Thursday, August 6, 2009

Its on - Rupert Murdoch to introduce pay online news

Today saw Rupert Murdoch's News Corporation announce one of its largest corporate losses in history. Details from ABC News are below:

The global economic downturn has had a huge impact on News Corporation's results, with Rupert Murdoch announcing a 30 per cent decline on last year's performance.

News Corp reported a fourth quarter loss of $US203 million ($241 million), in line with its forecasts.

Across the fiscal year the company recorded a $US3.4 billion ($4 billion) loss.

Mr Murdoch says newspapers have been hit particularly hard, with classified advertising never expected to return to previous levels.

"The last year has been one of the toughest in our history and the results today outlined for fiscal 2009 clearly reflect the sour economic environment that affected our businesses throughout the year," he said.

But Mr Murdoch says he is confident the worst is behind the company.

Mr Murdoch has also indicated that access to News Corp material on the internet may soon come at a price.

"The extended downturn has only increased the drum beat for change, but the secular challenge is clear," he said.

"Classified advertising revenues will never again reach the levels that print once offered.

"Quality journalism is not cheap and an industry that gives away its content is simply cannibalising its ability to produce good reporting."

The big news is that Rupert Murdoch has indicated that all News Corporation online news sites will become fee-based in the near future:

"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."


At present, only the Wall Street Journal charges a fee for online access and until recently, received wisdom in the publishing industry was that readers would not pay to read newspapers on the internet.

Murdoch said he had completed a review of the possibility of charging and that he was willing to take the risk of leading the industry towards a pay-per-view model: "I believe that if we're successful, we'll be followed fast by other media."

He said he was thinking in terms of "this fiscal year" to introduce charges. He said News Corp would avoid a migration of readers to free sites by "making our content better and differentiated from other people".

The charging model will be extended to red-top tabloids such as the Sun and the News of the World. Murdoch said he was keen to capitalise on the popularity of celebrity stories: "When we have a celebrity scoop, the number of hits we get now are astronomical."

As Bobbie Johnson observes in The Guardian:

A divisive split has emerged between those who believe that readers must be forced to pay for access to stories or see traditional reporting disappear altogether, and those who believe that a great deal of the information we consume each day is merely a commodity, and journalism must adapt itself to the changing environment.
News Corporation is at the forefront of the former camp, and plans are well advanced to make news on News Corp sites available onto on a fee-paying basis. Jeff Jarvis thinks that this won't work, as it misunderstands the nature of value creation through the Internet:

Newspapers have had 15 years since the launch of the internet browser to reimagine and rebuild themselves for the reality of the post-Guttenberg age. But they didn't. Now they are trying to reclaim old business models for a new media economy — a link economy, I call it, in which links give content value. Cut yourself off from links, behind pay walls, and you cut yourself off from the internet and its real value.
With any radical change to business models of this nature, some of the issues to be considered are:

  • Consumer reaction: will consumers simply shift en masse from News sites to other sites that provide free news content?
  • Competitor reaction: how will sites such as the Fairfax sites in Australia, or The Guardian in the UK, respond? The role of public service media is another factor here - the ABC and BBC are almost certain not to go down this path;
  • Advertiser reaction: will advertisers identify potential "premium clients" here, or simply migrate to where the consumers are going, if they leave News sites for free content?
  • Implications for different News properties: fee-based access to the Wall Street Journal can be profitable. But does this apply to The Sun, The Australian, The Courier-Mail, the Hobart Mercury etc.?
  • Implications for News journalists: if news is understood as a low-value-adding commodity, then status differentiations among journalists are not so great. But if there is a need to produce content that people will pay for, will this leave a small cadre of "star" journalists, and mass layoffs for those who provide everyday news content?
News Limited has being laying off journalists and other news staff in Australia, and this would be likely to continue under a pay-per model. There is also the interesting point, which was considered in Tech Crunch last week, of whether "star" journalists - those whose content attracts a personal following that readers would be willing to pay for - are better off leaving large flagship newspapers and starting their own sites, hoping to take readership and advertisers with them. Harvard Business Review blogger Umair Haque has been thinking along similar lines with his Nichepaper Manifesto.

(Hat tip to Tim Mansfield for the latter).

1 comment:

Kerry Raymond said...

I attended Shane Rodger's talk at the Brisbane Institute (yeah, I still seem to get free admission whatever QUT's sponsor status) and he seemed to have a different spin on it than Rupert about what the challenges are:

According to him, while newspapers in the USA are closing, most of the Oz ones are not so badly off. Indeed, he claims the C-M is doing well on sales of the newspaper, bucking the trend. I notice he did not mention that the C-M is in Australia's fastest growing city, which maybe helps. And the fact that Brisbane does not have a competitor (as a printed newspaper). He also didn't say that the C-M journalism quality is deteriorating by the minute. I am still a 7-day subscriber to the C-M (old habits die hard) so I get my daily dose of "reality TV" news and football :-(

But having said all of that that, I think much of what Shane said was fairly honest and probably true. He said there is definitely a market segment that looks for quality journalism (and commented that probably the audience he had that night was all part of it -- probably true enough).

I suspect it is all part of the Kerry Raymond theory of 22 million people can only support a finite amount of stuff: 2 major airlines, 2 major supermarkets, etc. I suspect there is a catchment size that can support 1 newspaper and Brisbane is probably at that size.

I'd pay more for a daily print newspaper with quality Queensland journalism (when did The Oz last mention the Ekka and until Kevvy became PM, it was like Qld didn't exist in the Syd-Mel-Canb triangle that The Oz reports on) but I fear I am not in the majority with this view.