Business Maverick, Media

ANALYSIS: What could Murdoch be thinking?

ANALYSIS: What could Murdoch be thinking?

Rupert Murdoch’s apparent decision to dump Google and support Microsoft search engine Bing is just the latest gambit in his strategy to change the rules of the online news game. No winners are yet emerging, but the contest sure is fascinating.

A few months ago, I submitted an 11,000-word research report to the Sol Plaatje Institute for Media Leadership entitled “Successful ‘New Media’ business models: Case studies of commercial print media in South Africa”. The research was focused on the online strategies of three local newspapers – The Times, Mail & Guardian and Daily Dispatch. When I was almost done with the work, Rupert Murdoch made what was arguably the most momentous announcement in the history of online content. Here’s how I incorporated that announcement into my final report:

In early August 2009, after declaring record financial losses at his global media empire News Corp., Rupert Murdoch reaffirmed his intention to introduce charges for all his news websites, including (in the United Kingdom) the Times, the Sun and the News of the World. According to the Guardian, Murdoch announced that the era of a free-for-all in online news was over. “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.”

News Corp., the largest producer of news in the English-speaking world, is set to place its online entities behind payment gateways by July 2010, a move that appears to have split the Web publishing world in two. In an article entitled “Will Rupert Murdoch be the pied piper of paid content?”, Time magazine reported that while many media executives are welcoming the move, there remain a large number of “free agents” who counter that online publishing is based on attracting traffic via the so-called “link economy” – which pay walls undermine. Further, reported Time, many customers simply won’t pay: “Internet experts say that almost everybody who has ever tried charging for content has failed. Murdoch is out of touch, they suggest.”

Still, shortly after Murdoch’s announcement, a handful of top-tier international newspaper brands – and at least one media multinational – indicated to the public that their current online business models might need to be revisited. As Time noted: “In the days that followed Murdoch’s announcement, the Financial Times, which charges for some content, and the Boston Globe dropped hints that they were looking into different payment schemes. Time Inc. has raised the possibility of charging for content.”

In South Africa, the free-versus-paid debate appears to be playing itself out with comparable fervour and urgency… At least two mainstream newspapers will be charging for online content in the near future – the editors of both the Mail & Guardian and Daily Dispatch believe that the uniqueness of their respective offerings will bypass the “for-free” mindset of Internet users, allowing them to generate increased online revenue and ensure the long-term viability of their brands.

On Monday, a second momentous announcement came out of News Corp., although this one doesn’t (yet) have the status of fact. According to an unnamed source – who chose to remain anonymous due to his or her role in negotiations – Murdoch has been in discussions with Microsoft about taking a fee to remove all links to News Corp.’s news sites from Google, and to place them exclusively on Bing, Microsoft’s search engine. “If such an arrangement came to pass,” the New York Times noted, “it would be a watershed moment in the history of the Internet, and set off a fierce debate over the future of content online.”

While acknowledging that more than 65 percent of the US’s search engine traffic runs through Google, as opposed to 9.9 percent through Bing, America’s “paper of record” was far more generous to Murdoch and Microsoft than at least one other household media brand. “So Rupert Murdoch, who has suffered for so long at the hands of Google – what with all the traffic Google directs to his News Corp. sites for free – has finally had enough,” Weston Kosova, Newsweek’s leading technology commentator, offered. “Now all Murdoch and Microsoft have to do is convince us to start using two search engines every time we go to the Web to look for news. First Google, which most of us already use; and then, oh yeah, I should now go to Bing in the hopes that one of Murdoch’s properties also has something to say on that subject.”

Kosova has a point – online news is enough of a commodity that people aren’t going to need two search engines to find what they’re looking for. But further down in his piece, Kosova made an even more important point. As reported by Bloomberg, he observed, a number of smaller companies are considering following Murdoch to Bing as part of a plan to start charging users for content. Dean Singleton, CEO of MediaNews Group Inc., publisher of the Denver Post and Boulder Daily Camera, has stated that he won’t allow Google to list any of the content behind his pay wall, although the search engine will still have unfettered access to the free articles.

“Let’s unpack that amazing quote,” Kosova continued. “Singleton recognises that Google drives valuable traffic to his sites. So he’s going to let Google users see some of his papers’ stories. But not the good stuff. To see that, you have to pay. But potential newcomers to the sites won’t even know that there is supposedly really good stuff locked up inside, because all of those stories will be invisible to Google users.”

It’s more than just a tricky problem. What Kosova articulates in these sarcastic lines is perhaps the real dilemma facing news websites that have decided to charge for content – how to keep the traffic stats up, and therefore satisfy the online advertisers, whose slice of the overall advertising pie is growing faster than any other medium’s.

Murdoch’s response to the argument that blocking Google would shrink his audience, and therefore his potential advertising base, is blunt: “We’d rather have fewer people coming to our Web sites, but paying,” he told Sky News Australia. These are the words of a man who understands that no matter how much online ad revenue is growing year-on-year, it’s still nowhere close to the ad revenue historically generated by newspapers – which were (and, despite the carnage, in some places still are) high enough to sustain newsrooms with a full complement of editors, reporters and correspondents.

Is it suicide to charge for content online? Murdoch’s convinced it isn’t; he knows all too well that the online version of the New York Times, despite its incredible 20-million unique users a month, remains reliant on its big print daddy for sustenance.

Locally, titles like the Daily Dispatch and Mail & Guardian appear equally committed to solving the online revenue problem via the pay wall model, and they may just succeed.  My research report for the Sol Plaatje Institute included lengthy interviews on the subject with the editors of both papers. Daily Dispatch editor Andrew Trench’s assurance is based on the fact that he has a unique product – on average, ninety percent of the title’s content is generated by his own reporters, and is focused primarily on East London and the surrounding areas. It’s the type of content that’s available nowhere else on the planet, which presumably means it’s the type of online offering that people will pay for. Mail & Guardian editor Nic Dawes believes he has a similar unique value proposition – at the weekly, according to Dawes, it’s the entrenched investigative tradition that should ultimately translate into significant online revenue.

The Daily Maverick, for the moment, is going the other route. All we can say is: watch this space.

By Kevin Bloom

Read more: Newsweek, New York Times

Photo: News Corporation Chairman and CEO Rupert Murdoch listens to morning discussion session during the Wall Street Journal CEO Council on “Rebuilding Global Prosperity” in Washington, November 17, 2009. REUTERS/Hyungwon Kang


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