Show him the money: Murdoch battles against free content

Ira BasenThere’s no such thing as free news, according to Rupert Murdoch, and he’s prepared to go to great lengths to prove it. Ira Basen, the new contributing editor for J-Source’s Future of News area, examines the paid content debate.

To charge or not to charge?

That is the question currently bedeviling many in the mainstream media as they try to figure out what to do with their online content.

Whether it is better to continue providing it free to users, aggregators and search engines, or to charge them, and by so doing, possibly compensate for a dramatic loss in ad revenue?

The original sin

It is a dilemma that goes back to the dawn of the online news revolution. When newspapers began posting their content to the web in the 1990s, most decided that free was the way to go. Millions of readers would flock to their websites, and advertisers would be sure to follow.

But it didn’t work out that way. The first part of the equation unfolded as expected. Millions did shift their news consumption to online sources, often abandoning paid subscriptions in favor of free news online.  

But the advertisers didn’t live up to their end of the deal. Those readers were now dispersed across millions of websites, and those online eyeballs were simply not as valuable to marketers as newspaper readers. Plus, many of those users were coming to stories through aggregators and search engines, further lessening the value of the newspaper’s brand. Revenue gained from online advertising simply could not replace the revenue lost by the dramatic drop in newspaper advertising.  

And that’s why that decision, made more than a decade ago, to give online content away for free is now widely known in the newspaper business as “the original sin.”

Mad men

Fast forward to 2009, and many of those publishers are facing bankruptcy. They’re mad as hell, and they’re not going to take it anymore. Or, to be precise, they’re not going to give it away anymore…if they can help it.

And the maddest of them all is the world’s biggest media mogul, Rupert Murdoch, the 78 year old Chairman and CEO of  News Corporation, whose vast stable of media properties includes The Wall Street Journal, The Times of London, Fox News, and dozens of other highbrow and lowbrow papers and broadcasters scattered across the globe.

In the past few months, Murdoch has escalated his rhetoric against search engines, specifically Google, and news aggregators who have been taking his content for free. Finally, on Dec. 1, in front of a U.S. Federal Trade Commission hearing, he declared it was time to repeal the industry’s original sin.

“These people are not investing in journalism. They are feeding off the hard- earned efforts and investments of others. And their almost wholesale misappropriation of our stories is not ‘fair use.’ To be impolite, it’s theft. Right now content creators bear all the costs, while aggregators enjoy many of the benefits. In the long term, this is untenable. We are open to different pay models. But the principle is clear: To paraphrase a famous economist, there’s no such thing as a free news story, and we are going to ensure that we get a fair but modest price for the value we provide.”

It’s not surprising that Murdoch would be leading the charge for paid content. He has always been a reluctant sinner. His most prestigious property, The Wall Street Journal sits comfortably behind a paywall, and still boasts a million subscribers.  

But the Journal offers business news not ordinarily found in most other papers, and it caters to a high-end audience prepared to pay for exclusive information. And for all of Murdoch’s bravado, the Journal‘s paywall is a rather leaky one. You can’t access Journal articles from the paper’s own site, but you can get them by searching on Google.  And those searches drive about 20 million page views to every month, generating an estimated $3 -$5 million a year in advertising.

But now Murdoch says that over the next few months, he plans to charge for all the online content delivered by all his media properties. No more free news; not for readers, or news aggregators or search engines. He’s betting that all of three of them will be willing to pay for the privilege of accessing his content. But most industry observers think he is wrong on all counts.

Bing -O  

Let’s start with search engines. Murdoch has had lots of nasty things to say about Google, the world’s dominant search engine, but so far, he’s been all talk and no action. There has been nothing stopping him, or any other publisher, from making their stories unavailable to Google searchers. Google makes it easy to opt out. But so far, no publishers have been prepared to sacrifice all those online readers in order to prove a point about the importance of paying for content.

But now, Murdoch appears ready to take the plunge  Over the past few weeks, there have been several reports that Murdoch is in negotiations with Microsoft over the software giant’s new search engine called Bing.  According to reports, Bing would pay News Corp. for the privilege of being the exclusive search engine for all of the company’s media properties. Want to read an article from The Times of London?  Forget about searching Google. You’ll only find it on Bing.  
Bing has made an impressive debut.  In just a few months it has captured 10 per cent of the search market. But that pales in comparison to Google’s 65 per cent. Is Murdoch really going to give up millions of eyeballs for the few dollars that Bing will pay him for the right to be his exclusive search engine?  

Revenge of the “parasites”

Then there are the aggregators; robotic aggregators like Google News, and news sites like The Huffington Post that include aggregated content from the mainstream media. Murdoch and his people call them “parasites” and “content kleptomaniacs” and argue that they are in violation of the “fair use” provisions of U.S. copyright law.

But the aggregators not so respectfully disagree. And not surprisingly, it is Arianna Huffington, publisher of the biggest aggregator of all, who has been leading the charge against Murdoch’s current war on free content. “In most industries, if your customers were leaving in droves, you would try to figure out what to do to get them back,” she said in a recent speech. “Not in the media.  They’d rather accuse aggregators of stealing their content… Basically they are attacking new media for being, well, new and transformational and there to stay. Get real you guys, the world has changed.”           

Social media consultant Seth Godin has also argued that Murdoch is seeing things completely backwards. “You don’t charge the search engines to send people to articles on your site, you pay them”, he wrote in a recent blog post. “If you can’t make money from attention, you should do something else for a living. Charging money for attention gets you neither money nor attention”.

Prepared to pay…but how much?

So barring some court ruling somewhere that determines that aggregators like the Huffington Post are violating copyright, don’t expect them to roll over in the face of Murdoch’s onslaught.  But what about the readers; the folks who have spent the last decade or so happily reading everything they want online without paying a penny for the privilege? Will they be willing to dip into their wallets to protect News Corp.’s share price?

Not too likely, according to several recent surveys, and even those who are prepared to pay, don’t want to pay enough to fatten a publisher’s bottom line. One study, conducted by Boston Consulting, talked to 5,000 online news consumers in nine countries (Canada not included). The good news for Murdoch and friends is that in the U.S., nearly half those polled said they were prepared to pay. In some Western European countries, that number was more than 60%.

The bad news is that when asked how much they were prepared to pay, the Americans averaged just $3 a month. That’s less than half the amount offered by the Italians in the survey, who indicated they would pay up to $7 a month, but that is still far less than the cost of a newspaper subscription. And the people who are most likely to want to pay for their online news tend to be people who already pay for their news on paper.

What does it all mean?  Clearly, publishers who think paid content is the answer to their financial woes are bound to be disappointed. There’s some money to be made there, but not enough to compensate for the precipitous decline in print ad revenues.  

Rupert Murdoch undoubtedly knows this, but that still might not stop him from erecting paywalls to protect him from the “thieves” who are stealing his content. In his mind, there is no such thing as free news, and he’s prepared to go to great lengths to prove it. 

Ira Basen is a former senior producer at CBC’s Sunday Morning and Quirks and Quarks. He was involved in the creation of programs including The Inside Track (1985), This Morning (1997) and Workology (2001), as well as several special series, including Spin Cycles (2007) and News 2.0 (2009). His writing has appeared in Saturday Night, The Walrus, Maisonneuve and the Canadian Journal of Communication. He currently teaches at Ryerson University and the DeGroote School of Business at McMaster University. He is a co-author of the Canadian edition of The Book of Lists.