After posting disappointing fourth quarter numbers, media giant News Corporation announced Wednesday that it would begin charging for online content for all of its news services. Many have bleak hopes for the company’s future should it institute a membership-fee regime, but it has an opportunity to be a trail-blazer in the world of online news.
News Corp. Chairman and media mogul Rupert Murdoch told reporters on a conference call that the conglomerate would begin charging for online viewing of all of its news services beginning in the summer of next year.
Among News Corp. subsidiaries are movie production and distribution giant 20th Century Fox, as well as Fox’s cable television stations, the Wall Street Journal and New York Post newspapers, and social networking pioneer MySpace.
Murdoch insisted that his company would have to begin charging for online access in order to maintain a high standard of reporting. “Quality journalism is not cheap, and an industry that gives away its content is simply cannibalizing its ability to produce good reporting,” he said.
News Corp.’s fiscal fourth quarter revenues fell by 10.5 percent, to $7.67 billion, and the company posted an operating loss of $136 million.
In a news release Wednesday, Murdoch noted the tough economic environment facing his company, but insisted that News Corp. would further streamline its operations and would continue “adjusting to the revolutionary changes taking place throughout the media industry.” He expressed confidence that the company would once again post profits “as the economy rebounds.”
But whether Murdoch has chosen the right path to respond to “revolutionary changes” in the delivery of news remains to be seen. Observers seem skeptical but note that Murdoch has blazed trails through the news business before.
“Rupert has pulled off upsets before. Though this one would be his most astounding,” wrote Michael Wolff on the Off the Grid blog at newser.com. Wolff is the author of The Man Who Owns the News, a chronicle of Murdoch’s rise to corporate media prominence.
Mr. Murdoch’s gambit seems to assume a lot about the state of the business. He has insisted that News Corp. will “[assert] our copyright at every point” in order to prevent the unauthorized dissemination of news throughout the Web, but the Associated Press’s recent troubles suggest that even strictly licensed news services are vulnerable to mass reproduction and circulation without the consent of copyright holders.
The AP recently settled a lawsuit with online news company AHN Media, whom it had charged with illegally reproducing AP stories without giving credit. The lawsuit was part of the AP’s ongoing efforts to clamp down on unauthorized reproduction of its content.
Dvorak.com noted the unlikelihood that Murdoch will be able to prevent violations of intellectual property laws should News Corp. begin charging for online content. “[Murdoch’s] plan to sue everyone should deliver about as much of a return as it did for the RIAA,” bloggers there said, referring to futile attempts by major record labels to prevent illegal online downloads of their artists’ work.
Furthermore, Murdoch will compete in an arena full of free news services. His solution: higher quality news. “Just make our content better and differentiate it from other people,” he says.
But what of the tabloid-like reporting of many of News Corp.’s publications—including the New York Post and UK tabloids The Sun and the News of the World? Murdoch himself has said that “[w]hen we have a celebrity scoop [online], the number of hits we get now are astronomical.” Celebrity gossip is celebrity gossip and it is doubtful that Mr. Murdoch could manage to charge people for viewing celebrity scoops online.
Bloggers at Mediate.com agreed, saying “Good content is key in this brave new media world (another reason the WSJ has been able to continue charging) and Murdoch’s others papers … have traditionally trucked in tabloid scandal and splashy headlines, neither of which are hard to find elsewhere on the Internets, free of charge.”
It is likely that other media outlets will follow the example of Murdoch’s Wall Street Journal, which allows free viewing for some of its content. In order to view expanded services, such as real time news and market updates, readers must pay two dollars per week. For print delivery and online access, the Journal charges $2.69 per week.
The New York Times tried a similar scheme in 2005, when it began charging for many of its online columns. Though the Times charged roughly half of the weekly fee charged by the Wall Street Journal (roughly $8/month), it confirmed the speculation of many in the industry that ad revenue due to increased traffic would outweigh online access fees when it returned to fee-free access two years later.
Though he expressed some confidence in Murdoch’s abilities, Wolff claimed he is “swimming against the tide.”
