Rupert Murdoch is picking up his toys from the playground and going home, and kicking sand at the “free” model touted by Wired’s Chris Anderson on the way out. The News Corp. (s nws) chairman has announced that, due to poor advertising revenue on the company’s numerous news properties, the company will begin charging for all online news content within a year. News Corp. lost $3.4 billion in the just-ended fiscal year, after a massive $8.9 billion in one-time charges.
The pay-wall strategy, which is still lacking many, many details, has more than a little bit of David Farragut’s “damn the torpedoes” mentality to it, but Murdoch noted that if his plan is successful, “we’ll be followed by all media.” Could this be the beginning of the end for free news on the Internet? Murdoch is hugely influential and could orchestrate a sea change for his contemporaries in the news business. And he’s in good company. His explanation that charging for news was natural because “quality journalism is not cheap” was virtually identical to the phrasing used by New York Times executive editor Bill Keller in an interview last December with NPR.
|What the web is saying:|
|Fred Wilson, A VC: I’m eager to see News Corp do this. We can talk until we are blue in the face about whether people will pay for news or not. Talk is cheap. Actions are not. So I’m eager to see the experiments begin.|
|Larry Dignan, Between The Lines: Now Murdoch’s riff on charging for news was notable. However, it was also notable how little analysts followed up on it. Why? There’s no money there. To Wall Street Murdoch would be better off shutting down some of these print assets. And if you really want to be cynical you could argue that Murdoch’s rant was a nice move to deflect from the fact that MySpace is a mess.So how much money would these various pay news models bring in? Goldman Sachs reckons less than $200 million in incremental revenue. That compares to $6 billion in revenue for News Corp.’s newspaper business.|
|paidContent: But Murdoch’s plans include charging for the web sites of UK tabloids The Sun and the News of the World; U.S. tabloid the New York Post, which already failed with its own celeb site sunk by high expenses; for general newspapers like the Times of London and The Australian. They also include non-print sites like FoxNews.com. What will News Corp. charge for? Micropayments to see the Sun‘s topless Page 3 girls (or maybe 10p not to see them)? “World exclusive” interviews with 15-second celebs? Bill O’Reilly outtakes?|
|The Guardian: 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.|
|The Register: If one media organisation has the heft to force a change in the market for online content, it’s News Corp. Such a move could even make Murdoch a hero to the struggling minor players he’s been painting into a corner for years.On the other hand, Murdoch plays a very long game. If he follows up on his promises, other players may well follow, only to find themselves in bruising price wars with Murdoch’s outlets.
The most cynical observers would not be surprised if Murdoch stated his intentions, prompting others to invest in their own charging mechanisms and pay walls, only to change his mind at the last moment, leaving rivals to contemplate redundant investment and/or plummeting web traffic.
Murdoch said in May that his company would test new pay models on one of its sites, saying News Corp. would charge for some of his flagship content “within the next 12 months” and that the company was “looking” at charging for all content. I figured this would be a small-scale test on one of his top properties — but he had assembled a global team, personally overseen by Murdoch himself, to determine the best way to charge for content — and “save journalism” at the same time. Murdoch predicts “significant revenues” from the paid content model.
Most existing pay models at major news pubs, News Corp.’s Wall Street Journal and the Financial Times being the most prominent, allow casual users to read articles for free, but once value is established — that is, people start coming back for more — they ask for money. There’s no direct value-add, other than to make it possible to read their content without jumping through hoops. We’re taking a slightly different approach, offering up free content on a network of ad-supported blogs, but charging for our subscription-only research and analysis service.
I suspect Murdoch will lean towards the first, partly free, model, but the Australian newsman can be unpredictable — and if he’s banking his entire company’s online model on “pay,” he could try anything — and it just might work. It’s also possible that Murdoch might bring his television content under the pay umbrella, perhaps altering News’ deal with Hulu or even — and I would love this — streaming Sky and Fox properties online for paying viewers. One thing’s for sure, Mr. Murdoch. Free or not, everyone’s eyes are on you.
(photo courtesy of the World Economic Forum)
This article also appeared on BusinessWeek.com.