Rupert Murdoch: Let's Charge for Online Content Again
During a recent conference call, Rupert Murdoch announced that he plans to fix the current newspaper business model by charging for access to News Corporation's newspaper web sites. News Corp's Wall Street Journal, of course, is one of the few newspaper sites in the United States that is still hides a lot of its content behind a paywall (though that wall is starting to crumble as well). The WSJ did, indeed, see some small revenue gains in the last few months while the rest of its competitors saw their daily circulation take a nosedive.
In the U.S., News Corp only owns a handful of papers (though these tend to be relatively powerful), including the Wall Street Journal and the New York Post. Although, it owns a large number of papers in Australia, as well as the U.K. and Ireland.
At the same time, Murdoch also dismissed Amazon's Kindle, because he doesn't want News Corp to cede its content rights "to the fine people who created the Kindle." During a Senate hearing about the future of the newspaper industry yesterday, the CEO of the Dallas Morning News announced that Amazon will take a 70% cut of the newspaper subscription revenues from the Kindle. Those numbers do, indeed, seem rather outrageous, though some might argue that the 30% the newspapers will get from Amazon is still more than the zero dollars they are getting from people who read the paper without the Kindle.
Interestingly, though, while Murdoch heralded the return of paid online newspaper subscription, News Corp also proudly announced that the Wall Street Journal's free iPhone application has been downloaded over 360,000 times. And that app, on a device fully controlled by Apple, gives users all of the WSJ content for free without the need for a subscription.
Senate Hearing
Yesterday's Senate hearing on the "Future of Journalism" made it clear that there are quite a few newspaper companies who would like to go back to charging for their content (while lobbying for tax breaks at the same time). Google's Marissa Mayer and Arianna Huffington managed to put some of the newspapers' hyperbole into some much needed context (Huffington's testimony starts at around 58min here). They argued that while the age of the printed newspaper may be coming to an end, journalism itself will blossom in the future, and that online publishers can indeed make money from their online content by smartly monetizing their traffic (and those who don't want their traffic to come from Google can just add a line to their robots.txt file anyway).
It's Not About the Future of Newspapers - It's about Journalism
We also think that it is important to move away from the question of how we can save the newspapers (easy answer: we can't). Instead, the more interesting question is how we can save good, in-depth, investigative journalism. There are clearly no easy answers for how to save the newspapers and still be able to finance good journalism, and we have doubts that charging for online access is a viable model. Users have clearly voted against this, and even if a paper wanted to charge, users could just head to another paper that decided to go with an advertising-based revenue model.
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I can't believe they're serious. Do they even bother checking in on reality, even through their underlings? If the paywalls come back up what little relevance these papers still have will disappear.
So apparently we're just going to have to keep repeating this line until everyone hears it enough times to accept it:
The problem with charging for content is that they've NEVER DONE IT BEFORE IN ANY MEDIUM. You're not paying for CONTENT when you buy a newspaper -- you're paying for printing, paper and delivery. In other words, print buyers pay for the overhead, and the content is given away so the companies can rent your attention to advertisers.
But pixels are free.
As Justin Pontin wrote this week, charging for news and opinion doesn't work.
Why doesn't Murdoch get it? Who cares? This is an evolutionary shakedown. The dinosaur line forms on the right.
127.0.0.1 online.wsj.com
@Dan
Include reporter's salary in your overhead, in other words, the content creators. Without them, most news-related blogs and sites wouldn't exist. Most bloggers aren't beating the street to create their content. They are rehashing the work that's been done by real journalists.
The future of media will not be anything that looks like the current structures...
A lesson worth remembering is that at the turn of the 20th century, people had a transportation problem...and the solution turned out not to be a "faster horse"...but a Ford.
And one should note that the Ford didn't arise out of the "horse industry's" R&D efforts, nor the "Horse Industry Revitalization Act" nor the horse industry's attempts to experiment with new Business Models.
I think the future of the media business will look as different as Ford and Toyota's operations look from horse traders and blacksmiths.
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What's historically given value to editorial content is the relative scarcity of distribution versus readers (not the Kindle kind). Newspapers have historically enjoyed natural localized economic monopolies that allowed each of them to exercise monopoly control over the amount of content (and advertising) they allowed into their local marketplace.
Monopoly constraint of distribution and supply will always lead to prices (and profits) significantly above open market rates. Newspapers then built costly organizational structures commensurate with that stream of monopoly profits (think AT&T in the 1970's).
Unfortunately the Internet came along and changed all the rules!
