Malcolm Coles on why Murdoch’s plan will work

Malcolm Coles has an extensive post on how Murdoch’s plan to charge for online content – contrary to popular belief – might just end up working. His justification revolves around the quality of content being produced by The Times and The Sun and the unique position of Murdoch, allowing him to offer exclusive, multi-platform content through a variety of pay schemes:

What if they add 50p on to the cost of Sky broadband subscriptions and bundle it as a non-optional part of the package? Straightaway, they would have more than 2 million subscribers to the Times or the Sun online – an instant success.

What if each copy of the Times/Sun papers came printed with a unique code that gave 24 hours’ access to the site. As people became used to the site, maybe they would be prepared to pay for ongoing access.

What if subscription included online access to Sky channels, so you could watch Premiership football live?

What if newsagents sold pre-paid access: £5 for a card with a unique code that gives you a week’s access

It’s worth reading the full piece. However, this comes on the same day that the Guardian publishes an in-depth interview from Claire Enders , of Enders Analysis, on the future of the media:

Her company predicts that half the country’s 1,300 local newspapers will close between now and 2013, destroying 20,000 media jobs. There will be “a decline of original content across the board that will have enormous consequences for democracy”.

When the bookseller Waterstone’s asked for her advice on how to combat Amazon, Enders argued that it needn’t bother. Amazon, she suggested, was unstoppable. Today, she offers similar advice to newspaper bosses. “They should stop looking and investing in the next thing,” she says, “because they’re wasting their capital.”In particular, Enders is critical of newspaper companies – including the Guardian Media Group (which publishes this newspaper), News International and Trinity Mirror – that have collectively spent hundreds of millions replacing printing presses. “Being tied down to fixed-cost equipment and fixed-cost staffing in an era where they cannot predict sales is crazy,” she says. In Enders’s view, the FT and the Telegraph Media Group have acted wisely in outsourcing their print work.

The Media Blog Survey on paid content

The Media Blog have published the results of their own survey into charging online. With over 1,000 respondents, it may provide some clarity as to whether users will pay for online news.

Of course, those who respond to surveys like this, from a media-focused website, are unlikely to be representative of the entire online population. Still, it’s worth an extract, and not one that makes for especially promising reading for News International:

An overwhelming 75 per cent of consumers said they do not believe any of the three UK News International newspapers produce the kind of content which cannot easily be found elsewhere.

There was some reassurance for The Times, with 21 per cent of respondents saying they believe the paper does produce exclusive content. However, only four per cent of respondents said the same of the News of the World, while not a single respondent said The Sun offered anything they can’t find elsewhere online.

The most urgent problem for Murdoch would appear to be with the kind of content consumers are prepared to pay for. Not a single respondent said they would be prepared to pay for celebrity gossip or sport which account for much of The News of the World and The Sun’s content.

Columnists (28 per cent) and exclusive interviews (13 per cent) were the two most popular types of content respondents would be prepared to pay for.

You can still vote in Fee or Free’s poll into charging online, and see an analysis of the results so far. What’s clear from both is that there may be something of a gap between what some newspaper owners hope users will pay for, and what those users will actually end up paying for. Any market research conducted by those advocating charging online would make for interesting reading.

Financial Times to introduce micropayments

As reported by the Independent, the FT is introducing micropayments, only a day after Rupert Murdoch’s NewsCorp announced plans to charge for all its news websites within a year:

FT executives, who hope to have the system in place by 2010, have not settled on the price for an individual story, but say that they have been impressed by the “fabulous buying experience” of iTunes, which allows users to buy a single song for 79p.

Rob Grimshaw, the managing director of FT.com, said that Apple’s impact on the music download culture was inspiring for news publishers: “iTunes is a great one to talk about because fundamentally they have created a fabulous buying experience. I’m a great believer that people don’t object to buying things online.

Mr Grimshaw said publishers had misunderstood the internet: “The demand for information is larger than it has ever been but for some reason the publishing industry as a whole decided it might be a good idea if they all gave away their primary product. It does not strike me as being a smart decision. There seems to be this belief abroad that the whole mechanics of human nature and economics have changed utterly on the internet and I simply don’t believe that’s the case. If you need a piece of information or an article and the only way you can get to it is to pay for it, then people will pay… they do object to hassle. If you create an experience that’s so quick and easy it involves pressing one button, you will find a lot of people are happy to do it.”

This plan would of course, complement the Financial Times’ pre-exisiting subscription method, which offers buiness and financial information essential to many companies. It seems unlikely that the FT thought this up in a day after Murdoch announced it, but could more papers be tempted to consider charging for content now that NewsCorp are planning to? Could they afford to wait to see if the business model works, a time which could be well over two years away?

Murdoch decides NewsCorp to charge for online news

After the release of their annual figures, NewsCorp have finally announced that they will be charging for news online by next summer.

