News Corp. (s nws) founder Rupert Murdoch caused a stir over the weekend with some comments he made on Twitter after the Obama administration criticized the SOPA anti-piracy bill, in which the octogenarian billionaire accused Google (s goog) of being the “piracy leader” and “stealing” content from movie companies and others. Whether he was trolling the social network or not, these comments reinforce the sense that Murdoch doesn’t understand how content works in a digital era — one in which, as venture capitalist Fred Wilson noted in an unrelated blog post, trying to impose scarcity is a sign of an increasingly broken business model. That fundamental misunderstanding has cost News Corp. a lot, and will likely continue to do so.
In one of his first comments, Murdoch criticized President Obama for siding with “Silicon Valley paymasters” who threaten software (and presumably content) creators with “plain thievery.” Then he attacked Google for being what he called the “piracy leader online,” and for streaming movies for free while selling advertisements around them — something that appeared to be a reference to copyright violations on YouTube. Finally, the News Corp. chairman said he had searched Google for links to the movie Mission Impossible and found several sites offering free links.
It’s more than a little ironic that Murdoch made these comments just a day or so after admitting that his company screwed up royally with Myspace, the social-networking leader it paid more than half a billion dollars for in 2005 — only to be forced to sell it last year for just $35 million after mismanaging it into oblivion. In a message that seemed to be a response to his many critics on Twitter, he admitted that the simple answer to the entity’s massive failure was that News Corp. had “screwed up in every way possible,” but the company had “learned lots of valuable [and] expensive lessons.”
Failing to learn the lessons of digital content
Were any of those lessons about how content works now, in an age of digital abundance and the “democratization of distribution,” as Om has called it? Murdoch isn’t saying, but his repeated attempts to lock up content in as many ways as possible don’t bode well. In addition to exporting his paywall model from the Wall Street Journal to British papers like the Times of London — where readership immediately plummeted by as much as 90 percent — News Corp. has also launched expensive projects like the iPad newspaper The Daily, which took the bizarre step of posting articles to its website as images with no links.
Perhaps the News Corp. founder doesn’t mind blowing hundreds of millions of dollars on (arguably) failed experiments like that — or like the news portal/aggregator code-named Project Alesia he spent a year trying to build and then shut down. But as author and journalism professor Jeff Jarvis describes in a post about Murdoch, he would be better off trying to understand the digital content market a little, instead of trying to recreate the scarcity entities like the Wall Street Journal have had in the past.
Financier and digital veteran Fred Wilson of Union Square Ventures has written a couple of posts that sum up this problem quite well. In the first one, which he wrote earlier this month, Wilson complained he was forced to find a pirated version of the New York Knicks game online because he couldn’t find any way of actually paying a rights-holder to watch the game in a more legitimate way — despite paying hundreds of dollars a month to his cable company, and subscribing to the pay-per-view NBA service, and routinely buying tickets to Knicks games. As Wilson put it in his post:
I’ve long believed that piracy is largely a business model problem not a human behavior problem. If you give people a legal way to consume the content they want, they will pay for it. But when you make it impossible to legally consume the content they want, they will pirate it.
Make it easy — and reasonably priced — and people will pay
In a post on Sunday, the New York-based venture capitalist described another episode in which he and his family tried to find something to watch through their cable company’s “movies on demand” feature, as well as through Netflix, (s nflx) Amazon’s video service (s amzn) and some other methods. Unable to find anything worth paying for, Wilson said they wound up watching a free TV show — and reiterated his point that the kind of artificial scarcity the media and entertainment industries rely on is broken:
I am sure there was a time when scarcity was a good business model for the film industry… I understand their muscle memory in terms of the scarcity business model. But restricting access to content is a bad business model in the age of a global network that costs practically nothing to distribute on.
This is the simplest possible rebuttal to Rupert Murdoch’s claims about Google and the web, and how it engages in what he sees as rampant piracy. While there will always be people who prefer to find ways of accessing content without having to pay for it, the simple fact is that many more people who do so are like Fred Wilson, and would be more than happy to pay for that content if someone made it easy to do so, and charged a reasonable price. The recent experiment by comedian Louis CK was a great example — it proved that millions of people will pay for something even if it is available for free.
Can Fox and the Wall Street Journal and other mainstream media outlets operate the same way, and simply hope that people will pay them for their content if given the chance? Perhaps not, but one thing is for sure: If even well-off venture capitalists are admitting they pirate content because they can’t find any way to pay for the things they want to watch, Murdoch and his scarcity-mongers are in deep trouble — and railing against Google is going to get them exactly nowhere.