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The dynamics of content replication and distribution on the Internet destroys this artificial constraint of distribution and re-aligns advertising (and subscription) prices back down to competitive open market rates. The often heard complaint of Internet ad rates being "too low" is inverted...the real issue is that traditional ad rates have been artificially boosted for enough decades for participants to assume this represents the long-term norm.
An individual reader now has access to essentially an infinite amount of content on any given topic or story. All those silos of isolated editorial content have been dumped into the giant Internet bucket. Once there, any given piece of content can be infinitely replicated and re-distributed to thousands of sites at zero marginal costs. This breaks the back of old media's monopoly control of distribution and supply.
To paraphrase Nietzsche, "God is dead. God remains dead. And we have killed him with the Internet..."
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The core problem for the newspapers is that in a world of infinite supply, the ability to monetize the value in any piece of editorial content will be driven to zero...infinite supply pushes price levels to zero!
What this implies is that no one can marshal enough market power to monetize the value of content in the face of such an infinite supply and such massively fragmented distribution. Pay-walls, lawsuits and ill conceived legislation won't allow the monopoly conditions to be re-constructed because only ONE VERSION each story has to leak out to start the cycle all over again.
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Another way to think about this is that once data becomes publicly visible on the Internet, its monetizable value rapidly dissipates to zero.
This is at the core of why Google can extract $25B a year from the economy without creating ANY content...what they create is meta-data about content (which CAN be monetized)...and all that meta-data remains non-visible. Only the results of decisions based on that meta-data by their search and advertising platforms is made publicly visible.
The lesson is that Google DOES NOT monetize other people's content...it monetizes its OWN meta-data. This is certainly one path to making the news profitable...not search per se...but various other approaches to the monetization of meta-data that's within the reach of publishers.
So the exquisite irony is this:
In the future, the only content that will have monetizable value is content that no one is ever allowed to read! (i.e. the meta-data)
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There are certainly ways to make online news profitable...and many of us are working to develop such approaches...but I can assure you they don't involve inventing a "faster horse"...
Dale Harrison
dale.harrison@inforda.com
The point about Amazon is interesting - we're seeing this 'well, it's better than nothing' argument being used a lot by technologists towards content creators.
The problem is that the technologists don't care about the quality of content, simply that content exists, and that they get a cut from delivering it.
For all the rhetoric about the Internet cutting out the middleman, Amazon, Google, Apple ARE the new middlemen (and equally companies like Akami, Cisco, etc, are the logistics and truck firms) - and their dominance in their fields are giving them Walmart-scale abilities to dictate terms to their suppliers.
And whatever Huffington says, I don't believe that anyone can monetize traffic enough to sustain current quality. The Guardian can't, and they have hugely more on-line readers than the paper ever did - the theory suggests that without having to print, and instant access to the whole English speaking world, they should be able to make more money than the old limited physical distribution model, where (arguably) the reader pays for the printing costs and the money came from advertising.
It's not a question of whether any profit is possible (we know it is) but what the nature of that market will look like. Presumably it will drive consolidation - bigger players are more able to survive in a low-profit environment. The other thing is cutting costs (and a recent survey showed what percentage of print stories were recycled from wire services vs originated from journalists employed by the paper).
Do we want a world where, as Dale's spot-on analysis points out, Google extract billions in revenue, or Amazon take their 70%, of work being done by other people?
I could see how this could work, with some caveats.
1. If a newspaper goes with paid online content, then it'll have to get rid of the print version, as the print and web versions of a newspaper actually compete with, rather than compliment each other.
2. To be successful, step one would need to be implemented industry wide for local and regional newspapers to benefit. Otherwise, readers will go get their content from the other closest news website, and vice versa.
3. Paid content wouldn't work with larger publications, because national and world news will complete with bloggers, who will gladly give it away.
4. Bloggers might end up making 1,2, and 3 moot anyway. I get the most up-to-date information from Twitter (like a recent bad storm that passed through our area), while the local newspaper was struggling to keep up.
I’m really convinced that is time to rethink all the information platform, and supply much more targeted and valuable information people can productively use in their everyday’s work and life instead of sellling tons of marketing and advertising driven useless informations.
http://www.cutuli.it/index.php/internet-paid-contents-dear-rupert-we-need-money/
Rupert Murdoch, Rupert Murdoch...
This guy is a fossil, 13 years past his expiration date.... why is anyone taking this seriously?
great article
Fox News prints stories from AP feeds.
AP feeds are free from many other sites.
Um. Yeah. Okay...
Agree that the core problem for the newspapers is that in a world of infinite supply, the ability to monetize the value in any piece of editorial content will be driven to zero...infinite supply pushes price levels to zero!