The figures themselves don’t make good reading: a $680 million quartley loss, overall revenues down 7.8%, and a $3.4 billion loss at the end of June, compared to a $5.4 billion profit the year before.

Rupert Murdoch (Creative commons)

PaidContentUK have some more figures:

News Corp. reported both its full fiscal year and quarter results today—swinging to a loss for both. For FY09, the company showed a net loss of $3.4 billion, compared with net income of $5.4 billion in FY08. Revenues were down 8 percent, to $30 billion from $33 billion. News Corp. took a pre-tax impairment charge in FY09 of $8.9 billion for goodwill and intangibles.

It appears that Rupert Murdoch has chosen to announce his online charging plan on the same day NewsCorp’s figures are released. This gives him the opportunity to show a wider context as to why users will soon be paying for material they used to receive for free. From Media Guardian:

“Quality journalism is not cheap,” said Murdoch. “The digital revolution has opened many new and inexpensive distribution channels but it has not made content free. We intend to charge for all our news websites.”

The Australian-born press and television baron was speaking as his News Corporation holding company slumped to a $3.4bn (£2bn) net loss for the financial year to June, hit by huge writedowns in the value of its assets, restructuring charges and a dive in commercial revenue.

It seems that David Simon, who created something of a blogosphere storm with his recent article in the Colombia Journalism Review, ‘Build the Wall’, has got his wish:

If the only way to read the Times is to buy the Times, online or off, then readers who clearly retain a desire for that product will reach for their wallets. And those comfortable acquiring their news at a keyboard will be happy to pay much less than they do for home delivery.

Bobbie Johnson sees a clear divide in the media between those charging for content, and those advocating a free model where journalism becomes something else entirely. This might be an overly simplistic way of analysing the debate – few media platforms will be all free, or all charged for – but it’s worth a look at the full article:

Proponents of free news say it is impossible to succeed by charging readers when there are so many competing sources of information prepared to give their services to readers for nothing, echoing the words of the famous futurist Stewart Brand, who said “information wants to be free”.

So far at least, history is one their side: while specialist news publications such as the Wall Street Journal, the Financial Times and the Economist charge for access to some of the information they publish, few mainstream publications have managed to succeed in implementing pay walls.

Of course, the kickback will be that users won’t pay for the content, but Murdoch believes he has found a simple solution:

The News Corp boss pointed to the Telegraph’s recent run of scoops about MPs’ expenses as an example of journalism readers would pay to read: “I’m sure people would be very happy to pay for that.”

Rarely afraid of a confrontation, Murdoch made it clear that he was gearing up for a bruising fight: “Our policy is to win.”

In the age of 24 hour news channels, and 24 hour newspaper online publishing, how often does a scoop like the Telegraph’s come along? For those slow news days, when papers are reporting the same stories, with similar quotes, figures, and pictures, will users will be willing to go to The Sun, The Times and the News of the World?

Unsurprisingly, Jeff Jarvis is having a field day, and points out one of the biggest problems with charging online – even the smallest cost allows you to be undercut by a website offering content for free: a business model where there is no direct charge to the user:

Charging for content brings marketing and customer-service costs. Online, it reduces audience and the advertising they justify. Putting content behind a wall cuts it off from search and links; they cut off your Googlejuice.

When publishers build those walls, they open the door for free competitors, who can now enter the content business with virtually no barrier to entry. Publishers who fool themselves into thinking pay will save the day only further forestall the innovation and experimentation that is the only possible path to success online.

If their content is behind a pay wall, NewsCorp will of course be looking into protecting their material, to a drastic extent. This from the Inquisitr:

Harold Mitchell, the founder of one of Australia’s largest advertising groups and a man connected to News Corp locally, said in a radio interview Thursday (local time) that News Corp. is preparing to sue Google and Yahoo to stop both from linking to, and quoting News Corp content.

Stopping Google linking to your articles, which will already be behind a pay wall, could have a substantial effect on online advertising revenue for NewsCorp websites. But will the subscriptions or micropayments they receive be enough to compensate?

Charlie Beckett reckons Murdoch could be going down one of three paths:

1. ‘Asset-stripping’: get as much cash out of these businesses as you can without completely killing the customer base to pump up the balance sheet while other media organisations burn their capital and plunge further into debt.

2. ‘The gamble’: If a few titles go down that just proves their weakness. Whatever is left standing will dominate a depleted market as the rivals follow in the wake of News International. In the same way that putting the price up of the Sunday Times actually strengthened its market dominance. If you are a sector leader – such as The Sun – then you have the brand community to set the pace and help dictate consumer behaviour.

3. Genius: Murdoch understands that enough of the public want to preserve their source of news and will be prepared to pay. They realise that they have had a free ride.

Although this business path is not inevitable, it needs to be experimented with – and if anyone can try it, it will be Murdoch. But if nothing else, as Matt Wells says in the Guardian – it is one hell of a gamble.