But Murdoch does have an opportunity to set the standard for online media consumption. Rather than simply post print stories online and charge membership fees or per-click fees for viewing that content, News Corp. could follow yet undeveloped and unexplored avenues for online news media.
Media industry blogger Alan Mutter, who now runs the Newsosaur blog, has floated a very compelling idea that could fit perfectly with Murdoch’s massive media conglomerate.
Mutter calls it ViewPass. Under the plan, parent companies could charge a flat rate for the viewing of all subsidiary organizations. So for a flat fee, Murdoch’s customers could read stories from the Wall Street Journal, The Times of London, the New York Post, and The Australian.
If implemented correctly, ViewPass, or a system like it, could allow Murdoch and his News Corp. to navigate the hazardous waters of membership sites. With non-membership-based news aggregators offering thousands of new stories from around the world every minute, readers feel little need to spend precious minutes filling out membership forms. To pay for the news likewise seems detestable to consumers used to browsing Google and Yahoo news feeds.
By phasing in a ViewPass-style, say by offering sites free to members, and triggering a fee-based system after hitting a certain number of subscribers, News Corp. could ease readers into the system, while still reaping huge profits from relatively small membership fees.
A recent startup called Journalism Online, created by media executives Steven Brill, Gordon Crovitz, and Leo Hindery Jr., has proposed a model similar to ViewPass, but that could encompass any number of companies, each bringing under the fold any or all of their various online news sources.
Journalism Online proposes creating a universal payment engine used by all subscribing companies. Customers could set up a payment account through Journalism Online, which would potentially (depending on the selected subscription options) give them access to the online contents of all companies using Journalism Online’s payment engine.
The organization’s website proposes offering a number of different payment/access options, including a ten-cent micropayment structure that would charge readers for each page view, and a monthly or annual flat rate allowing customers full access to all affiliated content.
The Financial Times confirmed Friday that it has been in talks with a number of companies in an effort to institute a micropayment regime, though the company did not say how much it would charge per page view.
The FT currently has a light/heavy payment system, which allows online viewers to read up to 10 articles monthly for free. The paper’s 177,000 subscribers, who pay roughly $260 (£155.48) per year, enjoy full access to all online content.
“Our view is that there’s significant potential for pricing per piece and per time period. The whole point about the internet is flexible consumption and reader choice,” CEO John Riddling told British newspaper The Independent.
The ability of news companies to charge readers for online content is often compared to the record industry’s efforts to subvert online peer-to-peer music sharing, which allowed consumers to download songs for free. The micropayment option has worked quite well in the music business, employed most successfully by Apple, whose software iTunes allows consumers to download individual songs for 99 cents or entire albums for ten times that fee. Apple recently enhanced its fee structure, raising prices for popular songs, and lowering prices for older, more obscure, or less popular music.
Amazon’s electronic reader, the Kindle, also employs a micropayment system which allows readers to read the first chapter of a book for free, and then choose whether they wish to purchase the entire work. The Wall Street Journal predicted that this feature would soon be “as conventional as jacket-flap copy and blurbs” as electronic readers grow in popularity. The Kindle also allows readers to purchase access to blogs, newspapers, and magazines.
Blog access, Kindle’s most recent addition in terms of available text content, allows readers to subscribe to their favorite blogs for up to $1.99 per month. Amazon keeps 70 percent of the revenue from the Kindle’s blog subscription service, making it less than appealing for big-name blogs, but a good deal for subscribers.
Former Time Magazine Editor Walter Isaacson wrote in the February 5 edition of Time that the key for paid online news and text content is to create “a one-click system that will permit impulse purchases of a newspaper, magazine, article, blog, application, or video for a penny, nickel, dime, or whatever the creator chooses to charge.” Amazon’s Kindle and Apple’s iTunes have managed to create this one-click-shopping system.
Other payment ideas have been floated, such as bringing internet service providers under the wing of the parent company (through fees from those ISPs), and allow the ISPs to compete amongst each other for news-hungry customers.
Whatever solution Murdoch devises, it will have to be novel, and it will have to find a way to convince readers that the news is still worth a few bucks, a feat he seems confident he can accomplish.
