power between publishers and advertisers. This won’t affect quality journalism but a new cost model is required which will occur after a nasty equilibrium caused by “bankruptcies, mergers and redundancies.”

At Larvatus Prodeo, Phil Gomes takes a broad look at the various arguments for and against paywalls. He thinks that payment for an ad-free experience may be a credible trade-off but wonders if “Rupert and other large scale publishers [can] balance that in the face of declining ad revenue?” Gomes suspects that ads will still proliferate in a paywall environment (certainly that seems to be the case at Pay TV) and may ultimately be “a grand experiment in imperial overreach.”

Phil was kind enough to link to my earlier piece on Thursday about Murdoch and I responded in comments at LP with my latest thoughts on the matter:
[Murdoch] told everyone this week this is what we are going to do, so get used to it. He knows the ABCs of the world will still be providing free content. But as Andrew Bolt said today they’ll still make a profit with one in a hundred of their previous audience. What Murdoch surely knows is that the really huge profits will occur only when a critical mass of his competitors in the industry join the paywall. Making the announcement 12 months in advance gives all the other media companies plenty of time to compare the likely network externalities of joining in vs staying out.

One of those competitors is Chris Ahearn, President of Media at Thomson Reuter. In a blog piece at Reuters earlier this week, Ahearn launched a vigorous defence of the “link economy”. Ahearn was addressing AP’s plan to charge for content rather than News’s but similar principles apply. “Blaming the new leaders or aggregators for disrupting the business of the old leaders, or sabre-rattling and threatening to sue are not business strategies – they are personal therapy sessions,” he said. “If someone wants to create a business on the back of others’ original content, the parties should have a business relationship that benefits both.”

Roy Greenslade is also a fan of linking which he calls “a transformational process to help bring about that new form of journalism”. He has also come out strongly against Murdoch proposals which he describes as a “giant step backwards”. Newspapers and their business models have been failing for years and the process has been hastened by the Internet and the recession. “The old-style form of top-down journalism funded by media moguls is wrong-headed,” said Greenslade.

But the Guardian also hosts the most spirited defence of Murdoch in an article written by James Harkin (HT: Terry Flew). Harkin ridicules the idea that news information could be free. What matters, he says, is whether newspapers distinctive have distinctive content worth paying for and interested audiences whose demographic data can be sold on to advertisers to target specific interests. “In one way or another,” says Harkin, “Rupert is right and the free-lords are wrong - we'll end up having to pay for the news that we really want.”

QUT media researcher Debra Adams wonders what paywall model Murdoch will implement. She believes that in the Australian context, Murdoch will only charge for business and finance content. Adams points out that The Australian currently re-publishes specialised content from the Wall Street Journal. “Why would content that is paid for at the WSJ be free at the Australian?” asks Adams. “It makes sense that he would have to charge money for the content at the Australian as well.”

Vivian Schiller, former general manager of, also thinks it would be a “huge mistake” to lock up everything behind a paywall at first entry. It was Schiller who dismantled NYT’s paywall and he says news organisations cannot afford to undermine the most lucrative form of online revenue (advertising) by cutting off the flow of readers. “The thing I am dubious about is everyone is looking for a silver bullet,” he said. “The answer is not one model but a diversified revenue approach.”

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