Murdoch lays groundwork for paid-for online contentMay 11, 2009
Rupert Murdoch has proven he is no fool in business, but he is a divisive character. He received a great deal of criticism after the publication of News Corporation’s latest financial figures, much of it for his plans to charge for online content. But do these plans deserve criticism?
Vanity Fair columnist Michael Wolff provided an ascerbic analysis, suggesting that a man who does not use email cannot possibly make a success of an internet business (this is familiar territory for Wolff, who last year wrote a biography of Murdoch). Maybe a more important point is that Murdoch, unlike some younger peers running web businesses, knows how to make money.
When he bought MySpace, it was turning over $79m a year. It has failed so far to break the $1 billion mark – though it has come close – but you would have to be churlish to deny that $850m turnover is impressive, particularly in comparison with the commercial realities at other social media such as Facebook and Twitter.
You use it, you pay for it
The real bombshell delivered by Murdoch, however, was his view that charging for online content is imminent at some of his newspapers, following the success of the subscription model at the Wall Street Journal.
It is often claimed that people will not pay for internet content. For example, Michael Tomasky at The Guardian makes this point very clearly. But that is only half the argument. The issue is that people will refuse to pay for content when they are offered something the same or similar for free at the same time. And this is usually the case because the media sector is so fragmented.
Thanks to the Internet, if your favourite newspaper starts charging for its use, there are thousands of alternative ways to get the same information for free. So in terms of moving to a paid-for content business model, unless all media websites change as one, the first movers will be so severely penalised as to render the change to a pay-per-use model impossible.
But Murdoch’s announcement may make a difference because he is a game changer. By announcing his intention to begin charging for content a year in advance, he has primed the entire media sector for a change in this direction. This would be good for newspaper users. A move to a mixed model, where revenue could come from web subscriptions, mobile devices such as the Kindle or iPhone, as well as ad-funded, is overdue. Dependence on a single revenue model is dangerous. If you need proof of this, just look at the current plight of the venerable Boston Globe: